A Look at New ETFs Hitting the Market

It’s not a secret that ETF manufacturers have caught a virulent form of dysentery this year, dumping 140 new products into the market - a figure all the more impressive for the fact that they took January off. But while more choice is always good - US markets now list around 340 ETFs, up from under 150 at the end of 204 - another 315, more or less, are working through the US Securities and Exchange Commission, or are cleared and just await a bell-ringing slot to open up somewhere.

David Fry, of ETF Digest, last week characterized the situation as a ‘tsunami.’ A few days before that, ‘Random’ Roger Nusbaum said it was a ‘filing palooza.’

So when Morgan Stanley’s latest ETF report showed up last week, it seemed to be a good time to look at the still-caged beasts, at least a few of which will likely bound to freedom before the year is done.

Ameristock/Ryan Labs (5)
The ghost of the unlamented FITRs – one of the first US ETF families to get carried out on its shield – has life. Ameristock, an affiliate of Victory Bay Asset Management, which launched the first crude oil ETF earlier this year, filed a registration statement for fixed income ETFs based on the Ryan ‘Adjusted’ Treasury indexes in August. But it is far from clear that these products will be any more successful, especially as BGI is moving to widen its well-established range of fixed income-related ETFs.

1-, 2-. 5-. 10- and 20-year Treasury ETFs.

Barclays Global Investors (16)
The 800lb gorilla of the ETF world doesn’t seem to have much on its plate at the moment, relatively speaking. But it does have some excuses: earlier this month it announced the acquisition of IndexChange, the Bayerische Hypo- und Vereinsbank (HVB) AG subsidiary that has dominated Germany’s ETF market, with assets of more than €15 billion. It’s unlikely the deal will have much, if any, impact this side of the Atlantic - European sectors anyone? I thought not - but it will add muscle to BGI’s European presence. On its US menu:
Stocks: S&P US Preferred (PFF); KLD 400 Social.
Fixed income: Lehman Short Treasury Bond, Government/Credit Bond, Credit Bond, 3-7 Year Treasury Bond, 10-20 Year Treasury Bond, 1-3 Year Credit Bond, Intermediate Credit Bond, Intermediate Government/Credit Bond, MBS Fixed Rate Bond; CSFB Liquid US Agency Bond.
Commodities: Livestock, metals, non-energy and light(ly weighted) energy versions of the Goldman Sachs Commodity Index.

Claymore Investments (8)
Claymore launched its initial tranche of five ETFs on The Worlds Most Unnecessary Securities Exchange™ on Sep. 21, so far garnering over $200 million in assets. On its launchpad:
Stocks: Ocean Tomo Patents; LGA Green; Clear Spinoff; Sabrient Defender; Robeco Developed World and Developed International Equity Portfolio.
Commodities: Oil Up-MACROShares and Down-MACROShares.

Deutsche Bank Commodity Services LLC (10)
Expanding its range of PowerShares-branded commodity and currency ETFs.
Commodities: Agriculture, Base Metals, Energy, Gold, Oil, Precious Metals, Silver.
Currencies: DB Currency Index Value; DB US Dollar Index Bullish and Bearish.

Ferghana Wellspring HealthShares (20)
With its website still under construction, the chances of Ferghana-Wellspring’s HealthShares – mostly razor-thin slices of the biotech and healthcare sectors – appearing soon appear remote. The company’s founder, Jeffrey Feldman, has a past, dating to 2004, involving unit investment trusts that didn’t pan out; earlier this year, in an interview with Investment News, he blamed the failure of those products on a 4.95 percent sales charge and partner First Trust Advisors “never really put[ting] much of a marketing effort into them.” The HealthShares registration statement proffers ETFs covering:

Asian Healthcare, Autoimmune-Inflammation, Cancer, Cardiology Devices, Cardiology, Composite, Dermatology and Wound Care, Diagnostics, Emerging Cancer, Enabling Technologies, European Drugs, European Medical Products and Devices, GI/Gender Health, Infectious Disease, Metabolic-Endocrine Disorders, Neuroscience, Ophthalmology, Orthopedic Repair, Patient Care Services, and Respiratory/Pulmonary.

First Trust Advisors (11)
Speaking of First Trust and “[not] much of a marketing effort,” past performance has indicated results so far. Its eight existing products, the first launched in Sep. 2005, have less than $200 million in assets; a potential jewel – the DJ Internet Index ETF, the first Internet ETF with GOOG on board - languishes with just $25 million in assets. It trades largely by appointment, although its volume has increased slightly in recent weeks.

