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4 Wealthy ETFs Of 2015

Thanks to unique strategies, creativity, transparency, diversification benefits, enhanced tax competences, low turnover and low cost, the global ETF industry has seen explosive growth, snapping up a large market share from mutual funds and hedge funds. In fact, overcoming all the odds and uncertainties in the market, the ETF industry surpassed hedge funds for the first time this year (read: How ETFs Are Overtaking Hedge Funds ). Low cost has been one of the biggest crowd pullers into the ETF world. Globally, the industry has over 6,000 products with AUM of more than $3 trillion from 271 providers listed on 63 exchanges in 51 countries at the end of October, as per ETFGI . It has gathered $287.3 billion in new capital in the first 10 months of the year, up 22.3% year over year. About 60.8% ($174.8 billion) of the total inflows came from the U.S. ETFs while 23.8% came from Europe. Canada and Japan products account for $10.1 billion and $35 billion of inflows, respectively. The rapid growth can primarily be attributed to currency hedging strategies, smart beta and factor investing. In particular, currency hedging is the most sought after ETF strategy of this year due to strength in U.S. dollar brought about by the global monetary easing policies against the Fed tightening policy. This is because the currency hedged funds look to strip out currency exposure to a foreign economy via the use of currency forwards or other instruments that bet against the non-dollar currency while at the same time offer exposure to foreign stocks. After that, investors are embracing smart stock-selection techniques and strategies to alleviate the risks in the market through smart beta products. The smart beta strategy helps to capture market inefficiencies in a transparent way by adding extra metrics like dividends, volatility, revenue, earnings, momentum, equal weight and other fundamental factors to the market cap or rules-based indices. It takes specific factors from the active management universe at a lower cost and instills it in a passive listed fund (read: 5 Smart Beta ETFs to Beat the Choppy Market ). Given this, we have highlighted four ETFs that are enjoying incredible AUM growth this year. Deutsche X-trackers MSCI EAFE Hedged Equity ETF (NYSEARCA: DBEF ) – AUM Growth: 93.2% This ETF, with an asset base of around $13.7 billion and average daily volume of more than 3.9 million shares, emerged as the biggest winner in the currency hedge space. It has pulled in about $12.8 billion in capital so far this year. This fund targets the developed international stock market with no currency risk and tracks the MSCI EAFE US Dollar Hedged Index. In total, the product holds 917 securities in its basket with none holding more than 1.93% share. However, it is skewed toward the financial sector, which makes up for one-fourth of the portfolio, while consumer discretionary, industrials, consumer staples and health care round off the top five with double-digit exposure each. Among countries, Japan takes the top spot at 23%, closely followed by United Kingdom (18%), France (10%) and Switzerland (10%). The fund charges 35 bps in fees per year from investors and has gained 6.1% so far this year. It has a Zacks ETF Rank of 3 or ‘Hold’ rating. QuantShares U.S. Market Neutral Anti-Beta ETF (NYSEARCA: BTAL ) – AUM Growth: 90.7% This fund invests in low beta securities and simultaneously in short high beta stocks of approximately equal dollar amounts within each sector. It seeks to deliver the spread return between low and high beta stocks. This can easily be done by tracking the Dow Jones U.S. Thematic Market Neutral Anti-Beta Index. This approach results in long and short positions in 200 stocks, in equal proportions. The fund is expensive, charging 1.49% in fees per year and trades in a good volume of about 142,000 shares per day. BTAL is unpopular having AUM of $9 million, out of which $8.16 million has been scooped up this year. The fund is down 2.9% in the year-to-date timeframe. WisdomTree Europe Hedged Equity Index ETF (NYSEARCA: HEDJ ) – AUM Growth: 75.8% HEDJ has gathered about $15.7 billion in capital since the start of 2015 that has boosted its asset base to over $20.7 billion. The ETF tracks the WisdomTree Europe Hedged Equity Index holding 128 securities with each security holding no more than 6.08% of assets. It is also pretty well