July was another hectic month for equities, as the world struggled to deal with numerous debt crises that put downward pressure on global markets. In our first full month off of the quantitative easing program, rumors have already sprung up that a QE3 may be in store, as markets have failed to establish a strong trend higher, although bond yields have remained subdued. July saw a number of firsts, with one of the most surprising being that Apple Inc. (AAPL) hit $400 per share for the first time. The company is just $50 billion away from being the most valuable firm in the world. This month also saw gold finish above the $1,600 per ounce mark for the first time, as investors sought safe havens amid the uncertain future of the debt crises in Europe and the U.S.
The ETF industry saw somewhat of a slowdown in launches, as recent months have brought record numbers of products to market. After previous months saw dozens of new products launch, only 13 new exchange-traded products hit the market in July.
ETFs that began trading in July included:
- Morgan Stanley released the S&P 500 Crude Oil Linked ETN (BARL), which is similar to the S&P 500 SPDR (SPY), United States Oil Fund (USO) and United States Brent Oil Fund (BNO), all rolled up into one giant fund.
- First Trust rolled out the ISE Cloud Computing Index Fund (SKYY). The fund will specifically invest in companies deemed to be engaged in the cloud computing industry and may present itself as a great growth opportunity for an investment portfolio that is light in technology.
- iPath resurrected the recently closed VZZ when it released the iPath Long Enhanced S&P 500 VIX Mid-Term Futures ETN (VZZB), a similar fund which will be comprised of mid-term VIX futures. But the issuer was not done there. Later, the company released a pair of Treasury ETNs, iPath U.S. Treasury 5-year Bull ETN (DFVL), and iPath U.S. Treasury 5-Year Bear ETN (DFVS).
- Van Eck rolled out its new Market Vectors CEF Municipal Income ETF (XMPT), which will be composed almost entirely of investment grade debt. The fund will also have a unique structure that gives it both passive and active qualities.
- IndexIQ brought a unique new ETF to market with IQ Emerging Markets Mid Cap ETF (EMER), which will offer exposure to an index comprised of mid-cap stocks listed and domiciled in emerging markets.
- Precidian Funds, a New Jersey-based ETF newcomer, announced its new MAXIS Nikkei 225 Index ETF (NKY), which will seek to replicate the widely followed benchmark of Japanese stocks, often referred to simply as the Nikkei or the Nikkei Index.
- WisdomTree debuted its new Real Return Fund (RRF). The actively-managed ETF will take a unique approach to delivering total returns that outpace the rate of inflation, going beyond many of the more simplistic strategies that may have limited effectiveness when rising prices put a dent in portfolio returns. This is accomplished by using both commodities and bonds together to fight inflation, a tactic that very few products use.
- Schwab shook up the industry by rolling out the cheapest ever bond ETF, Schwab U.S. Aggregate Bond ETF (SCHZ), which charges just 0.10% in expenses.
- ProShares launched the Hedge Replication ETF (HDG), a new product that will seek to provide returns characteristic of the hedge fund asset class.
- As July neared its end, UBS rolled out two new ETNs focused on young Internet companies. Both the ETRACS Internet IPO ETN (EIPO), and its leveraged cousin, the Monthly 2xLeveraged Internet IPO (EIPL) hit the market at the end of last month.
July also saw a number of filings for new ETFs:
- Global X filed for 22 country-specific and region-specific international equity ETFs, including funds targeting Greece, Portugal, Bangladesh and Kazakhstan. The firm later revealed its plans for a social media fund, which has the potential to be a very popular fund given today’s current environment. As if this wasn’t enough, Global X closed out its month by stuffing five more funds into its pipeline, including a railroad and a cement fund.
- Russell has grown rapidly since making its ETF debut earlier this year, and the company filed for five more ETFs this month, including Russell Developed ex-U.S. Low Beta ETF, Russell Developed ex-U.S. High Beta ETF, Russell Developed ex-U.S. Low Volatility ETF, Russell Developed ex-U.S. High Volatility ETF, and Russell Developed ex-U.S. High Momentum ETF.
- Van Eck joined the China bond race when it detailed its plans for two new funds: Market Vectors Greater China Corporate Bond ETF, Market Vectors Greater China High Yield Bond ETF.
- After launching SKYY, First Trust wasn’t done for the month, as it filed for an inflation fighting product that would maintain a primary investment objective of “long-term capital appreciation” and secondary objective of current income.
- WisdomTree also detailed plans for three new products that will focus on emerging market TIPS, a China debt ETF, and an emerging markets corporate debt ETF. Later on in the month, WisdomTree detailed plans for a Germany hedged product and an Asian small cap dividend fund.
July saw several ETFs shut down:
- The Long Enhanced S&P 500 VIX Mid-Term Futures ETN triggered an automatic redemption after shares declined to less than $10. Investors in VZZ were paid out on July 11th, though the product remained active through its closure.
- FaithShares completed the previously announced shuttering of four of its faith-based ETFs, and laid the groundwork to transition the firm to a new phase of operations. Using the exemptive relief acquired for the FaithShares products, the new company will partner with other organizations looking to bring ETFs to market.
Disclosure: No positions at time of writing.
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