New ETFs Present New Opportunities

by: Wall Street Sector Selector
In today’s fast moving markets, investors need every weapon available to succeed and so in my work at Wall Street Sector Selector, I keep a constant watch on new ETF offerings that can offer investors and traders exposure to new and potentially profitable markets.
I don’t endorse nor receive compensation from any of the ETF providers I monitor, but here are a few recent offerings that caught my eye:
From the ProShares Family:
EPV: Ultra Short MSCI Europe
JPX: Ultra Short Pacific x Japan
BZQ: Ultra Short MSCI Brazil
SMK: Ultra Short MSCI Mexico
TBF: Short 20+ Year Treasury Bond
EFO: Ultra MSCI EAFE (Europe, Australia, Far East)
EET: Ultra MSCI Emerging Markets
Lately, leveraged ETFs have made the news frequently regarding their tracking errors and suitability of lack thereof for retail investors. If you’re considering these for your portfolio, you should carefully read the prospectus and understand that these track “daily” returns and so their performance could differ substantially from the underlying index.
ProShares publishes the following quote on their web site:

This ETF seeks a return that is either 300%, 200%, -100%, -200% or -300% of the return of an index or other benchmark (target) for a single day. Due to the compounding of daily returns, ProShares' returns over periods other than one day will likely differ in amount and possibly direction from the target return for the same period. Investors should monitor their ProShares holdings consistent with their strategies, as frequently as daily. For more on correlation, leverage and other risks, please read the prospectus.

And iShares is also introducing a couple of new funds:
EPU: iShares MSCI All Peru Index
EMIF: S&P Emerging Markets Infrastructure Index
Other new offerings include Global X with their (NYSEARCA:GXF) Nordic Region ETF which encompasses Sweden, Denmark, Norway and Finland, and MarketVectors new (NYSEARCA:VNM), Viet Nam Index which focuses on the emerging economy in Viet Nam.

In the 3X leveraged market, Direxion continues to roll out new products, most recently (NYSEARCA:DRN), the 3X Daily Real Estate Bull Fund and (NYSEARCA:DRV), the 3X Daily Real Estate Bear Fund.
Not to be outdone, giants Charles Schwab and PIMCO are about to jump into the growing ETF market with their own families of funds, with Schwab focusing on general index funds and PIMCO jumping into the index and actively managed space.
A quick glance at these new offerings, tells you that ETFs remain a hot investment vehicle and that major players like Schwab and PIMCO see growing opportunities here.

Also, in spite of all the recent negative press surrounding leveraged ETFs, the providers of these continue offering new vehicles for investors. And finally, this year’s hot action in emerging markets appears to have spawned a whole new series of ETFs specializing in various single country exposures to the developing regions.
All in all, ETFs remain an active and dynamic marketplace and since 1998, according to Morningstar, ETFs have grown from $13 Billion to $533 Billion by the end of 2008.

This is no surprise since, in my view, ETFs offer nearly unlimited flexibility and the opportunity to gain exposure to markets that retail investors have traditionally not been able to access.

Of particular note in the list above is (NYSEARCA:TBF) the ProShares Short 20 Year Bond Fund. This is the first ETF that I know of that offers a non leveraged short exposure to the bond market, a valuable supplement to (NYSEARCA:TBT), the widely traded ProShares Ultra Short 20 Year Bond Fund. TBF is still thinly traded as it's so new, but I would expect over time that this ETF would offer excellent opportunities to investors and traders who want to "short" the Treasury Bond market.

Another interesting new entry is (VNM) the Market Vectors Viet Nam ETF, which offers exposure to a new emerging market that has also previously been unavailable to investors. Introduced on August 14th, it already is trading more than 70,000 shares per day and so promises to be a popular emerging market ETF along the lines of (NYSEARCA:EWZ) the iShares Brazil Index or (NYSEARCA:FXI) the iShares FTSE China Index.

These single country emerging market ETFS can be extraordinarily volatile and require a disciplined plan to trade successfully, but the potential rewards are well documented with the emerging markets sector having been one of the hottest performers to date in 2008.

As a student and practictioner of sector rotation, I'm excited about these new funds and the potential diversification and exposure to a wide variety of asset classes they offer. Retail investors and traders have never had a broader selection of choices and opportunities, and even in today's difficult markets, I think we can expect to see a steady stream of new ETFs coming our way.

Disclosure: None