spread across a number of sectors with consumer staples, industrials, consumer discretionary, financials and health care taking double-digit exposure each. Among countries, Germany (25.9%), France (24.5%), the Netherlands (17.1%) and Spain (16.6%) dominate the holdings’ list. The fund charges 58 bps in annual fees and sees an average daily volume of about 4.9 million shares. It has surged 11.7% in the year-to-date timeframe and has a Zacks ETF Rank of 3 or ‘Hold’ rating. First Trust Dorsey Wright Focus 5 ETF (NASDAQ: FV ) – AUM Growth: 72.8% This ETF tracks the Dorsey Wright Focus Five Index, which provides targeted exposure to the five First Trust sector and industry-based ETFs that Dorsey, Wright & Associates (DWA) believes have the maximum chance of outperforming the other ETFs in the selection universe. Securities with high relative strength scores (strong momentum) are given higher weights. Currently, the product has the highest exposure to the biotech sector via the First Trust NYSE Arca Biotechnology Index ETF (NYSEARCA: FBT ) at 24.8%, followed by the First Trust DJ Internet Index ETF (NYSEARCA: FDN ) and the First Trust Health Care AlphaDEX ETF (NYSEARCA: FXH ) at 21.3% and 19.4%, respectively. It has attracted over $3.2 billion, propelling its total AUM to $4.4 billion. FV trades in solid volumes of more than 2.1 million shares a day on average but charges a higher 94 bps in fees. The ETF has returned 4.2% in the year-to-date timeframe. Link to the original post on Zacks.com

Stocks Bleed With Paris, Safe Havens Surge: ETFs In Watch

Ominous clouds over the Eurozone are refusing to pass. At least back-to-back hits last week corroborate this fact. If weaker than expected GDP data for the bloc in Q3 – merely 0.3% – was not enough to dampen investors’ mood, a gruesome terror attack in Paris, slaughtered whatever little bit of risk-on trade investing sentiment over the region was left. In fact, not only the Eurozone, the entire risk-pro global investing backdrop took a beating after the terrorist group ISIS took responsibility for the attack in the French capital on Friday. Squads of Islamic State-backed gunmen assassinated about 129 people in a chain attack at various locations and left hundreds severely injured. This was Europe’s worst terror assault in over a decade, as per Bloomberg . In vengeance, France bombed the Syrian city of Raqqa on Sunday night, which was the most hostile anti-terrorism strike by the former against this Islamic group. With the global superpowers including France now looking confident of bolstering defense against ISIS, geo-political issues may crop up in the coming days. Needless to say, all global risky assets went into a tailspin following this horrible incident. Though the French economy fared better than other biggies in the bloc in Q3, having returned to subtle growth on higher domestic demand , investors did not have time to celebrate the recovery as terrorism took the upper hand over an improving economy. Market Impact Investors appeared to take this bloodbath too seriously and rushed to panic selling in apprehension of a surge in geo-political threats. The sudden elevation of risk aversion in the market brightened the appeal for safe haven assets. Volatility ETFs, which track the implied volatility of the market, also surged thanks to the massacre in the stock market and concerns over a further downturn. This specifically caused the uptrend in a few segments of the financial world that are seeing dire trending of late, but hold promises now. Below, we highlight a few of the biggest gainers from the latest sell-off in the global stock market. Also, these ETFs may continue to thrive should tensions persist in the global economy in the near term. Gainers Gold Gold is often viewed as a hedge against market risk. The precious metal went through a brutal stretch in the last one-month period thanks to the rising greenback and reduced demand from the major consuming nations like China. The metal has seen some strength thanks to this market turmoil. In fact, the solid Fed rate hike bet for December couldn’t hold back this safe haven metal post Paris attack. The ETF tracking gold bullion SPDR Gold Trust (NYSEARCA: GLD ) added over 0.5% after hours on November 13 and is expected to tack on gains in the short term. GLD was down 9% in the last one month. Long-Term U.S. Treasury Though U.S. treasuries were out of favor a few days back due to worries over Fed