ETF Edge: June 2011

Published on by on June 1, 2011 | Updated June 2, 2011

Welcome to the June issue of ETF Edge. After a record-breaking April saw the introduction of more than 40 new ETFs, May followed with another flurry of activity. While many of the new products debuting in recent weeks were first-to-market innovations from existing issuers, the ETF industry also welcomed a familiar face in a new role (to the tune of 16 new ETFs hitting the market).

We continue to be surprised by the success of many of the new and relatively small ETFs; though the industry remains very top-heavy, the smaller products are gaining ground on their larger counterparts, a development that bodes well for future expansion that is both significant in terms of assets and new products and broad based in nature. Many of the products now debuting and gaining traction would certainly have been failures just a few short years ago, a testament to the growth of the ETF audience and to the continued adoption of these products.

Consistent with recent history, the tremendous advances have also been accompanied by some minor setbacks; ETFs are squarely in the crosshairs of multiple regulatory agencies across several continents; as regulators continue to examine both the complex subtleties and higher level mechanisms related to exchange-traded products, the potential pitfalls widen.

As temperatures rise and summer vacations kick off, it seems as if the active ETF space has gained considerable momentum thanks to a thawing of the SEC’s deep freeze and both expected and surprise announcements from existing issuers. The next few months could be a telling time for this corner of the market, potentially setting the stage for a flurry of activity in the active ETF arena in the final quarter of 2011.

Inside this issue we highlight all of the new products, including a review of the suitability for various types of investors and accounts. We also highlight the biggest winners and losers from the first five months of 2011, giving a detailed performance and expense breakdown by asset class and ETFdb Category.

Here’s a look at what’s inside this month’s ETF Edge:

  • Heard On The Street: While new ETF launches dominated the headlines, a number of other interesting developments played out in May. Most notably, one of the largest ETF issuers seems ready to abandon a cornerstone of its product lineup, shifting towards a new corner of the U.S. equity market.
  • Actionable ETF Investment Ideas: Still licking our woulds from some disappointing May performances, we review what went wrong and reaffirm some bullish outlooks on picks form months past. Looking forward, our ideas this month include a pair of ETNs with appealing dividend yields as well as a long/short play within the troubled euro zone.
  • ETFdb Portfolios: Our team of ETF experts comment on the performance of their all-ETF model portfolios, noting some new additions and winners and laggards over the last month.
  • Coming and Going: May saw more than three dozen new ETFs debut, making the last month one of the busiest in the history of the ETF industry. Many of these products were first-to-market concepts, offering opportunities to invest in asset classes and investment strategies not previously accessible through the exchange-traded structure. In this section, we highlight the investment thesis behind each new ETP and discuss which type of investors may be interested in some of the latest additions to the lineup.
  • ETF Milestones: In this section ETF Edge, we highlight all of the ETFs that reached three-year and five-year milestones in May. For investors and advisors facing “age restrictions” or uncomfortable investing in products without a track record, May saw a number of ETFs hit important milestones.
  • ETF Spotlight: In this segment we highlight an ETF that is flying under the radars of most investors, but that may present an intriguing investment option in the current environment. This month’s spotlight focuses on one of the “one stop shops” that offers exposure to a variety of asset classes using a unique methodology.
  • ETF Scorecard: This section includes a performance matrix that highlights how the combination of market cap exposure and weighting methodology can lead to very different bottom line results. Also, we take a look as how U.S., developed, and emerging markets have performed over the last month.
  • Sector & Region Outlook: In this section, we take a look at pricing multiples across the U.S. economy and around the world, pointing out some apparent opportunities.
  • Inside The ETFdb 60 Index: We take a look at the biggest gainers and losers in our all-ETF index for the month of May, taking a closer look at some of the drivers for each.
  • Now Is The Season To: This section takes a look at a new type of ETF that offers investors an opportunity to bet on relative performances of multiple asset classes, a potentially powerful–and potentially dangerous–tool.
  • ETF Performance Database: Year-to-date performance and expense data for all 1,000+ U.S.-listed ETFs, organized by ETFdb Category.

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