First Trust is, however, the first to license Russell’s new sector indexes, but even that name won’t do much good until the firm takes the mute out of its trumpet:
Stocks: ‘AlphaDex’ sector funds based on Russell Consumer Discretionary, Consumer Staples, Energy, Financial, Health Care, Industrials, Technology, Materials, and Utilities indexes; Value Line & Ibbotson Equity Allocation and Value Line Dividend.

London & Capital (6)
A UK-based newcomer modestly describes itself as “a leading independent firm of investment advisers and fund managers with a client base as international as its investment outlook” proposes a set of products based on MarketGrader, a “highly successful algorithmic stock selection tool that has returned 183.9%*” since 2003. (Curiously, the word ‘hypothetical’ appears nowhere in its press release. Nor, according to the search function, does it appear anywhere on its website.)

In registration are the MarketGrader 40, 100 and 200, along with large, mid- and smallcap versions. The MarketGrader 40 is characterized as “a basket of 40 North American equities selected by computer algorithms based on fundamental analysis.” Good thing they didn’t call it ‘fundamental indexing’ or they’d get one of those letters that Rob Arnott is dishing out to anybody using the phrase without acknowledging RAFI’s yet to be formally sanctioned appropriation of the English language.

PowerShares (18)
Bruce Bond’s sausage factory keeps doing churning its würst, although with a smaller backlog now. It’s a little early to tell whether PowerShares will suffer from a recent negative story in Barron’s alleging conflicts at Halter, the index provider for the up-and-breathing PowerShares Golden Dragon China ETF, and the still-caged India Tiger ETF. In the hopper:
Dynamic portfolio series: LargeCap, Aggressive Growth, Deep Value, Brand Name Products, MidCap, SmallCap, Internet Software & Services.
FTSE-RAFI series: Autonomic Allocation.
Achievers series: Buybacks, Nasdaq Dividends.
Others: DWA Technical Leaders; Financial Preferred; India Tiger; Nasdaq Internet Services; REIT Preferred; Value Line 400, and Industry Rotation; Zacks Rank LargeCap.

ProShares (66)
As reported on these pixels some time ago, ultra (long, double leverage), short (inverse, no leverage) and ultrashort (inverse, double leverage) versions of 22 indexes are lining up. Its first 12 funds, eight of which were launched in June with the rest following in July, already have assets of more than $1.5 billion.
Indexes (2/6): Russell 2000, S&P SmallCap 600.
Sectors (14/42): Basic Materials, Biotechnology, Consumer Goods, Consumer Services, Financials, Healthcare, Industrials, Oil & Gas, Precious Metals, Real Estate, Semiconductors, Technology, Telecommunications, Utilities.
Style indexes (6/18): Growth and value iterations of the S&P 500/Citigroup, S&P MidCap 400/Citigroup and S&P SmallCap 600/Citigroup indexes.

Rydex (96)
In one of the least surprising developments in recent ETF history, Rydex leapt aboard the leverage-inverse tumbril that ProShares wheeled out of the US Securities and Exchange Commission’s deep freeze after a seven-year sojourn. Its filing for 96 – probably a new world record  – ETFs pretty much matches the ProShares playbook offering, ultra dynamic (long, double leverage), short inverse (no leverage, umm…inverse), and ultrashort dynamic inverse (inverse, double leverage) versions of a mere 32 indexes, at least 15 of which are already in, or in the process of being added to, its archrival’s arsenal.

That overlap would be considerably higher but for the fact that Rydex tends to follow S&P benchmarks, while ProShares favors the Dow Jones marque, a distinction without much of a difference. And it would be higher still if ProShares hadn’t gone for the Citigroup style flavors of the S&P 500, 400 and 600 indexes, while Rydex stayed with S&P. Again, as if the difference is discernable to the naked eye.

(ProFunds, which manages the ProShares ETF family, was founded by Rydex escapees, but the passage of time has barely calmed the feud; the only place the hatchet has ever been buried is in each other, and whenever possible. While recent industry speculation on the possibility of recently, and suddenly after a brief tenure, departed ProShares chief investment officer Gus Fleites showing up to fill an empty seat at Vanguard, it’s at least possible that Rydex, which isn’t known to be in need of a chief investment officer, would make a bid. Think RedSox/Yankees/Johnny Damon; the only difference is that the Yankees actually needed a center fielder and a lead-off hitter.)