tightening, heightened global uncertainty brought this safe asset into the limelight. Along with the terror attack, global growth worries and severely low oil price, which put a lid on global inflation should help treasury valuation going forward. Yields on the U.S. benchmark 10-year notes slipped to 2.28% on November 13 from 2.32% recorded the day earlier. Long-term U.S. bond ETF the iShares 20+ Year Treasury Bond ETF (NYSEARCA: TLT ) was up 0.6% on November 13 and added over 0.3% after hours. For the month, the fund is down about 3.9%. Greenback The U.S. dollar or greenback is yet another product, which acts favorably when a flight to safety commands the market. Plus, a ripe prospect of a sooner than expected Fed lift-off also favors this asset class. As a result, the PowerShares DB US Dollar Bullish ETF (NYSEARCA: UUP ) added about 0.4% on November 13, advanced about 0.6% after hours, and soared about 5.4% in the last one month. Yen The Japanese currency, yen, is often considered a classic safe haven asset. Though a somber GDP data for Japan – which indicates that Asia’s second-largest economy is into a recession in Q3 – had the chance of wrecking havoc on the yen, the currency moved higher on a safe-haven appeal. Thus, the CurrencyShares Japanese Yen Trust (NYSEARCA: FXY ) might see a surge ahead. Volatility When sentiments among investors are so shaky, the volatility index is sure to gain. Obeying this law, the CBOE volatility index or “fear gauge” reached its highest tip since October 2. The ProShares VIX Short-Term Futures (NYSEARCA: VIXY ) – the ETF tracking the performance of the S&P 500 VIX Short-Term Futures Index – returned over 6.8% on November 13 and added more than 2.8% after hours. However, investors should note that volatility investments are not meant for long-term traders. Losers Along with several research houses like Goldman , we believe that this market turmoil is here to stay. Yet, we would like to highlight the losers in the wake of the Paris attack. While most of the global equities lost after the massacre, with the U.S. equity gauge the SPDR S&P 500 Trust ETF (NYSEARCA: SPY ) losing 1.12% on November 13 and shedding over 0.8% after hours, Europe-based products are likely to be the worst hit. France As expected, France equities and the related ETFs were the worst hit. The pure-play France ETF the iShares MSCI France (NYSEARCA: EWQ ) lost 1.1% on November 13 and plunged over 4% after hours. Euro First a soft GDP report and then the attack weighed on the common currency Euro and its related ETFs. The euro fell to a six-month low versus the greenback. The CurrencyShares Euro Trust (NYSEARCA: FXE ) lost over 0.5% on November 13. Broader Europe Since the impact of this bloodshed would be far-reaching, broader Europe ETFs would also be vulnerable in the coming few days. Already, the Vanguard FTSE Europe ETF (NYSEARCA: VGK ) shed over 0.8% on November 13 and went on to lose over 1.3% after market. Bottom Line Though we do not expect this bearish move to continue especially in the U.S., which has a strong trend underneath, the upheaval in the stock market may persist for a week or so due to the gloomy global backdrop and the rise in fear among investors. However, as the central banks of the U.S., Eurozone and Japan start to speak again, this unsteady market will take solid shape and decide the fate of several asset classes and sectors. Original Post

The Smart Beta Rally That Many Investors Missed In 2015

By Luciano Siracusano, III One of the big trends in the exchange-traded fund (ETF) industry has been this year’s flow of new money into developed world equity ETFs, both unhedged and currency hedged. WisdomTree estimates that nearly $100 billion of this year’s $171 billion in ETF industry inflows cascaded into these funds through the end of October. But the vast majority of assets in international equity ETFs-and the vast majority of net inflows this year-has been concentrated primarily in developed world large-cap strategies. While equity returns for the MSCI Europe and MSCI Japan indexes have, thus far in 2015, exceeded those generated by the S&P 500 Index, the bigger bull market has actually occurred in the smaller-company segment of the developed world. If we look at year-to-date returns through October 30, we can see by how much small-cap indexes have outperformed compared to broad market indexes comprising primarily large-cap companies in Europe, Japan and