Tag Archives: zacks-com

iShares To Shut Down 18 ETFs

iShares, the biggest issuer of ETFs, has planned to shut down 18 funds from its lineup. The closures reflect a lack of interest in these products in an investment world with more than 1,700 U.S. listed ETFs. The products to be closed have a combined AUM of $227 million and will be liquidated by August 21. All these funds are quite unpopular, as all have AUMs of under $50 million. Among the ones to be closed, the iShares FTSE China (HK-Listed) Index ETF (NASDAQ: FCHI ) is the most popular with an asset base of $36.3 million, followed by the iShares MSCI Emerging Markets Eastern Europe ETF (NYSEARCA: ESR ) with an AUM of $29.2 million. Most of the products to be closed down offer exposure to international stocks. Some of these include the iShares MSCI All Country Asia ex-Japan Small Cap Index ETF (NASDAQ: AXJS ) , the iShares MSCI Australia Small Cap Index ETF (BATS: EWAS ) , the iShares MSCI Canada Small Cap Index ETF (BATS: EWCS ) , the iShares MSCI Hong Kong Small-Cap ETF (NYSEARCA: EWHS ) and the iShares MSCI Singapore Small-Cap ETF (NYSEARCA: EWSS ) . Others with an international focus are the iShares MSCI Emerging Markets EMEA Index ETF (NASDAQ: EEME ) , the iShares MSCI Emerging Markets Growth Index ETF (NASDAQ: EGRW ) and the iShares MSCI Emerging Markets Value Index ETF (NASDAQ: EVAL ) . Apart from these, the issuer has also planned to shut down some sector specific funds including the iShares MSCI All Country Asia Information Technology Index ETF (AAIT ), the iShares MSCI Emerging Markets Consumer Discretionary Sector Index ETF (NASDAQ: EMDI ) , the iShares MSCI Emerging Markets Energy Sector Capped Index ETF (NASDAQ: EMEY ) , the iShares FTSE EPRA/NAREIT Asia Index ETF (NASDAQ: IFAS ) and the iShares FTSE EPRA/NAREIT North America Index ETF (NASDAQ: IFNA ) . The i Shares Financials Bond ETF (NYSEARCA: MONY ) , the iShares Industrials Bond ETF (NYSEARCA: ENGN ) and the iShares Utilities Bond ETF (NYSEARCA: AMPS ) are the three debt funds which will also face shutdown. The above closures will shrink the offerings of iShares by about 6% to 299, according to XTF, as mentioned in an article by Barron’s . BlackRock (NYSE: BLK ) – the parent company of iShares – said that the decision was “based on an ongoing process to review its product lineup and ensure it meets the evolving needs of its clients.” The closures clearly highlight the survival of the fittest funds and a healthy process to eliminate the unpopular and unwanted funds. In fact, the ETF industry recently witnessed its 500th closure of ETFs and ETNs. Nonetheless, even following the 18-fund closure, iShares will still have a large number of U.S. listed ETFs under its umbrella, with the iShares Core S&P 500 ETF (NYSEARCA: IVV ) being the most popular with an asset base of $68.7 billion. Link to the original article on Zacks.com

