The first 29 days of November were relatively quiet from a product development perspective, with only a handful of new exchange-traded products hitting the market. But that all changed on the final day of the month, when iPath debuted a new breed of leveraged ETNs and newcomer VelocityShares rolled out six products linked to VIX-related indexes. Both November 30 launches highlighted ongoing trends in the ETF industry; exchange-traded notes continue to gain traction as investors become more comfortable with the inherent credit risk, while options for exposure to equity market volatility continue to multiply.
November also continued the impressive string of product innovation that has become commonplace in the ETF industry in recent years, with various issuers introducing first-to-market products. Below, we highlight all of the new additions to the ETF lineup over the last month, as well as some of the ideas filling the pipeline [for updates on all new ETF launches, sign up for our free ETF newsletter].
ETFs that began trading in November include
- Vanguard released its International Real Estate Fund (VNQI), providing investors with additional global exposure in addition to their already popular US Real Estate Fund (VNQ). The new fund tracks the S&P Global ex-U.S. Property Index, which includes real estate investment trusts (REITs) and real estate operating companies (REOCs) in emerging and developed markets outside the U.S. [see Vanguard Debuts International Version Of VNQ].
- UBS announced the launch of its new E-TRACS Wells Fargo MLP Index ETN (MLPW). The exchange-traded note is linked to the Wells Fargo Master Limited Partnership Index, a float adjusted, capitalization weighted benchmark that seeks to measure the performance of all energy master limited partnerships listed on the NYSE and NASDAQ. Interest in MLPs has been growing as investors are looking for ways to gain exposure to this high yield corner of the domestic energy sector [see Guide To MLP ETFs]. The debt security is scheduled to expire on October 29, 2040.
- PIMCO expanded its ETF lineup with its new Broad U.S. Treasury Index Fund (TRSY), which tracks the BofA Merrill Lynch Liquid US Treasury Index. The launch of TRSY brings the total PIMCO ETF lineup to 13 funds, four of which are active. TRSY features an expense ratio of just 0.15%, well below the category average for Government Bonds of 0.27% [see TRSY Fundamentals].
- Global X rolled out the Gold Explorers ETF (GLDX), the first fund to offer pure play exposure to gold exploration companies and the potential to profit from new discoveries of the precious yellow metal. The fund tracks the Solactive Global Gold Explorers Index, a benchmark that consists of about 30 stocks. Many of these component companies are speculative in nature–they are literally hoping to strike gold–which makes the immediate diversification offered by the ETF structure potentially very valuable [see Playing Precious Metals Through Equity ETFs].
- Global X also added the Uranium ETF (URA) to its lineup. URA tracks the Solactive Global Uranium Index, a benchmark designed to reflect the performance of companies engaged in various parts of the uranium industry, including mining, refining, exploration, and manufacturing of equipment for the uranium industry. Uranium is a potentially compelling investment opportunity due to its importance as a fuel for nuclear power plants, which may become an increasingly important component of the energy sector.
- Citigroup made its ETF debut with a new exchange-traded note that offers investors another option for exposure to VIX futures [see filing details]. The new C-notes track the performance of the Citi Volatility Index Total Return (CVOL), a benchmark designed to measure directional exposure to the implied volatility of large cap U.S. stocks [also see Using ETFs As "Portfolio Insurance"].
- Global X continued its release of new products with the FTSE Norway 30 ETF (NORW), increasing its rapidly-growing ETF lineup to a total of 17 funds. NORW seeks to replicate the FTSE Norway 30 Index, which includes many of the largest publicly-traded Norwegian countries [see What Makes The Norway ETF Unique]. Those wishing to gain more diversified exposure to the Nordic region may look to the Global X Nordic ETF (GXF), which covers Sweden, Denmark, Norway, and Finland.
- iShares rolled out its version of a Russia ETF with the debut of the MSCI Russia Capped Index Fund (ERUS). The new fund will seek to replicate the performance of the MSCI Russia 25/50 Index, a benchmark that currently includes about 28 individual securities [also see Emerging Market ETFs: Seven Factors Every Investor Should Consider]. Exposure to the Russian economy ought to be managed wisely, as the BRIC component offers great potential, but it the faces the challenges of a shrinking population, under-developed infrastructure, and widespread corruption.
