Coming & Going: March 2011

Published on by on March 1, 2011

February ETF Launches
Ticker ETF Assets
(In Millions)
Avg. Volume
NAGS Natural Gas Fund $3.48 N/A
AND FTSE Andean 40 ETF $5.82 39,500
TPS ProShares UltraShort TIPS $3.80 5,300
ASEA FTSE ASEAN 40 ETF $1.51 N/A
FONE NASDAQ CEA Smartphone Index Fund $2.96 72,900
CRUD WTI Crude Oil Fund $5.08 38,800
FSE 2x S&P 500 Bull/T-Bond Bear $5.02 N/A
FSA 2x T-Bond Bull/S&P 500 Bear $4.95 N/A
FSU 2x S&P 500 Bull/USD Bear $4.80 N/A
FOL 2x Oil Bull/S&P 500 Bear $4.80 N/A
FSG 2x Gold Bull/S&P 500 Bear $4.80 N/A
EBND SPDR Barclays Capital Emerging Markets Local Bond ETF $9.16 N/A
EDIV SPDR S&P Emerging Markets Dividend ETF $5.03 N/A

The headlines for the year’s shortest trading month were dominated by struggles in the Middle East, sending stocks on a roller coaster ride. This month saw precious metals and oil rebound amid conflicts overseas, as oil prices now hover just under the $100/barrel mark.

The ETF industry saw a healthy bump in new funds as 14 new products hit the market over the past four weeks. Thus far, it seems that these new funds have been somewhat slow to catch on with investors, as AUM remains relatively low for each ETF, but funds like FONE and AND have notably high trading volumes which could translate into strong growth in the coming months.

Below, we take a closer look at each of the products that debuted in February:

February ETF Launches

Natural Gas Fund (NAGS)

  • Launch: February 1
  • Asset Class: Commodity
  • Structure: Futures-Based
  • Expense Ratio: 1.00%

NAGS will spread exposure to futures contracts across multiple maturities. The investment objective of the new fund is to reflect the daily changes in percentage terms of a weighted average of the following: the nearest to spot month March, April, October, and November Henry Hub Natural Gas Futures Contracts traded on the NYMEX, weighted 25% equally in each contract month. That structure is utilized in an effort to reduce the effects of contango and backwardation on fund returns. The diversified futures structure is designed to reduce the cost of rolling the investment when compared to other funds that hold only a single month.

FTSE Andean 40 ETF (AND)

  • Launch: February 3
  • Asset Class: Latin America Equities
  • Structure: ETF
  • Expense Ratio: 0.72%

This fund will measure and index which tracks the performance of the 40 largest companies in Chile, Colombia, and Peru. The new Andean ETF will give the largest weighting to Chile, which accounts for close to half of the fund’s assets. Colombia will account for about 29%, with 22% going to Peru. Not surprisingly, the fund has a tilt towards the materials sector; basic materials companies make up about 28% of assets. The next biggest sector allocations are to financials (21%) and oil & gas (15%). AND also has a healthy allocation to consumer services (13%), making it unique from many emerging markets ETFs.

ProShares UltraShort TIPS (TPS)

  • Launch: February 9
  • Asset Class: Bond
  • Structure: Inverse 2x leveraged
  • Expense Ratio: 0.95%

The new fund seeks daily investment results that correspond to 200% the inverse of the daily performance of the Barclays Capital U.S. Treasury Inflation Protected Securities (TIPS) Index (Series-L). The underlying Barclays (TIPS) Index includes all publicly issued, U.S. Treasury inflation protected securities that have at least one year remaining maturity, are non-convertible, are denominated in U.S. dollars, are rated investment grade (at least Baa3 by Moody’s Investors Service or BBB- by S&P), are fixed rate, and have more than $250 million or more par value outstanding. Additionally, the underlying index is weighted by the relative market value of all securities meeting the above stated criteria, and its holdings are updated on the last calender day of each month.

FTSE ASEAN 40 ETF (ASEA)

  • Launch: February 17
  • Asset Class: Emerging Market Equities
  • Structure: ETF
  • Expense Ratio: 0.65%

The new fund seeks to replicate the FTSE/ASEAN 40 Index, a benchmark that is made up of the largest companies in the original five ASEAN countries: Indonesia, Philippines, Singapore, Malaysia, and Thailand. ASEA is the first U.S.-listed ETF to offer exposure to these five economies, though there are “pure play” options for investing in each of the ASEAN member countries individually. The five member countries include some of the fastest-growing emerging markets, thriving thanks to low labor costs, strong relationships with China, and a wave of economic liberalizations that have encouraged foreign investment.