Fund Managers Who Eat Their Own Cooking

According to fund tracker Morningstar, funds that have a significant amount invested in the portfolio from their manager’s pockets are likely to perform better. The Securities and Exchange Commission (SEC) made it compulsory since 2005 for fund companies to disclose their manager ownership. Using this data, Morningstar’s director of manager research Russel Kinnel compared funds and the degree of manager ownership against their performance in terms of benchmark returns between 2009 and 2014. The study concluded that 47% of funds having over $1 million of the fund manager’s personal money invested in the fund, outperformed benchmarks. The 47% figure is significant, as Kinnel says that nearly one-third of companies had either merged or shut down in the five-year timeframe. Meanwhile, 35% of funds that had no investment from their managers were able to beat their benchmarks. Fund Performance Based on Categories The performance difference is however not uniform for all category of funds. The most prominent difference was observed in U.S. and international stocks and Balanced funds. On the other hand, the ownership factor makes less impact on sector and taxable-bond funds’ performances. Among them, balanced funds showed the biggest difference in performance. As against a 32% success rate for Balanced funds with no investment from managers, 85% funds beat their benchmarks which have over $1 million investment from their managers. International funds having over $1 million managers’ money invested saw a 68% success rate, while those without managers’ personal wealth had a success rate of 32%. For U.S. stock funds, the success rate for funds with over $1 million of managers’ personal money was at 39%. Funds with no such investment from managers clocked a 29% success rate. However, sector funds showcase a less significant impact. Managers’ investment in sector funds helped 40% outperform, while 39% with no investment from managers outperformed benchmarks. Also for taxable-bond funds, 42% funds with manager investment beat benchmarks, while 38% funds with no manager money invested were able to succeed. Funds with Manager Investment Morningstar notes that 5,364 managers have no investment in their funds, while 2,659 have less than $100,000 invested. The number of fund managers who have over $1 million invested in their portfolios is just over 1,000. The list mentioned by Morningstar includes funds like the Artisan International Fund (MUTF: ARTIX ), which has total assets of $20.17 billion. This Zacks Mutual Fund Rank #2 (Buy) has 3 and 5 year annualized returns of 15.7% and 13.9%. The Oakmark Global I Fund (MUTF: OAKGX ), with total assets of $3.57 billion also features in the list. OAKGX has 3 and 5 year annualized returns of 18.8% and 13.4%. However, it currently has a Zacks Mutual Fund Rank #5 (Strong Sell). On the other hand, Zacks Mutual Fund Rank #1 (Strong Buy) fund Oppenheimer Global Fund A (MUTF: OPPAX ) is one such funds with manager investment over $1 million. OPPAX has total assets of $10.76 billion and its 3 and 5 year annualized returns stand at 19.2% and 14.3%. The Meridian Growth Fund (MUTF: MERDX ) saw investments from managers Chad Meade and Brian Schaub within a year they took over the fund. MERDX’s 3 and 5 year annualized returns are 15.6% and 16.6% and it carries a Zacks Mutual Fund Rank #3 (Hold). Similarly, Mihir Worah and Scott Mather also invested $1 million each after taking over the popular PIMCO Total Return Fund A (MUTF: PTTAX ) from bond investor extraordinaire William Hunt “Bill” Gross. PTTAX currently holds a Zacks Mutual Fund Rank #2. Interestingly on the other hand, Bill Gross, who had quit PIMCO in a shocking move to join Janus Capital Group (NYSE: JNS ), was reported to have invested $700 million from his own pocket in the Janus Global Unconstrained Bond fund. Should You be Interested in Such Funds? Managers who “eat their own cooking” helps in building confidence. Personal ownership in the portfolio means the managers’ money is also at stake along with investors’ money. However, this factor is limited to building confidence and acts only as a positive indicator. Investing in a fund based on if managers are investing should not be driving investment decisions. However, a fund’s fundamentals, historic and potential performance strength among other factors should also be considered. Low cost structure of the fund is also a key criterion. Investors may also look for a favorable manager rating. The mutual funds listed below carry either a Zacks Mutual Fund Rank #1 (Strong Buy) or Zacks Mutual Fund Rank #2 (Buy) as we expect the funds to outperform its peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but the likely future success of the fund. They also have encouraging year-to-date and 3 and 5-year annualized returns. These funds have a high manager rating . It measures the risk-adjusted performance of a fund’s management relative to the fund’s peer group. The minimum initial investment is within $5000. T. Rowe Price Health Sciences Fund (MUTF: PRHSX ) invests a lion’s share of its net assets in common stocks of companies engaged in the research, development, production, or distribution of products or services related to health care, medicine, or the life sciences. PRHSX may invest in companies of any size, the majority of fund assets are invested in large and mid capitalization companies. PRHSX currently carries a Zacks Mutual Fund Rank #2 and has gained 19.7% year to date. The 3 and 5 year annualized gains are 38.4% and 31.8%, respectively. The manager rating is 19.2. Janus Global Life Sciences Fund A (MUTF: JFNAX ) invests a large portion of its assets in companies that have a life science orientation. JFNAX generally invests a minimum 25% of its assets in companies that are part of the “life sciences” sector. JFNAX currently carries a Zacks Mutual Fund Rank #1 and has gained 18.2% year to date. The 3 and 5 year annualized gains are 39.9% and 30%, respectively. The manager rating is 13.3. Diamond Hill Select Fund A (MUTF: DHTAX ) seeks to provide capital growth over the long term. DHTAX invests in 30-40 US equities which the Adviser believes are undervalued. These equity securities may be of any size. The adviser estimates a company’s value devoid of its market price and also takes into effect the industry competition, regulatory factors and various industry factors among others. DHTAX currently carries a Zacks Mutual Fund Rank #1 and has gained 8.9% year to date. The 3 and 5 year annualized gains are 24.1% and 16.2%, respectively. The manager rating is 7.8. Originally posted on Zacks.com

