By Robert Goldsborough
Back in September, we evaluated several themes in recent exchange-traded product launches and how they might have reflected investor interest in the previous months.
Now, as 2013 draws to a close, it seems a good time for a closer look at the year's most popular ETP launches, and what they might tell us about investors' tastes and providers' new-product efforts.
A Move Away From Bonds
As we look over the list of the exchange-traded funds and exchange-traded notes that have garnered the most assets in 2013, several important themes stand out. First, the array of offerings is far more diverse than it was in 2012, when new bond ETFs dominated the landscape as they attracted investors. And the growth wasn't just from PIMCO Total Return ETF (BOND), which had $3.87 billion in assets as of the end of 2012 (and today has $3.55 billion). Many other bond ETFs also were among 2012's new launches with the most assets as of December 31, 2012, including SPDR BarCap Short-Term High Yield Bond ETF (SJNK), iShares AAA – A Rated Corporate Bond ETF (QLTA), Market Vectors International High Yield Bond ETF (IHY), and iShares Emerging Markets High Yield Bond ETF (EMHY).
Fast-forward to December 2013, and the bond category is one that has seen major outflows this past year. As investors' appetite for bonds has waned, ETP providers mostly have directed their energy elsewhere. So while several bond ETF launches--most notably from Vanguard--did indeed draw assets in 2013, the majority of the most successful new launches of the year were equity funds.
A Diverse Set of Launches
It's difficult to generalize when it comes to the most popular ETPs launched in 2013. There are me-too products that are not dissimilar from other products that were launched in prior years, such as a new bank-loan ETF--one of several that launched in 2013--and a new fund that tracks China A-Shares. There also are new funds that stake out new territory but seem like such obvious ideas that one wonders why they hadn't been launched earlier, such as an ALPS-managed fund that tracks the Barron's 400 Index and a broad-based international bond ETF from Vanguard. There’s even a risk-weighted, foreign-stock ETF. And, there are some ETFs that were rolled out in a bid to capitalize on the growth in so-called "smart beta" strategies, such as the momentum, size, and value factors.
Also, as we noted in September, few of the most popular launches have had income as their core selling point, even as ETP providers have continued to roll out product after product devoted to income in what remains a relatively low-interest-rate environment.
High Seed Capital, and Products Designed for Specific Investors
One other trend that has emerged in 2013 and that is present in the largest launches of the year involves ETPs that were launched with unusually high levels of seed capital or those that were rolled out for a specific investor. Such appeared to be the case for the single largest new launch of the year, Barclays ETN+ FI Enhanced Europe 50 ETN (FEEU), which has attracted almost $1 billion. The new ETN, which seeks to offer double-leveraged exposure to a basket of blue-chip European stocks and thus is designed for investors bullish on a European rebound, is one of three ETNs that debuted in 2013 offering identical exposure. It appears that all three ETNs were created for Fisher Investments.
Similarly, high levels of seed capital helped land several other ETPs on the list, including Vident International Equity (VIDI) and two iShares factor ETFs devoted to quality and momentum factors. In fact, in the case of the iShares funds, the massive Arizona State Retirement System became the first public pension plan to serve up seed capital for newly launched ETFs, placing $100 million in each fund right out of the gate. It's hard to predict whether Arizona’s action is the start of a trend with public pension plans, but it certainly bears watching. And even absent the Arizona seed capital, the iShares factor ETFs have done a solid job drawing assets.
The Top 10 Largest ETP Launches, by Assets (as of December 20, 2013)
- Barclays ETN+ FI Enhanced Europe 50 ETN (FEEU) - $999 million
- Vanguard Total International Bond Index ETF (BNDX) - $805 million
- SPDR Blackstone/GSO Senior Loan ETF (SRLN) - $580 million
- Vident International Equity (VIDI) - $484.5 million
- iShares MSCI USA Quality Factor (QUAL) - $248 million
- db X-trackers Harvest China ETF (ASHR) - $207 million
- Barron’s 400 ETF (BFOR) - $193 million
- iShares MSCI USA Momentum Factor ETF (MTUM) - $191 million
- Barclays ETN+ Select MLP ETN (ATMP) - $174 million
- iShares Short Maturity Bond (NEAR) - $165 million
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