NASDAQ CEA Smartphone Index Fund (FONE)

  • Launch: February 18
  • Asset Class: Communications Equities
  • Structure: ETF
  • Expense Ratio: 0.70%

The First Trust NASDAQ CEA Smartphone Index Fund (FONE) is linked to a modified equal dollar weighted index that includes companies primarily involved in the building, design, and distribution of the handsets, hardware, software and mobile networks associated with the development, sale, and usage of smartphones. At the individual security level, FONE’s components includes some well known firms such as Motorola, Samsung, and LG Electronics as well as a number of companies with which most consumers likely aren’t familiar. Sub-sectors represented in the fund include semiconductors (25%), communications equipment (23%), and electronic equipment instruments and components (18%).

WTI Crude Oil Fund (CRUD)

  • Launch: February 23
  • Asset Class: Commodity
  • Structure: ETF
  • Expense Ratio: 1.00%

The Teucrium WTI Crude Oil Fund (CRUD) offers exposure to futures contracts for WTI crude oil, also known as Texas Light Sweet Crude Oil, traded on the NYMEX. Unlike many of the ETFs in the Oil & Gas ETFdb Category, CRUD spreads exposure across multiple maturities. That structure is “designed to reduce the effects of contango and backwardation” according to Teucrium, which employs similar weighting strategies in its natural gas and corn funds. This ETF may be an attractive option for investors tired of the heavy risks that come with contango and backwardation in such funds such as USO.

2x S&P 500 Bull/T-Bond Bear (FSE)

  • Launch: February 24
  • Asset Class: Leveraged Equity
  • Structure: ETF
  • Expense Ratio: 0.75%

FSE marks the entrance of a new issuer into the ETF space, FactorShares. This fund is designed for investors who believe the large-cap U.S. equity market segment will increase in value relative to the long-dated U.S. Treasury market segment over the next day. This fund will offer 200% daily leveraged exposure to the spread between large cap U.S. equities and Treasuries, through a leveraged long position in the E-mini S&P 500 Stock Price Index futures and a leveraged short position in the U.S. Treasury Bond futures.

2x T-Bond Bull/S&P 500 Bear (FSA)

  • Launch: February 24
  • Asset Class: Leveraged Equity
  • Structure: ETF
  • Expense Ratio: 0.75%

This fund is the counterpart to FSE, offering an opportunity to play outperformance of long-dated Treasuries relative to large cap U.S. stocks. This fund takes a short position in E-mini futures and long position in Treasury Bond futures.

2x S&P 500 Bull/USD Bear (FSU)

  • Launch: February 24
  • Asset Class: Leveraged Equity
  • Structure: ETF
  • Expense Ratio: 0.75%

This fund is designed for investors who believe that large cap stocks will increase in value relative to the general indication of the international value of the U.S. dollar, taking a long position in E-mini contracts and a short position in U.S. Dollar Index futures. The currency futures contract is weighted heavily towards the euro (which makes up more than 50% of the underlying exposure), with additional exposure to the Japanese yen, British pound, Canadian dollar, Swedish krona, and Swiss franc (PowerShares’ UUP and UDN offer exposure to the same index).

2x Oil Bull/S&P 500 Bear (FOL)

  • Launch: February 24
  • Asset Class: Leveraged Equity
  • Structure: ETF
  • Expense Ratio: 0.75%

This fund is designed to profit when oil outperforms large cap stocks, offering leveraged exposure to an index that includes a long position in oil futures that offer exposure to light sweet crude oil and a short position in E-mini futures.

2x Gold Bull/S&P 500 Bear (FSG)

  • Launch: February 24
  • Asset Class: Leveraged Equity
  • Structure: ETF
  • Expense Ratio: 0.75%

Designed to capture the spread between gold and large cap stocks on a daily basis, FSG maintains a long position in gold futures and a short position in E-mini futures.

SPDR Barclays Capital Emerging Markets Local Bond ETF (EBND)

  • Launch: February 25
  • Asset Class: Emerging Market
  • Structure: ETF
  • Expense Ratio: 0.50%

This ETF will replicate a benchmark that tracks the fixed-rate local currency sovereign debt of emerging market countries. By investing in local currency debt, EBND will offer exposure both to sovereign debt of emerging markets while also delivering a hedge against the U.S. dollar. With interest rates in the U.S. and many other developed countries near record lows amid lingering weakness in underlying economic fundamentals, many investors have turned to other options for supplying current yield to their portfolios. At the end of January, the index underlying EBND had a yield-to-worst of 6.74%. The fund invests in sovereign debt of about 18 different countries, giving the largest allocations to South Korea (12%) and Brazil (12%).

SPDR S&P Emerging Markets Dividend ETF (EDIV)

  • Launch: February 25
  • Asset Class: Emerging Market
  • Structure: ETF
  • Expense Ratio: 0.50%

The SPDR S&P Emerging Markets Dividend ETF (EDIV) is linked to a dividend-weighted benchmark that includes approximately 100 emerging market stocks paying the highest dividend yields. The largest individual holdings is Brazilian credit card processor Redecard SA (3.5%), followed by Telefonica O2 Czech Republic (3.3%) and Czech utility giant Cez (3.2%).

ETF Closings

No ETFs closed during the month of February.

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