Indexes (8/24): Nasdaq 100, Russell 1000, 2000, 3000 and MidCap; S&P 500, MidCap 400, and SmallCap 600.
Sectors (10/30): Biotech (Nasdaq), Consumer Discretionary, Consumer Staples, Energy, Financials, Healthcare, Industrials, Materials, Technology, Utilities.
Style indexes (14/42): Growth and value iterations of the Russell 1000; 2000, 3000 and MidCap; S&P 500, MidCap 400, and SmallCap 600.

State Street Global Advisors (26)
SPDR (S&P) US sectors (10): Aerospace & Defense, Building & Construction, Computer Hardware, Computer Software, Healthcare Equipment, Healthcare Services, LeisureTime, Outsourcing & IT Consulting, Telecoms, Transportation.
SPDR Non-US (11): Asia Pacific, China, Emerging Asia Pacific, Emerging Europe, Emerging Latin America, Emerging Markets, Emerging Middle East and Africa, EPAC (Europe, Pacific Asia composite), Europe, World (Ex-US), World (Ex-US) Small Cap
streetTracks (5): DJ Wilshire International Real Estate and MidCap Value; KBW Mortgage Finance; Macquarie Global Infrastructure 100; and MSCI ACWI (All Country World Index (Ex-US).)

Vanguard (1)
High Dividend Yield. Unlikely to be dividend-weighted. Ahem.

Voskian (1)
Given the on-going process of creative destruction in the ‘space,’ it’s probably appropriate that someone finally named a semiconductor index for what is – according to one highly impeachable source on the Internets - “one of the three official languages spoken in the Republic of Vosks and Gurds, a country between Italy and Albania. Voskian is closest related to Greek, but it is written in the Latin alphabet.”

According to the somewhat less impeachable Google Maps, the countries between Italy and Albania include Slovenia, Croatia, Bosnia & Herzegovina and Serbia & Montenegro (formerly dba Yugoslavia, more or less). But with a political history at least as tortured as Hertz Rental Car’s corporate timeline, it is quite possible that the alleged Republic of Vosks and Gurds just got overlooked in one of the boundary restructurings. Moving right along…

The most recent filing for the Voskian Citigroup Semiconductor 50 Index was dropped off at the SEC on or about Mar. 28 2003. So including this on a list of impending ETFs is probably a bit of a stretch.

WisdomTree (30)
Some of these indexes may be dividend-weighted, according that nice Mr Steinhardt and that nice Professor Siegel, seen occasionally on Bubblevision. That nice Mr Maria Bartiromo can’t appear in case any former subscribers to his ‘Individual Investor’ magazine recognize him.

US (8): Top 100, Total, LargeCap, MidCap and SmallCap Earnings; Communications, Financial and REIT sectors.
Non-US (22): Pacific ex-Japan (formerly DIPR) Total Dividend and High-Yielding Equity ETFs; Asia Emerging Markets Total Dividend and High-Yielding Equity ETFs; Latin America Total Dividend; Emerging Markets Total Dividend and High-Yielding Equity ETFs; Emerging Markets Dividend Top 100; Total Dividend funds for Australia, Canada, China, France, Germany, Hong Kong, India, Malaysia, Singapore, South Africa, South Korea and Taiwan; and UK Total Dividend and High-Yield Equity funds.

Ziegler Capital Management (1)
Another one almost in the Voskian category for sitting around twiddling its thumbs, Ziegler’s NYSE-ArcaEx Tech 100 ETF is probably not high on the priority list, although someone did drop by to bolt on the NYSE initials on earlier this year. Anybody who just can’t wait can always sign up for the North Track ArcaEx Tech 100 mutual fund (PPTIX), which, according to a story that ran on MarketWatch almost exactly a year ago, then had $410 million tucked away.

---

More reading

Morgan Stanley: Exchange Traded Funds and Holders Listed in the US
Nov. 14 2006

ETF Tsunami Alert
by David Fry
ETF Digest Nov. 13 2006

Filing palooza
by Roger Nusbaum
Random Roger’s Big Picture Oct. 10 2006

Ferghana Wellspring

Niche medical ETFs may leave investors with ailing finances
By David Hoffman
Investment News Mar 27 2006

HBV sells IndexChange to Barclays
Nov. 7 2006

London & Capital: The Company

London & Capital Extends MarketGrader Suite of Products
Aug. 15 2006

Voskian Babel Text
Cartoon adapted from www.cartoonstock.com