This past year the ETF industry picked up steam, as total assets in exchange-traded products reached $1 trillion for the first time. As ETFs continued their impressive growth, issuers have continued to provide innovative products to the market in order to meet ever-increasing demand. This past year saw the inception of a number of unique funds, such as the Market Vectors China ETF (PEK), which is the first ETF to offer exposure to the China A-Shares market, and the Global X Lithium ETF (LIT), a fund that allows investors to focus in on this important commodity.
A number of these new products have garnered a significant level of assets in their short lifespans, demonstrating that the ETF boom is far from over. Currently, there are more than 750 ETFs at some point in the registration process, suggesting that 2011 will be another very busy year on the product development front.
Rifling through such a large number of filings is no easy task, and many of the proposed products are slated to become direct competitors with existing products or expand on current ETF themes. In light of this, we have picked out 10 of the most interesting filings that are currently on deck and could hit the market sometime in 2011.
IQ International Indonesia Small Cap ETF
This ETF, filed by IndexIQ, will invest in a surging emerging market that has shown incredible growth over the last two years. The proposed fund will invest in the IQ Indonesia Small/Mid-Cap Index, which is a rule-based, modified capitalization-weighted, float-adjusted benchmark intended to give investors a means of tracking the overall performance of the small and middle capitalization levels of publicly-traded companies domiciled and primarily listed on an exchange in Indonesia. The most popular and longest-running Indonesia fund, IDX, has had an impressive run, as it has shot up nearly 200% since its inception in January of 2009. As small- and mid-cap firms are considered to be more of pure plays on an emerging economy, this new ETF would be tremendously useful in helping investors gain exposure to one of the world’s fastest-growing economies. Based on the most recent filings, the fund is expected to charge fees of 0.79%. No ticker has been released.
First Trust NASDAQ CEA Smartphone Index Fund (FONE)
The smartphone industry represents one of the few high-growth sectors left inside of U.S. borders, as the technology fueling these devices has dramatically improved in recent years. The proposed FONE would be one of the most targeted products on the market, as it would track the NASDAQ OMX CEA Smartphone Index. That benchmark is designed to track the performance of companies engaged in the smart phone segment of the telecommunications and technology sectors, including companies primarily involved in the building, design and distribution of handsets, hardware, software and mobile networks associated with the development, sale and usage of smart phones.
PowerShares S&P 500 High Beta Portfolio
This ETF will track the S&P 500 High Beta Index, which will consist of 250 stocks with the highest sensitivity to market movements, or beta, over the past 12 months. Beta is a measure of how closely correlated a stock’s returns are to that of the market, which for the underlying index includes all of the stocks included in the S&P 500 Index. The fund's high volatility will make it popular with traders and investors wishing to harness bull market volatility. PowerShares will also be offering a low-beta ETF to pair with this fund.
SPDR Leisuretime ETF (XLZ)
As consumer spending begins to pick up after a long recession, this ETF may be hitting the market at just the right time. XLZ will replicate the performance of the S&P LeisureTime Select Industry Index. The current crop of funds tracking this space leaves much to be desired, as ETFs somewhat dedicated to leisure time are currently missing heavy allocations to big sectors like theme parks, restaurants, cruise ship operators, or even video game companies. This could be a quality product for investors who believe that discretionary spending will continue to come back in 2011, or for those who believe that some of these world-famous discretionary leaders will be able to capitalize on increased levels of consumer spending.
WisdomTree Emerging Markets Total Dividend Fund
Emerging markets have surged in popularity over the past few years, and many investors have embraced ETFs as a way to access this asset class. This proposed fund from WisdomTree would give investors exposure to emerging markets while focusing on stocks that offer healthy dividend yields. The fund would track the WisdomTree Emerging Markets Dividend Index, which measures the performance of companies in the emerging markets that pay regular cash dividends, and includes equities from Brazil, China, India, Malaysia, and Thailand, among others. It should be noted that State Street has also filed for a similar emerging market dividend ETF.
Global X Waste Management ETF
This fund will seek to replicate the performance of the Solactive Global Waste Management Index, which is designed to measure the broad-based equity market performance of global companies involved in the waste management industry. Though there is a similar fund on the market, Market Vectors’ EVX, this product will separate itself by investing solely in waste management -- as opposed to EVX, which offers exposure to companies that engage in industries such as water treatment or related industries. Waste management firms have long been a favorite of investing great Warren Buffett, as they provide vital services that our world simply cannot do without. These firms also have high growth potential; the world’s population is growing at an alarming rate, and the amount of waste produced can only increase exponentially as well. No ticker or expenses have been released for this fund.
Direxion Auto Shares Fund
Finally, an ETF dedicated to the automobile industry! This proposed ETF would seek to replicate the performance of the Dow Jones Automobiles & Parts Titans 30 Index, which includes 30 stocks selected based on rankings by float-adjusted market capitalization, revenue and net profit. This ETF would stand alone when it comes to exposure to the auto industry, and it could be a favorite tool among traders around the release of monthly sales figures. Note that this will be one of just a few ETFs offered by Direxion that will be unleveraged, as the firm typically applies a 2x or 3x leverage to their products. It also appears that this fund will have some exposure to emerging markets, where automobile growth will likely coincide with rapidly expanding consumer demand for what is commonly viewed as the ultimate product of the middle-class life. This fund could make for an alternative play on emerging markets, depending on its exposure to foreign markets -- as the vast majority of emerging market ETFs on the market today offer little in the way of consumer exposure.
IQ Hedge Distressed Tracker ETF
This ETF will track the IQ Hedge Distressed Index, developed by IndexIQ. The objective of the index is to replicate the risk-adjusted return characteristics of a group of hedge funds employing a distressed securities strategy. The method typically involves investing in securities (such as common and preferred shares, bank debt, trade claims and corporate bonds) of companies that are near, or are currently going through, bankruptcy in order to profit later, based either on the company’s ability to improve its operations or the success of the bankruptcy process. While certainly a high risk play, it could make for an interesting investment for those looking to pick up securities on the cheap that more risk-averse investors are looking to dump.
Global X Fishing ETF
This fund would measure the Solactive Global Fishing Index, which is designed to measure broad-based equity market performance of global companies involved in the fishing industry. This is another ETF that will break new ground, as exposure to the fishing industry has yet to be singled out in the exchange-traded world. The global fishing industry hauls in roughly $80 billion annually, and a growing population should create a demand floor for this industry. Perhaps the most comparable existing product is the PowerShares Food & Beverage ETF (PBJ), a fund that offers exposure to food and beverage companies and assets now approaching $125 million.
Disclosure: No positions at time of writing.
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