- iPath introduced a new kind of leveraged ETP on the final day of November, introducing 10 ETNs linked to popular domestic and international equity benchmarks. Unlike leveraged products that reset exposure on a daily basis, the new iPath products will seek to deliver amplified results over the term of the note–about ten years. iPath also rolled out a leveraged ETN linked to a mid-term VIX index.
- November also saw the entrance of a new player into the ETF arena, as VelocityShares debuted a total of six ETNs linked to various VIX-related indexes. Among the offerings are funds offering daily leveraged to indexes consisting of both short-term and mid-term VIX futures. VelocityShares, which was founded by former iPath execs, is targeted sophisticated traders looking to implement daily trading strategies with the new products [see VelocityShares Makes Splash In VIX ETF Space].
November proved to be a an active month for new ETF filings, as the pipeline of new product ideas continued to fill:
- ProShares provided details on a Hedge Fund Replication ETF that would track the performance of the Merrill Lynch Factor Model – Exchange Series. That benchmark is designed to maintain a high correlation with hedge fund beta, as represented by the HFRI Fund Weighted Composite Index, an equally-weighted composite of more than 2,000 constituent funds [see ProShares Planning Hedge Fund ETF].
- PowerShares is getting creative with its product offerings, with its most recent idea being a Bank Loan ETF [see detailed filings]. The proposed fund would seek to replicate the S&P/LSTA U.S. Leveraged Loan 100 Index, a benchmark designed to track the market-weighted performance of the largest institutional leveraged loans based on market weightings, spreads and interest payments. The broader S&P/LTSA Leveraged Loan Index serves as the benchmark to a handful of mutual funds, many of which have been popular with investors [try the Mutual Fund To ETF Converter Tool].
- PIMCO is proposing an actively managed ETF benchmarked against the Barclays Capital Universal Government Inflation-Linked Bond Index. The fund would be the first of its kind by offering investors exposure to the global TIPS market [see 2010: Year Of The Bond ETF].
- Global X is further growing its product pipeline by laying the groundwork for four new ETFs. The FTSE Andean 30 ETF is projected to track the FTSE Andean 30 Index, a benchmark that includes the 30 largest companies in Chile, Colombia, and Peru. Growing interest in Southeast Asia is perhaps behind the proposal for the FTSE ASEAN 40 ETF, which will track a benchmark that measures the performance of the 40 largest companies in the five ASEAN regions: Indonesia, Philippines, Singapore, Malaysia and Thailand [also read Looking For Green Shoots? Try Southeast Asian ETFs]. Additionally, Global X is planning on an N-11 ETF, which would focus on a bloc of emerging and frontier markets identified as having the potential to someday rival the G-7 [see ETFs For The "Next-11" Economies]. Lastly, Global X is proposing an ETF that offers concentrated exposure to emerging Canadian companies, specifically targeting the TSX Venture exchange in Canada. The proposed ETF would track the S&P/TSX Venture 30 Index, which consists of the 30 most liquid securities of the S&P/TSX Venture Composite Index [see Do You Need A Canada ETF?].
- State Street has plans two new funds with emerging market exposure. The first proposal is the SPDR Barclays Capital Emerging Markets Local Bond ETF (EBND), which would be the ETF giant’s first product offering in the emerging market debt category, an increasingly competitive space [read International Bond ETFs To Diversify Fixed Income Exposure]. The second proposal is for a fund that would track the S&P Emerging Markets Dividend Opportunities Index, a benchmark that consists of 100 of the highest yielding emerging markets stocks.
- Direxions’s lineup will shrink a bit in coming weeks, as the firm has announced that it will close down the Daily 2-Year Treasury Bull 3x Shares (TWOL) and the Direxion Daily 2-Year Treasury Bear 3x Shares (TWOZ). The closure was recommended by Rafferty Asset Management, the adviser for the Direxion Shares ETF Trust.
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Disclosure: No positions at time of writing.
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