In 2014, investors were introduced to over 180 new exchange-traded products, as well as a handful of ETF issuer newcomers. While the majority of new offerings offer more traditional investment objectives, there are a handful of funds that provide exposure to unique methodologies and hyper-targeted sectors.
In this piece, we highlight 10 of the newest, most intriguing funds on the market.
1. Medical Breakthroughs ETF (SBIO)
On New Year’s Eve, ALPS launched its Medical Breakthroughs ETF (SBIO ), which gives investors targeted exposure to a niche sector in the biotech and pharmaceuticals industries. The fund’s objective is to capture research and development opportunities in these fields. More specifically, SBIO’s underlying index is comprised of small- and mid-cap stocks of biotechnology and pharmaceutical companies that have one or more drugs in either Phase II or Phase III of U.S. Food and Drug Administration clinical trials.
The resulting portfolio consists of about 75 individual securities. Currently, the top three holdings are:
- Receptos Inc (RCPT)
- NPS Pharmaceuticals Inc (NPSP)
- Seattle Genetics Inc (SGEN)
2. BioShares Biotechnology Clinical Trials Fund (BBC)
In December 2014, LifeSci Index Partners made its debut in the ETF industry, launching two health and biotech funds. One of these funds is the BioShares Biotechnology Clinical Trials Fund (BBC ), which like SBIO targets U.S.-listed biotechnology companies with a primary product offering that is in a Phase 1, Phase 2 or Phase 3 clinical trial stage of development.
BBC’s portfolio is comprised of 68 securities, featuring relatively younger, smaller companies that focus on testing their experimental drug candidates in human clinical trials. Unlike SBIO, however, BBC is a bit more balanced; no single security accounts for more than 3.00% of the fund’s total assets, whereas SBIO’s top three holdings account for roughly 13%.
3. BioShares Biotechnology Products Fund (BBP)
LifeSci Index Partners’ second ETF is the BioShares Biotechnology Products Fund (BBP ), which focuses on biotechnology companies with a primary product offering or product candidate that has received U.S. Food and Drug Administration approval. Unlike BBC and SBIO, this fund invests in primarily larger, more established companies with much clinical trial failure risk behind them, making it an ideal pick for those wanting to get their feet wet in biotechnology.
BBP’s portfolio offers exposure to approximately 36 stocks, making it significantly smaller than the two funds mentioned above. Currently, the fund’s top three holdings are:
- Raptor Pharmaceutical Corp (RPTP)
- Halozyme Therapeutics Inc (HALO)
- Exelixis Inc (EXEL)
4. Validea Market Legends ETF (VALX)
Another ETF newcomer, Validea Funds introduced its Market Legends ETF (VALX ) in December of 2014. The actively-managed fund utilizes a proprietary investing system that utilizes the fundamental stock-selection methods outlined by great investors, such as Ben Graham, Warren Buffett, Martin Zweig, John Neff and many others.
VALX runs 17 different computerized fundamental models as the foundation for the fund’s stock-selection methedology; the top-scoring individual stocks, ranked according to the manager’s best-performing risk-adjusted “guru”-based models, are held within the portfolio. Currently, the fund’s portfolio holds 100 stocks,
5. Emerging Markets Internet & eCommerce ETF (EMQQ)
Exchange Traded Concepts introduced its Emerging Markets Internet & eCommerce ETF (EMQQ ) in November. The fund aims to offer investors exposure to eCommerce and internet companies based in emerging market countries in Asia, Latin America, Africa and Eastern Europe. It is currently the only ETF that offers this type of exposure.
EMQQ’s portfolio consists of roughly 40 stocks from countries including China, India, Brazil, Russia, South Korea, Taiwan, South Africa, Argentina, Malaysia, Thailand, Indonesia, Vietnam, Philippines, Turkey, Czech Republic, Poland, Colombia and Mexico. Currently, the fund’s top three holdings are:
- Alibaba Group Holding (BABA)
- Tencent Holdings (700)
- Naspers Limited Class (NPN)
Be sure to also read Under the Hood of the Internet ETF.
6. ISE Cyber Security ETF (HACK)
In November, PureFunds launched its ISE Cyber Security ETF, the first fund ever to offer targeted exposure to companies in the cyber security industry. In recent years, cyber attacks have increased significantly, on both an individual and company level basis, as well as on a government level. Given the need for cyber security, this ETF may be a compelling option for those looking to tap into a rapidly growing industry.
Taking a look under the hood of HACK, the fund holds approximately 30 individual securities, which include companies either classified as cyber security infrastructure providers or cyber security service providers. To learn a bit more about this fund, be sure to check out our interview with Christian Magoon where he gave us his insights about the cyber security industry as a whole in addition to taking a deeper dive under the hood of the HACK.
7. Genomic Revolution Multi-Sector ETF (ARKG)
ARK Investment Management made its ETF debut in 2014, launching four unique funds. One of these ETFs is the Genomic Revolution Multi-Sector ETF (ARKG ), an actively-managed fund that aims to focus on those companies involved in extending and enhancing the quality of human and other life by incorporating technological and scientific developments, improvements and advancements in genomics into their business.
Some of the sub-sectors ARKG invests in are companies that are involved in agricultural biology, beyond DNA, bioinformatics, bioinspired computing, bionic medicine, instrumentation, molecular medicine and diagnostics, pharmaceutical innovation, and stem cells. Check out our interview with Cathie Wood, the founder and CEO of ARK Investment Management.
8. Web X.0 ETF (ARKW)
Another offering from ARK Investment Management, the Web X.0 ETF (ARKW ) made its debut in October of 2014. The fund, which is also actively managed by Cathie Wood, focuses on innovative companies that are focused on the increased use of shared technology and infrastructure.
Many of these companies are also involved in cloud computing, big data, wearable technology, cryptocurrencies, services and data mining, social media, and digital education. Currently, ARKW’s holdings are quite varied in the tech space. Below are the current top three holdings:
- Athena Health Inc (ATHN)
- Facebook (FB)
- Amazon.com (AMZN)
9. Industrial Innovation ETF (ARKQ)
The last ARK ETF on our list, the Industrial Innovation ETF (ARKQ ), gives investors a new way to play the industrial equities sector. The actively-managed fund invests in companies that are involved in the development of new products or services, technological improvements and advancements in scientific research related to a wide array of sub-sectors, including:
- Alternative Energy Sources
- Autonomous Vehicles
- Energy Storage
- Development of Infrastructure
- 3D Printing
- Innovative Materials
- Space Exploration
Currently, ARKQ’s top three holdings include Tesla Motors (TSLA), Stratasys LTD (SSYS), and AutoDesk Inc (ADSK).
10. Emerging Markets Real Estate ETF (EMRE)
Launched in September of 2014, Guggenheim’s Emerging Markets Real Estate ETF (EMRE ) is the first fund of its kind to provide broad exposure to emerging market real estate. EMRE consists of publicly traded companies and real estate investment trusts (REITs) which derive the majority of their revenues from emerging market countries.
The fund invests in a wide away of real estate sub-sectors, including residential, office, and retail. Currently, securities from China make up roughly one-third of the portfolio, though meaningful exposure is given to real estate in South Africa, Philippines, Mexico, Thailand, Taiwan, and Indonesia.
The Bottom Line
These ETFs are just a handful of the many intriguing funds launched this year. But for those looking for unique exposure to up-and-coming industries, these 10 ETFs may be a compelling option.
Be sure to check out our ETF Launch Center to see the full list of 2014 launches.