The third quarter got off to a sizzling start in the ETF industry; a surge in asset prices boosted asset levels significantly after two months of freefalls, and the product development activity remained strong after a busy month of September. Close to 30 new products began trading last month, including many first-to-market ideas that have opened up new asset classes and investment strategies. October additions to the ETF lineup are highlighted below.
New exchange-traded products that began trading in October include:
- ProShares, the leading provider of alternatives ETFs, launched two more volatility ETFs. These funds that offer leveraged and inverse exposure to VIX futures contracts are Ultra VIX Short-Term Futures ETF (UVXY) and Short VIX Short-Term Futures ETF (SVXY).
- Rydex rolled out the CurrencyShares Chinese Renminbi Trust (FXCH), adding to its currency product lineup and following on the heels of other ETFs tapping into the Chinese currency. This ETF is structured as a grantor trust allowing investors to participate in the changes of the U.S. dollar price of the Chinese currency.
- AdvisorShares released the TrimTabs Float Shrink ETF (TTFS) to add to its portfolio of actively-managed ETFs. The main methodology under this ETF is the idea that stocks perform best when the total number of outstanding shares has decreased over the past four months or so.
- UBS brought ETRACS Monthly 2x Leveraged ISE Cloud Computing TR Index ETN (LSKY) to market three months after First Trust launched SKYY in July linked to the same index. LSKY offers leveraged exposure to cloud computing in the technology sector.
- Russell added to its portfolio with the launch of four investment discipline products that target segments of the Russell 2500 Index: Small Cap Aggressive Growth ETF (SGGG), Small Cap Consistent Growth ETF (SCOG), Small Cap Low P/E ETF (SCLP), and Small Cap Contrarian ETF (SCTR).
- ProShares debuts two products linked to the Dow Jones-UBS Natural Gas Subindex. The new Ultra DJ-UBS Natural Gas (BOIL) and UltraShort DJ-UBS Natural Gas (KOLD) will seek to over 2x daily leverage to their underlying index.
- Van Eck rolled out another ETF to its lineup of international bond ETFs. The Market Vectors Renminbi Bond ETF (CHLC) will allow investors to gain exposure to changes in the U.S. dollar value of the yuan through investment grade debt available to investors outside of China denominated in renminbi.
- A series of ETNs were launched by VelocityShares linked to precious metals indexes. These eight notes offer both long and inverse leveraged exposure: 3x Long Gold ETN (UGLD), 3x Inverse Gold ETN (DGLD), 3x Long Silver ETN (USLV), 3x Inverse Silver ETN (DSLV), 2x Long Platinum ETN (LPLT), 2x Inverse Platinum ETN (IPLT), 2x Long Palladium ETN (LPAL), and 2x Inverse Palladium ETN (IPAL).
- Charles Schwab released the Schwab U.S. Dividend ETF (SCHD) replicating the Dow Jones U.S. Dividend 100 Index. The criteria used to determine the stocks in the underlying index include cash flow to total debt, return on equity, dividend yield, 5-year dividend growth rate.
- iShares, the largest issuer of ETFs in the U.S. by total assets, added four more products focusing on low volatility stocks: MSCI USA Minimum Volatility Index Fund (USMV), MSCI EAFE Minimum Volatility Index Fund (EFAV), MSCI Emerging Markets Minimum Volatility Index Fund (EEMV), MSCI All Country World Minimum Volatility Index Fund (ACWV).
- iShares launched another ETF similar to EMB, the Emerging Markets Local Currency Bond Fund (LEMB). This ETF will allow investors to gain exposure to exchange rates as the debt held by LEMB is denominated in local currencies.
- RBS released the Global Big Pharma ETN (DRGS) that employs an equal weighting allocation. This ETN will replicate the NYSE Arca Equal Weighted Pharmaceutical Total Return Index.
- As October came to an end, WisdomTree revised its Dreyfus New Zealand Dollar Fund (previously traded under the ticker BNZ) to the Australian & New Zealand Debt Fund (AUNZ). This actively managed fund will focus on bonds denominated in local currencies of Australia and New Zealand.
In addition to all the new product launches in October, the pipeline continued to fill with some interesting ideas that could hit the market in the fourth quarter of this year. Some of the more intriguing proposed products detailed in October SEC filings include:
- United States Commodity Funds detailed plans this month for an Asian Commodity Basket Fund. This fund plans to reflect Asian demand for physical commodities with the fund tilting holdings towards those resources that are particularly in demand.
- First Trust filed for a CBOE VIX Tail Hedge Index Fund seeking to hedge against volatile markets with dividends reinvested.
- iShares continues on their expansion as it plans for another ETF launch. A number of funds offering exposure to small cap stocks were proposed: MSCI South Korea Small Cap Index Fund, MSCI Taiwan Small Cap Index Fund, MSCI Hong Kong Small Cap Index Fund, MSCI Germany Small Cap Index Fund, MSCI Canada Small Cap Index Fund, MSCI Australia Small Cap Index Fund, MSCI Singapore Small Cap Index Fund, MSCI United Kingdom Small Cap Index Fund.
- Russell detailed plans fro six new active products, including the Russell U.S. Large ETF, Russell U.S. Large Cap Growth ETF, Russell U.S. Large Cap Value ETF, Russell U.S. All Cap ETF, Russell Mid Cap ETF, and Russell Small Cap ETF.
One fund closed in October:
- Direxion shut down its Airlines Shares ETF (FLYX) citing a lack of assets. After the closing of this fund, Direxion no longer will have any non-leveraged or inverse products.
Disclosure: Photo courtesy of Martin Doege. No positions at time of writing.