Innovation has been a dominant theme in the ETF industry and this year, 2011, has shaped out to be perhaps the most exciting one yet. Growth is the other key ingredient for success and the exchange-traded universe has seen an abundance of new product launches; veteran issuers and newcomers alike have expanded their product lineups with dozens upon dozens of first-to-market products, while also making plans for more exciting offerings in the near future [see ETF Launch Center]. With over 1,400 funds to choose from at the moment, investors are surely looking forward to the expansion of the “toolkit” as the ETF structure has demonstrated its effectiveness in allowing for easy, and transparent, access to a multitude of asset classes that were previously out-of-reach for many. In light of this, we have picked out seven intriguing filings that are currently on deck and could hit the market sometime in 2012 [for more ETF insights, sign up for our free ETF newsletter]:
EG Shares Turkey Small Cap ETF
This exciting proposal, filed by EG Shares, will seek to replicate the price and yield performance of the INDXX Turkey Small Cap Index. The fund will fill a void for those seeking targeted exposure to Turkey’s robust economey; this ETF will feature an underlying portfolio that consists of 30 small cap equities that are domiciled in Turkey and have a market capitalization between $100 million and $2 billion. Turkey is home to a growing service based economy, which separates it from many other emerging market countries which are dependent on the production and export of commodities. Rising levels of urbanization along with favorable demographic trends are two good reasons for why many investors should be excited for this proposed small cap Turkey ETF. This new ETF would allow for “pure play” exposure to the local economy, whereas the current offering by iShares, the MSCI Turkey Index Fund (TUR), holds a top-heavy portfolio dominated by large cap, multinational stocks [see Turkey ETF Looks Delicious].
USCF Asian Commodity Basket Fund
The issuer behind the popular “contango-killer”, the United States Commodity Index Fund (USCI), has made plans to beef up its product lineup with an exciting offering that is sure to please investors with bullish prospects for Asia. The proposed Asian Commodity Basket Fund would include exposure to commodities that are deemed to maintain systemic importance to Asian economies, including the three major behemoths in the region: China, Japan, and India. Booming populations and rapid urbanization have been important drivers of commodity prices in recent years as developing Asian economies have developed an insatiable appetite for natural resources [see Special Report: In Search Of The Best Commodity ETF]. The construction of the underlying index of commodity futures will take into account a number of different factors, including: global production/consumption levels in Asian countries, as well as taking into account whether Asian economies are either net importers of exporters of a particular commodity.
ProShares USD Covered Bond
Fixed income instruments have seen a surge in popularity as investors are seeking out safety in anticipation of continuing market turmoil. Amidst the uncertainty, ProShares has laid out plans for a one-of-a-kind bond offering that is sure to please defensive-minded investors; this ETF will be designed to track the USD Covered Bond Index, which is comprised of U.S. dollar-denominated fixed income securities. The underlying holdings are “Covered Bonds” which are debt instruments issued by a financial institution that are secured by a pool of financial assets, most commonly through a “cover pool” of mortgages or public-sector loans [see also International Bond ETFs: Cruising Through All The Options]. Covered bonds also distinguish themselves from traditional debt securities because the bondholders have a senior claim against the cover pool in the event of a default by the issuing financial institution.
Global X Farmland & Timber ETF
Global X, one of the fastest growing ETF issuers, has filed for a specialized fund that allows for investors to favorably position themselves in anticipation of growing demand for food and shelter. This ETF will track the Solactive Global Farmland & Timberland Index, which consists of the largest and most liquid companies engaged in the farmland and timberland industry. This ETF could be a good choice for current income investors as the companies that own farmland and timberland areas tend to pay relatively higher dividends than the businesses which produce goods from these locations [see Futures Free Commodity ETFdb Portfolio].
PIMCO Foreign Currency Strategy ETF
Industry giant PIMCO is planning to roll out an actively-managed currency ETF, expanding its product lineup beyond traditional fixed income offerings. This intriguing fund will invest in the currencies of foreign countries, with a focus on those that are likely to outperform the U.S. dollar over the long term. To achieve this objective, PIMCO will evaluate other currencies based on a number of fundamental factors including: relative interest rates, inflation rates, exchange rates, monetary and fiscal policies, trade and current account balances, as well as legal and political developments. This ETF may serve as a valuable diversifying agent in investors’ portfolios as it will include both developed market and emerging market currencies [see Getting Creative With Currency ETFs].
First Trust North American Energy Infrastructure Fund
First Trust is planning on launching a sector-specific ETF that may appeal to conservative investors with a bullish outlook on the energy sector [see Energy Bull ETFdb Portfolio]. The First Trust North American Energy Infrastructure Fund would invest in U.S. and Canadian companies deemed to be engaged in the energy infrastructure segment of the energy and utilities sectors. The underlying portfolio will feature exposure to common stocks, depositary receipts, master limited partnerships (“MLPs”), MLP I-shares, MLP related entities, pipeline and power utility companies, Canadian energy infrastructure companies and Canadian Energy Infrastructure Trusts (“CEITs”). This could be a good choice for investors looking to access the “safer” corner of the energy market; firms that own and operate energy infrastructure, such as pipelines and storage tanks, generate revenues that are not impacted materially by changes in crude oil or natural gas prices [see MLP ETFs: Fact And Fiction].
German Hedged Equity Fund
New York-based WisdomTree is planning to bring to market an ETF focusing on the robust German economy, while at the same time avoiding the potentially adverse impacts of fluctuations in the currency market. This proposed fund will track the WisdomTree Germany Hedged Equity Index, which offers investors exposure to German equity markets while at the time offsetting exposure to fluctuations of the value relative to the U.S. dollar. The index will consist of German securities that have a minimum market cap of at least $1 billion and the underlying securities will be weighted by aggregate dividends. The fund’s methodology, which strips out exposure to the euro, may appeal to investors who want exposure to German companies but believe that the euro will be weakening against the dollar [see Three Long/Short Ideas For Euro Zone Debt Drama].
Disclosure: No positions at time of writing.