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Successful ETF Launches Of Q1

The ETF industry is growing by leaps and bounds irrespective of whether the markets are on a bull or bear run. Thanks go largely to unique strategies, creativity, transparency, diversification benefits, enhanced tax competences, low turnover and low cost. In fact, ETFs are now considered as a preferred investment vehicle across the globe over mutual funds and hedge funds. U.S. ETFs have gathered about $2.2 billion of capital so far in 2016, as per etf.com . Though it is much lower than $59 billion inflows seen in the year-ago period, both existing and new issuers remain active in binging innovative products to the market. About 37 ETFs have been launched in the first quarter, taking the total number of ETFs to 1,863 and total assets to over $2.1 billion. Below, we highlight four ETFs that have gathered maximum attention from investors and have a huge potential to dominate the market in the coming months. SPDR SSGA Gender Diversity Index ETF (NYSEARCA: SHE ) Several researches found that companies that have female employees in the top brass have a tendency to outperform the market. As per the latest study from market index provider MSCI , companies with boardrooms featuring “strong female leadership” have generated 36.4% greater return on equity since 2009 than male-dominated companies. A new study by Quantopian, a Boston-based trading platform, has revealed that companies with female CEOs in the Fortune 1000 generated 226% better returns than the S&P 500 over the past 12 years (read: Women Leaders ETFs Head to Head: WIL vs. SHE ). Given the long history of outperformance, investors have shown their eagerness to add female-centric companies to their portfolio. This is easily depicted by the successful debut of SHE, which has attracted nearly $265 million in assets since its inception on International Women’s Day. It is the most popular ETF launch of Q1. The fund offers exposure to the companies that have managed to recruit and retain women in leadership positions by tracking the SSGA Gender Diversity Index. Holding 140 stocks in its basket, it is moderately concentrated in the top firms with each holding less than 6.6% share. In terms of sector, financials, healthcare, information technology, consumer discretionary, and industrials occupy the top five positions with double-digit exposure each. The fund charges 20 bps in annual fees and trades in solid volume of 310,000 shares a day on average. PowerShares DWA Tactical Multi-Asset Income Portfolio (NASDAQ: DWIN ) Amid heightened uncertainty and volatility, investors are seeking to employ strategies that could fetch higher returns with lower risk to their portfolio. This has raised the appeal for multi-asset ETFs, which offer huge diversification benefits by investing across different asset classes having low correlations with each other. These products aim to provide a high level of current income with stability and potential for long-term appreciation while they simultaneously avoid the downside risk of specific asset classes (read: Multi-Asset ETFs to Counter Volatility ). As a result, DWIN has become extremely popular among investors in its first month of debut having amassed $35.5 million in AUM. It is a fund of five funds and tracks the Dorsey Wright Multi-Asset Income Index, which seeks to capitalize on seven different income-producing market segments including corporate bonds, emerging market debt, dividend stocks, MLPs, REITs, and preferred shares based on relative strength and current yield criteria. Currently, each of the five ETFs in the basket accounts for around 20% of the assets, making the portfolio highly diversified. The fund is quite expensive, charging 69 bps in fees and expenses while volume is light at around 40,000 shares. ETRACS 2xMonthly Leveraged S&P MLP Index ETN Series B (NYSEARCA: MLPZ ) This is a leveraged ETN targeting the MLP corner of the broad energy segment. It delivers twice (2x or 200%) the returns of the monthly performance of the S&P MLP Index. Launched on February 8, the note is catching investors’ eye amid wild swings in oil prices. This is because most MLPs, which are engaged in the processing and transportation of energy commodities such as natural gas, crude oil, and refined products, are best positioned to withstand the decline in oil prices and be the major beneficiaries of an oil boom in the long term. These have relatively consistent and predictable cash flows, making them safer and less risky than other plays in the broader energy space. Additionally, the leveraged factor tacked on it is encouraging investors to make big gains on quick turns in oil prices. MLPZ has gathered about $34.9 million in its asset base since its inception but trades in light volume of about 30,000 shares. Expense ratio comes in at 0.95%. ETRACS 2xMonthly Leveraged Alerian MLP Infrastructure Index ETN Series B (NYSEARCA: MLPQ ) MLPQ is also a leveraged MLP ETN launching on February 8 and providing two times exposure but tracks the Alerian MLP Infrastructure Index. It saw slightly lower inflows of $34.7 million and even lower average daily volumes than MLPZ. However, it charges lower fees by 10 bps. Link to the original post on Zacks.com

