ETF Edge: May 2011

Published on by on May 2, 2011

Welcome to the May issue of ETF Edge. Although seemingly every month brings a flurry of activity to the ETF industry, April was particularly busy. A record number of new funds launched, including major initiatives from First Trust (expanding their AlphaDEX lineup to international markets) and iPath (rolling out a number of “pure beta” commodity ETPs). But by far the most interesting development last month was related not to a product launch but a simple filing; PIMCO and bond king Bill Gross have laid the initial groundwork for an ETF version of the ultra-popular total return fund, a step that could ultimately provide a tremendous boost to the active ETF space.

The last several weeks have also seen renewed scrutiny on ETFs, as a handful of regulatory agencies (both in the U.S. and abroad) spoke out on potential abuses and elements of ETFs that they find troubling. As regulators take a closer look at some of the nuances of ETFs, it is very possible that coming months and years will see some changes to practices such as share lending, disclosure requirements, and oversight of futures-based products.

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 four months of 2011, giving a detailed performance and expense breakdown by asset class and ETFdb Category.

As we look forward to May, the economic environment is somewhat perplexing. Commodities are seemingly having a major impact on a number of different asset classes, with concerns about inflation taking center stage and escalating prices providing a boost to many resource rich emerging markets (as well as developed economies such as Australia and Canada). The performance of commodities in coming weeks figures to be a key factor for global equity markets, and we see several asset classes that seem poised to perform well throughout the remainder of this year.

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

  • Heard On The Street: A number of different ETF issuers ramped up their product development departments in April, with more than three dozen new products debuting. But the biggest stories of the month came in the active ETF arena, where Ameriprise took a major step towards entering the space and PIMCO has investors dreaming of an ETF version of their total return fund.
  • Actionable ETF Investment Ideas: After a stellar April, we look forward by identifying a handful of ETFs that seem poised for a solid summer performance. This month’s picks include a commodity fund, an international equity ETF, and even a product focusing on a narrow corner of the U.S. Treasury market.
  • ETFdb Portfolios: Our team of ETF experts comment on the performance of their all-ETF model portfolios, reflecting on a growing gap between the performances.
  • Coming and Going: April was the busiest month of 2011 so far on the product development front, with more than 40 new ETFs hitting the market. These new additions covered the full spectrum, including a number of international equity products from First Trust and commodity ETNs from iPath. In this section, we highlight the investment thesis behind each new ETP and discuss which type of investors may be interested.
  • ETF Milestones: In this section ETF Edge, we highlight all of the ETFs that reached three-year and five-year milestones in March. For investors and advisors facing “age restrictions” or uncomfortable investing in products without a track record, March 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 an alternative option for accessing large cap U.S. equities, reviewing a fund that has beaten SPY by a wide margin yet offers an almost identical risk profile.
  • 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 Apriil, taking a closer look at some of the drivers for each.
  • Now Is The Season To: With more and more investors embracing ETFs as a means to access alternatives, we dive into some of the options for implementing a strategy that has long been popular among hedge funds.
  • 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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