Coming & Going: August 2011

Published on by on August 2, 2011 | Updated August 23, 2011

June ETF Launches
Ticker ETF Assets
(In Millions)
Avg. Volume
BARL S&P 500 Crude Oil Linked ETN $10.8 8,300
SKYY ISE Cloud Computing Index Fund $50.0 322,000
VZZB Long Enhanced S&P 500 VIX Mid-Term Futures ETN $4.4 400
DFVL iPath U.S. Treasury 5-Year Bull $4.0 8,500
DFVS iPath U.S. Treasury 5-Year Bear $4.0 200
XMPT Van Eck Market Vectors CEF Muni Income Fund $3.6 4,500
NKY Precidian MAXIS Nikkei 225 Index Fund $114.3 77,800
EMER IndexIQ Emerging Markets Mid Cap Fund $4.0 6,800
RRF WisdomTree Real Return Fund $5.1 3,000
SCHZ Charles Schwab U.S. Aggregate Bond ETF $70.3 5,100
HDG ProShares Hedge Fund Replication ETF $10.0 26,500
EIPO UBS ETRACS Internet IPO ETN $9.5 2,400
EIPL UBS Monthly 2x Leveraged ETRACS Internet IPO ETN $8.9 27,200

July was another hectic month for major equities, as the world struggled to deal with numerous debt crises that put downward pressure on global markets. In our first full month off of the quantitative easing program, rumors have already sprung up that a QE3 may be in store, as markets have failed to establish a strong trend.

This month saw 13 new products launch; while this may seem miniscule in comparison to recent months, this actually is more on par with the industry average, as the past few months have been particularly robust. Also, the healthy number of filings ensures that an ETF slowdown is nowhere in sight as the industry continues to expand its horizons. Below, we outline each of the new launches this month, and which investors these new products may be right for:

July ETF Launches

S&P 500 Crude Oil Linked ETN (BARL)

  • Launch: July 1
  • Asset Class: Equity
  • Structure: ETN
  • Expense Ratio: 0.79%

This Morgan Stanley fund is essentially a combination of the S&P 500 SPDR (SPY), United States Oil Fund (USO), and United States Brent Oil Fund (BNO), all rolled up into one. It’s important to note that BARL provides equal exposure to both stocks and commodities; a $100 investment in BARL provides both $100 worth of exposure to the S&P 500 and $50 worth of exposure to both Brent and WTI futures contracts. For those who like this strategy, this product will make for a great complimentary holding in your portfolio.

ISE Cloud Computing Index Fund (SKYY)

  • Launch: July 6
  • Asset Class: Equity
  • Structure: ETF
  • Expense Ratio: 0.60%

First Trust debuted SKYY much to the delight of many investors, as this product saw over 1 million shares traded in its first two days on market. Being the first ETF of its kind, many investors are anxious to see how this product will perform in the long run. For those who buy into the holdings and strategy of this fund, SKYY may be a great way to beef up the growth in your portfolio without investing abroad.

Long Enhanced S&P 500 VIX Mid-Term Futures ETN VZZB)

  • Launch: July 11
  • Asset Class: Volatility
  • Structure: ETN
  • Expense Ratio: 0.89%

This product offers exposure to mid-term VIX futures contracts, and forms in the ashes of the recently closed VZZ. VZZB will deliver returns that correspond to the 2x leveraged return of the CBOE Volatility Index over the life of the note. Unlike ETFs that may operate indefinitely, exchange-traded notes are debt instruments that feature predetermined maturity dates. VZZB will mature in July 2021. This ETN will be a good tool for gaining exposure to mid-term VIX contracts for those seeking to make a leveraged play.

iPath U.S. Treasury 5-Year Bull (DFVL)

  • Launch: July 12
  • Asset Class: Government Bonds
  • Structure: ETN
  • Expense Ratio: 0.75%

DFVL is a new offering into the intermediate-term exposure within iPath’s lineup of U.S. Treasury funds. This long 5-Year Treasury ETN is unique in that the underlying holdings of the related index are not U.S. Treasuries but futures contracts. That has the potential to deliver a risk/return profile that differs somewhat from a traditional ETF that invests directly in Treasuries.

iPath U.S. Treasury 5-Year Bear (DFVS)

  • Launch: July 12
  • Asset Class: Inverse Bonds
  • Structure: ETN
  • Expense Ratio: 0.75%

DFVS is the inverse offering to DFVL. Investors should note that the underlying holdings of both DFVL and DFVS are actually 5-year U.S. Treasury futures contracts, as opposed to actual Treasury holdings.

iPath U.S. Treasury 5-Year Bear (DFVS)

  • Launch: July 12
  • Asset Class: Inverse Bonds
  • Structure: ETN
  • Expense Ratio: 0.75%

DFVS is the inverse offering to DFVL. Investors should note that the underlying holdings of both DFVL and DFVS are actually 5-year U.S. Treasury futures contracts, as opposed to actual Treasury holdings.