Hungary Too In The Rate-Cut Club: ETFs In Focus

Hungary slashed its benchmark three-month deposit rate to a new low of 1.20% from 1.35%. It also lowered the overnight lending rate to 1.45% from 2.1%. The overnight deposit rate is now in negative territory from 0.1%.to -0.05%. The central bank took the step citing low imported inflation, European Central Bank (ECB) easing measures and continued slump in oil prices. Meanwhile, the bank also lowered its forecast for inflation this year. The bank now expects inflation to be around 0.3% as compared to the previous expectation of 1.7% announced in December. The target inflation the bank seeks to achieve is 3%. Thus, it plans to set a benchmark rate at such levels, which can be maintained for an extended period to reach its inflation target. Earlier this month, the ECB came up with a more intensified economic stimulus and opted for multiple rate cuts and the expansion of its quantitative easing program to boost the economy. Meanwhile, several other countries are undertaking easing measures and cutting rates. Last week, Norway indicated that it could join other European countries Sweden, Denmark and Switzerland in sub-zero levels of interest rate. On the other side of the pond, the Fed kept a dovish stance and dialed back its number of rate hikes to two instead of four as was projected last December. The rate cut measures by the Hungarian central bank, which was undertaking initiatives like cheap lending to small firms, subsidized funds to retail banks and buying government bonds, represent a huge shift in policy. Although the possibility of further rate cuts can’t be excluded, the central bank warned that too low rates may be counterproductive, forcing the banks to tighten lending conditions. Keeping these points in mind, we highlight four ETFs – RevenueShares Global Growth ETF (NYSEARCA: RGRO ), Cambria Global Value ETF (NYSEARCA: GVAL ), Guggenheim MSCI Emerging Markets Equal Weight ETF (NYSEARCA: EWEM ) and EGShares Low Volatility Emerging Markets Dividend ETF (NYSEARCA: HILO ) – that have high exposure of 11.7%, 7.7%, 5% and 4.8%, respectively, to Hungary. RGRO This ETF looks to track the RevenueShares Global Growth Index comprising the top five developed and top five emerging countries in the Standard & Poor’s Global Broad Market Index based on year-over-year GDP growth from the prior two quarters. The fund charges 70 basis points a year and has 95 stocks in its basket. Energy takes 21% of the fund’s exposure followed by basic materials and financials. As much as 74% stocks in the fund are large caps. The fund has total assets of $2.1 million with paltry volumes of less than 1,000 shares. It has gained 6% so far this year (as of March 23, 2016). GVAL GVAL seeks to match the performance of the Cambria Global Value Index. With 126 stocks in its basket, the fund is well diversified with none of the stocks holding more than 3% weight while financials has the highest exposure at 23%. With total assets of $65.7 million, the fund has average volume of 17,000 shares and an expense ratio of 69 basis points. It has returned 3.3% so far this year. EWEM EWEM is based on the MSCI Emerging Markets Equal Country Weighted Index and has 346 stocks in its basket with none holding more than 4% of total assets. The fund has an AUM of $11 million and trades in average volumes of 5,000. Financials dominates in terms of sector exposure, accounting for an almost 39% of total assets. The fund charges an expense ratio of 76 basis points. It has gained 7.1% in the year-to-date period. HILO HILO is based on the EGAI Emerging Markets Quality Dividend Index and has 49 stocks in its basket with none holding more than 2.3% of total assets. The fund has an AUM of $17.3 million and trades in average volumes of 6,000. Financials dominates in terms of sector exposure with telecommunication services and materials rounding off the top three. The fund charges an expense ratio of 85 basis points. It is up 9.8% in the year-to-date period. Original post