the developed world. (click to enlarge) For definitions of indexes in the chart, visit our glossary . What’s interesting is that the excess return produced by the small caps compared to their large-cap brethren is not just a 2015 phenomenon. Excess returns have held up over the last year, three years, five years and the better part of the last decade going back to the inception of the WisdomTree Indexes back in May of 2006. When One Compares Returns across Asset Classes, Additional Light Bulbs Light Up The double-digit gains European and Japanese small caps have generated thus far in 2015 have not only surpassed the broad European and Japanese benchmarks (MSCI Europe and MSCI Japan), they have outperformed the major asset classes investors typically tap to construct a globally diversified portfolio: large caps and small caps in the U.S. 1 ; MSCI EAFE Index and MSCI Emerging Markets Index; REITs 2 , U.S. Treasuries, investment-grade and high-yield corporate bonds 3 ; commodities 4 and gold 5 . Moreover, year-to-date in 2015, small caps measured by the WisdomTree Japan SmallCap Dividend Index and the WisdomTree Europe SmallCap Dividend Index outperformed each of the major indexes designed to measure how each smart beta factor is performing: MSCI Momentum, MSCI Quality, MSCI Value, MSCI Low Volatility or MSCI Size. What accounts for the divergence in returns? Part of it can be explained by sector concentrations, country and currency exposure. Another reason: Small-cap stocks are less tied to the global economy and often more sensitive to inflections in local economies. This can be partly explained by the historic tendency of small-company stocks to outperform large caps. This is one of the reasons that back in 2006 WisdomTree became the first ETF manager to launch international small-cap ETFs. At that time, WisdomTree knew that international small caps not only added potential for higher returns compared to large caps but they could also provide diversification benefits to a globally diversified portfolio. Since its inception in 2006, for example, the WisdomTree Japan SmallCap Dividend Index had a correlation of .49 to the S&P 500. Adding components with lower correlations to one’s U.S. equity exposure has the potential to lower the overall volatility of a globally diversified portfolio. Conclusion Because most passive indexes and active international managers tend to concentrate primarily on large-cap stocks, international investors may miss the potential of small-cap companies unless they make a conscious effort to include them in their portfolios. We believe international small-cap exposure can help investors complete their international allocations. Returns this year in Europe, Japan and the developed world add additional real-time evidence to support our thesis. Unless otherwise stated, data sources are Bloomberg and WisdomTree. Sources S&P 500 and Russell 2000 Index. MSCI US REIT Gross Total Return and S&P Global ex-U.S. REIT USD Index. Barclays US Agg Corporate Yield-To-Worst and Barclays U.S. High Yield 2% Issr Cap Yield To Worst. Commodity Research Bureau BLS/US Spot all Commodities Index. Gold Spot Price Index. Important Risks Related to this Article Performance, especially for very short periods, should not be the sole factor in making your investment decision. Foreign investing involves special risks, such as risk of loss from currency fluctuation or political or economic uncertainty. Investments focusing on certain sectors and/or smaller companies increase their vulnerability to any single economic or regulatory development. Investments in commodities may be affected by overall market movements, changes in interest rates, and other factors, such as weather, disease, embargoes and international economic and political developments. Diversification does not eliminate the risk of experiencing investment losses. Luciano Siracusano, III, Executive Vice President-Head of Sales and Chief Investment Strategist Luciano Siracusano, III has served as our Executive Vice President-Head of Sales and Chief Investment Strategist since March 2011. Prior to serving in those positions, Mr. Siracusano served as our Director of Research from 2001 until October 2008, and as a research analyst and editor of our various media publications from 1999 until 2001. Mr. Siracusano, together with Mr. Steinberg, was responsible for the creation and development of our fundamentally weighted index methodology.