Market Vectors Rolls Out A Spin-Off ETF

The niche ETF concept has been at the top of every issuer’s mind lately. There is hardly any scope for plain vanilla products in this rapidly growing industry. Moreover, these unique investing options give investors a scope to play the various areas of the market in basket form, using strategies that are usually hard to reproduce in a regular-themed portfolio. Probably, inspired by this sentiment, Market Vectors recently rolled out a spin-off ETF. The Market Vectors Global Spin-Off ETF (NYSEARCA: SPUN ) in Focus The fund tracks the Horizon Kinetics Global Spin-Off Index and comprises approximately 87 multi-cap securities belonging to the developed world. The universe of companies eligible for inclusion in the Index includes those that have been spun off. As per the summary prospectus , “for each company, an early entry at the start of the spin-off cycle aims to exploit valuation disconnects caused by selling pressure and pricing inefficiencies. A long-term hold seeks to capture periods of improved operating efficiency.” The fund does not appear to be concentrated on the top 10 holdings as no stock accounts for more than 1.64% of the basket. Among individual holdings, Global Brands Group Holding Ltd, Prothena Corp Plc (NASDAQ: PRTA ) and Indivior Plc ( OTCPK:INVVY ) occupy the top three positions in the fund, which has a net expense ratio of 0.55%. In terms of sector allocation, the ETF has double-digit allocation each in Consumer Discretionary, Financials and Industrials with 25.2%, 19% and 18.5%, respectively. Geographically, the fund is heavy on the U.S. with more than 65% exposure while the U.K. (6.5%) and Australia (5.5%) come in as the distant second and third. How Does it Fit in a Portfolio? In a spin-off, a company detaches certain assets to make a separate company and ‘spins off’, or hands out shares in that entity to the current shareholders. The most usual cause of a spin-off procedure is that the stock price of a big diversified company is unable to reciprocate the fair value of all its branches of operations. These could actually be among one of the top performing assets in the market. This is true for SPUN which actually reflects the full-phase of the separated companies. The issuer noted that such entities normally underperform in the earlier phase of their life-cycle due to the absence of historical performances, dearth of analyst coverage, inferior peer comparisons and market cap issues. However, over the long term, these entities trend to perform better on availability of historical results and the consequent perfection in the analysts’ reports. Better management often makes these lucrative bets. Thus, from the long-term perspective, the fund might be well liked by investors. ETF Competition The coast is clear for this newly launched ETF as it has to compete with just one ETF namely the Guggenheim Spin-Off ETF (NYSEARCA: CSD ) . Otherwise there is no meaningful player in this space. This fund tracks the Beacon Spin-off index which looks to focus on about 40 companies that have been spun-off within the past 30 months, but not before six months prior to the applicable rebalancing date. The fund charges 66 bps in fees (net) which much lower than the newly ETF. Thus, from the expense ratio point of view, SPUN scores a point over CSD. Moreover, CSD has moderately heavy concentration risk with the top four holdings taking 5% to 6% each. Thus, we see no hurdle for SPUN in garnering investors’ money. Article originally published on Zacks.com