How To Avoid The Worst Style ETFs: Q1’16

Question: Why are there so many ETFs? Answer: ETF providers tend to make lots of money on each ETF so they create more products to sell. The large number of ETFs has little to do with serving your best interests. Below are three red flags you can use to avoid the worst ETFs: Inadequate Liquidity This issue is the easiest issue to avoid, and our advice is simple. Avoid all ETFs with less than $100 million in assets. Low levels of liquidity can lead to a discrepancy between the price of the ETF and the underlying value of the securities it holds. Plus, low asset levels tend to mean lower volume in the ETF and larger bid-ask spreads. High Fees ETFs should be cheap, but not all of them are. The first step here is to know what is cheap and expensive. To ensure you are paying at or below average fees, invest only in ETFs with total annual costs below 0.48%, which is the average total annual cost of the 298 U.S. equity Style ETFs we cover. The weighted average is slightly lower at 0.17%, which highlights how investors tend to put their money in ETFs with low fees . Figure 1 shows that the AdvisorShares Madrona Domestic ETF (NYSEARCA: FWDD ) is the most expensive style ETF and the Schwab U.S. Large Cap (NYSEARCA: SCHX ) is the least expensive. Absolute Shares Trust ( WBIB , WBID , WBIC , and WBIG ) provides four of the most expensive ETFs while Schwab ( SCHX and SCHB ) and Vanguard ( VOO and VTI ) ETFs are among the cheapest. Figure 1: 5 Least and Most Expensive Style ETFs Click to enlarge Sources: New Constructs, LLC and company filings Investors need not pay high fees for quality holdings. The State Street SPDR S&P 500 Buyback ETF (NYSEARCA: SPYB ) earns our Very Attractive rating and has low total annual costs of only 0.39%. On the other hand, a fund such as the iShares Core U.S. Growth ETF (NYSEARCA: IUSV ) holds poor stocks. No matter how cheap an ETF (0.08% TAC), if it holds bad stocks, its performance will be bad. The quality of an ETFs holdings matters more than its price. Poor Holdings Avoiding poor holdings is by far the hardest part of avoid bad ETFs, but it is also the most important because an ETFs performance is determined more by its holdings than its costs. Figure 2 shows the ETFs within each style with the worst holdings or portfolio management ratings . Figure 2: Style ETFs with the Worst Holdings Click to enlarge Sources: New Constructs, LLC and company filings PowerShares ( EQAL , PXMV , and EQWS ) appears more often than any other providers in Figure 2, which means that they offer the most ETFs with the worst holdings. The ProShares Ultra Telecommunications ETF (NYSEARCA: LTL ) is the worst rated ETF in Figure 2. The PowerShares Russell MidCap Pure Value ETF (NYSEARCA: PXMV ), the PowerShares Russell 2000 Equal Weight ETF ( EQWS ), the Vanguard Russell 2000 Growth Index Fund (NASDAQ: VTWG ), the Global X Super Dividend U.S. ETF (NYSEARCA: DIV ), and the Guggenheim S&P Small Cap 600 Pure Value ETF (NYSEARCA: RZV ) also earn a Dangerous predictive overall rating, which means not only do they hold poor stocks, they charge high total annual costs. Our overall ratings on ETFs are based primarily on our stock ratings of their holdings. The Danger Within Buying an ETF without analyzing its holdings is like buying a stock without analyzing its business and finances. Put another way, research on ETF holdings is necessary due diligence because an ETF’s performance is only as good as its holdings’ performance. PERFORMANCE OF ETFs HOLDINGs = PERFORMANCE OF ETF Disclosure: David Trainer and Kyle Guske II receive no compensation to write about any specific stock, style, or theme. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.