5 Very Successful ETF Launches Of 2014
2014 turned out to be momentous for the ETF industry with assets hitting the $2 trillion (approximately) mark. Over 180 ETFs were launched in 2014, higher than last year’s 150 initiations and 2012’s 168 rollouts. Not only this, a considerable number of ETFs are in the pipeline, pointing to growing investor interest for exchange-traded products in this market. Net inflows in November itself were $42.4 billion , indicating a record month exceeding the prior high of $41.1 billion in July 2013. Kudos go mainly to a wide range of innovative and fresh-themed products in the space, which hold investors’ attention despite the ebb and flow in the market. Among the new products, active funds, smart-beta ETFs, high yield options and hedged international products were appreciated by investors. Below, we have highlighted five ETFs launched in 2014 that scooped up assets within a short time span on the market, and look to be big winners for their issuers down the road: First Trust Dorsey Wright Focus 5 ETF (NASDAQ: FV ) The product saw huge success, though it kicked off in the initial phase of the year, earning as much as $1.7 billion in assets. First Trust has always been famous for its ‘smart indexing’. The product is designed to indentify the five First Trust sector- and industry-based ETFs that are arguably expected to have the maximum chance of outperforming the other ETFs in the selection universe. The new portfolio is based on momentum strategies as measured by Dorsey Wright’s definition of relative strength characteristics. DWA essentially eliminates the underlying ETF’s volume, intraday net asset value (NAV) or bid/ask spread and closely monitors how their prices are performing versus other ETFs within their respective universe. The following are the sector ETFs featuring in FV: First Trust NYSE Arca Biotechnology Index Fund (NYSEARCA: FBT ), First Trust Health Care AlphaDEX Fund (NYSEARCA: FXH ), First Trust Consumer Staples AlphaDEX Fund (NYSEARCA: FXG ), First Trust Dow Jones Internet Index Fund (NYSEARCA: FDN ) and First Trust Consumer Discretionary AlphaDEX Fund (NYSEARCA: FXD ). While the top choice receives about 25% exposure, the last pick gets 17.7% focus of the fund. For this ‘smart’ approach, the product charges 95 bps in fees. The product is up about 12% since its inception in early March. First Trust Enhanced Short Maturity ETF (NASDAQ: FTSM ) The actively managed product seeks to provide current income, with a focus on capital preservation. For this purpose, the fund invests in U.S. dollar denominated short-term investment grade securities. Making its debut in August, the product has already amassed as much as $798 million in assets. As such, the fund has a weighted average maturity of 0.90 years and an average duration of 0.20 years, indicating negligible interest rate risk. The fund holds a big basket of 162 securities. The fund charges 25 bps in fees and the product has been flat this year thanks to the upheaval in the short-end of the yield curve, and the fact that this space generally makes small moves anyway. Vident Core U.S. Bond Strategy ETF (NASDAQ: VBND ) The bond ETF space is tossing around the potential rate hike talks in the U.S. market. This has left investors busy in thinking through what sort of duration and investment grade bonds to pick right now. Thanks to this backdrop, VBND too has been able to garner considerable assets of $313 million within just two months. Securities with 5-7 years of maturity, with 7-10 years of maturity and with 3-5 years of maturity take about 35%, 34% and 26% of weight, respectively, in the ETF indicating the fund’s tilt toward medium-to-long-term bond market. The product charges 45 bps in fees and has lost about 0.6% since its inception. First Trust Eurozone AlphaDex ETF (NASDAQ: FEUZ ) The product hit the market on October 21 and has amassed about $323 million since then. The product looks to pick the Euro zone stocks with both growth and value factors being taken into consideration. The product is highly diversified with no stock accounting for more than 1.39% of the portfolio. The ETF has been heavy on France (23.1%) and Germany (22.6%). Investors are basically mulling over the accommodative monetary policy of the ECB and counting on the likely QE measures to be introduced in the region soon. This has helped the fund see success in such a short time frame. The product charges 80 bps in fees. iShares MSCI ACWI Low Carbon Target ETF (NYSEARCA: CRBN ) Investors would be surprised to know that the ETF industry has received two carbon funds lately. While both have been all the rage, the newer one – CRBN – has piled up $140 million in assets within just 15 days of its launch. The fund has global coverage with reduced carbon exposure. The index the fund tracks looks to pick stocks with low carbon emissions. The fund charges 20 bps in fees a year from investors.