Van Eck Market Vectors CEF Muni Income Fund (XMPT)

  • Launch: July 13
  • Asset Class: National Munis
  • Structure: ETF
  • Expense Ratio: 1.43%

The release of the Market Vectors CEF Municipal Income ETF  this week was well timed, giving investors a new option for accessing a corner of the U.S. bond market that has been the subject of heated debate in recent weeks. XMPT contains elements of both active and passive management, resulting in a hefty expense fee. In essence, the product seeks to passively replicate an index comprised of actively-managed CEFs.

Precidian MAXIS Nikkei 225 Index Fund (NKY)

  • Launch: July 13
  • Asset Class: Japan Equities
  • Structure: ETF
  • Expense Ratio: 0.50%

Precidian Funds a newcomer announced on Thursday the launch of the first U.S.-listed ETF offering exposure to the Nikkei 225 Index. There are several investment products linked to the Nikkei in existence around the world, but NKY is the first U.S.-listed ETF to offer exposure to the well known index. The largest components of NKY include robotics manufacturer Fanuc Ltd. (5.7%), Fast Retailing Co. (5.5%), and Softbank Corp (3.7%), much different than those of  EWJ.

IndexIQ Emerging Markets Mid Cap Fund (EMER)

  • Launch: July 13
  • Asset Class: Emerging Market Equities
  • Structure: ETF
  • Expense Ratio: 0.75%

IndexIQ launched their 15th offering in the space of mid-cap equity exposure, and EMER is yet another tool to fine portfolios that are lacking proper exposure to emerging economies. The fund has a broad portfolio of close to 350 securities and is most heavily weighted towards firms in Taiwan (22.8%), South Korea (13%), and South Africa (11.7%), although 20 countries in total are represented in the fund.

WisdomTree Real Return Fund (RRF)

  • Launch: July 14
  • Asset Class: Hedge Fund
  • Structure: ETF
  • Expense Ratio: 0.60%

RRF is a new actively-managed ETF that takes a unique approach to delivering total returns that outpace the rate of inflation, going beyond many of the more simplistic strategies that may have limited effectiveness when rising prices put a dent in portfolio values. Most importantly, unlike most ETFs in the Inflation Protected Bonds ETFdb Category, RRF won’t invest exclusively in U.S. TIPS; the bond portion of the portfolio is split between the U.S., developed markets, and debt of emerging market issuers as well.

Charles Schwab U.S. Aggregate Bond ETF (SCHZ)

  • Launch: July 14
  • Asset Class: Total Bond Market
  • Structure: ETF
  • Expense Ratio: 0.10%

SCHZ is the fourth ETF seeking to replicate that bond index, joining products from the three largest ETF issuers. The new ETF will also be the cheapest of the group with an expense ratio of just 0.10%. That makes SCHZ the cheapest bond ETF available to U.S. investors, undercutting BNG by a single basis point. Also, like all Schwab ETFs, SCHZ will be eligible for commission free trading within Schwab accounts, making it an attractively cheap offering.

ProShares Hedge Fund Replication ETF (HDG)

  • Launch: July 15
  • Asset Class: Hedge Fund
  • Structure: ETF
  • Expense Ratio: 0.95%

The new ETF is designed to maintain a high correlation to the HFRI Weighted Composite Index, an equal-weighted composite of more than 2,000 hedge funds. HDG will employ a proprietary model to establish weighted long or short exposure to six factors. Additionally, the fund will rebalance monthly, at which point a systematic regression analysis will determine which weighting for the factors would have produced the strongest correlation with the HFRI benchmark over the previous 24 month period.

UBS ETRACS Internet IPO ETN (EIPO)

  • Launch: July 21
  • Asset Class: Technology Equities
  • Structure: ETN
  • Expense Ratio: 0.65%

This new product offers exposure to Internet-related companies that have recently completed an initial public offering (IPO). The underlying portfolio includes many of the companies that have recently completed high profile IPOs, such as Pandora Media, OpenTable, and LinkedIn. EIPO rebalances monthly and while most holdings are U.S.-based, the portfolio does offer some international exposure, including Yandex, the operator of Russia’s largest search engine, and Renren, a popular social networking site often referred to as the “Facebook of  China”.

UBS Monthly 2x Leveraged ETRACS Internet IPO ETN (EIPL)

  • Launch: July 21
  • Asset Class: Leveraged Equities
  • Structure: ETN
  • Expense Ratio: 0.65%

EIPL is linked to the same index as EIPO, but will deliver monthly results that correspond to 200% of the monthly change in the underlying index. As such, this ETN offers an opportunity for investors to amplify exposure to young Internet-based companies, resulting in both greater risk and greater potential return.

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