With 2013 in the books, the ETF industry looks to be gearing up for yet another year of growth and innovation. Last year, investors welcomed a slew of new exchange-traded products, including several new first-to-market products: the FTSE Portugal 20 ETF (PGAL), the Nashville Area ETF (NASH), and the Nigeria Index ETF (NGE). Though some new funds struggled to gain traction, other 2013 launches were quite successful; the Barclays ETN+ FI Enhanced Global High Yield ETN (FIGY) raked in more than $1.3 billion in assets, while the Barclays ETN+ FI Enhanced Europe 50 ETN (FEEU) saw $1 billion in inflows [see The Most Successful New ETFs of 2013].
Democratization remains a driving theme in the ETF universe and investors have been quick to take advantage of cost-efficient products offering access to increasingly popular asset classes. And though 2014 has just begun, ETF issuers are already filling the product pipelines. Below, we take a look at seven ETFs investors should be excited for in 2014:
After launching its highly successful Buyback Achievers Portfolio (PKW, B+) in 2006, Invesco PowerShares announced that it will be debuting its international version of the fund sometime this year. The International BuyBack Achievers Portfolio will track the NASDAQ International BuyBack Achievers Index, a broad-based index that invests in foreign companies classified as “BuyBack Achievers.” To be included in the index, companies must have reduced, through repurchases, the number of their outstanding shares by at least 5% in the past 12 months [see 14 Rapid Fire ETF Ideas for 2014].
The main appeal behind this strategy is relatively straightforward: if a company is buying back its own stock, management must believe that shares are undervalued, which can be interpreted as a signal to the market that shares are mispriced as they are likely discounted. In other words, a stock repurchase program can be seen as a sign of confidence, which may potentially bolster the stock price higher as more and more investors take notice.
International Hedged Dividend Growth Fund
WisdomTree announced in 2013 that it plans to add another currency hedged ETF to its lineup this year, but this time with a focus on international dividends. The International Hedged Dividend Growth Fund will track the WisdomTree International Hedged Dividend Growth Index, which is designed to provide exposure to dividend-paying common stocks with growth characteristics of companies in the industrialized world, excluding Canada and the United States, while at the same time neutralizing exposure to fluctuations of the value of foreign currencies relative to the U.S. dollar.
The fund will consist of roughly 300 companies from WisdomTree’s DEFA Index (Dividend index of Europe, Far East Asia, and Australia), and will be ranked by certain growth and quality factors. The fund will feature exposure to 15 developed countries, including Australia, Belgium, Denmark, Israel, Japan, Australia, and Singapore .
Market Vectors All China ETF
Van Eck filed regulatory paperwork with the SEC for permission to create a passively managed equity ETF that would hold every kind of share class of Chinese companies. The All China ETF will track a market-cap weighted index (which is currently unnamed), that consists of Chinese companies that are traded in a variety of share classes, including China A-Shares, China B-Shares, China H-Shares, China Red Chips, and China P-Chips, along with Chinese companies listed in the United States and Singapore.
Investors should note, however, that because Van Eck s not a qualified foreign institutional investor it invests directly in A-Shares using an A-Share quota of an unspecified subadvisor [see the Best and Worst Country ETFs of 2013].
Ark Genomics Revolution ETF
The Los Angeles-based Ark Investment Management LLC is hoping to make its debut in the ETF world with the launch of several unique ETFs, one of which is the Genomics Revolution ETF. The ETF will primarily invest in domestic and foreign equity securities of companies that are expected to benefit from the development of new products or services, technological improvements and advancements in scientific research that are relevant to the theme of genomics.
According the to prospectus, the healthcare fund will focus on companies that are involved in “extending and enhancing the quality of human and other life.” These types of companies within the healthcare sector may include manufacturers and distributors of health care equipment and supplies, owners and operators of health care facilities, health maintenance organizations and managed health care plans, health care providers and issuers that provide services to health care providers [see Best and Worst Sector ETFs of 2013].
SmartX Nasdaq Quality Dividend Index ETF
In its recent SEC filing, Guinness Atkinson Asset Management, an issuer known for its actively managed mutual funds focused on alternative energy and Asia, outlined plans for the SmartX Nasdaq Quality Dividend Index ETF. The fund will track the Nasdaq Quality Dividend Index, which is comprised of companies that meet a number of requirements regarding cash flow return on invested capital, dividend payment history, and debt-to-equity.
The fund will also be equal-weighted, and will offer exposure to a variety of countries including the U.S., the UK, France, Germany, Italy, the Netherlands, China (including Hong Kong), Canada, and Australia.
Isolated U.S. Dividend Growth Index ETF
Another ETF newcomer, Reality Shares Advisors plans to launch three new dividend funds, one of which is the Isolated U.S. Dividend Growth Index ETF. The fund will rack an index that reflects the level of “implied dividends” on a select group of large capitalization securities listed for trading in the U.S [see The Best and Worst Performing Dividend ETFs of 2013].
The term “implied dividends” is sometimes used to refer to the level of dividends an issuer is expected to pay during a given time period. The fund will use a combination of long positions in both stocks and ETFs, as well as long and short positions in options based on U.S. large capitalization equity securities and indexes comprised of U.S. large capitalization equity securities such as the S&P 500 Index and NASDAQ 100 Index.
RBA Industrial Renaissance ETF
First Trust shared its plans to roll out its new American Industrial Renaissance ETF, which will track the Richard Bernstein Advisors American Industrial Renaissance Index. The fund’s underlying index is designed to measure the performance of small and mid cap U.S. companies in the industrial and community banking sectors.
The investment thesis for this fund is based on RBA’s belief that the United States may regain industrial market share, based on factors such as access to cheap energy sources, the growing availability of bank financing for manufacturers, and the relative stability of the U.S. market compared with any emerging markets.
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Disclosure: No positions at time of writing.