As many had expected, the first half of 2012 saw the continuation of an aggressive expansion of the ETF industry. More than 120 new exchange-traded products began trading during the first six months of the year, including several innovative and first-to-market ideas. At first glance, it appears as if the new wave of ETFs have been extremely successful; the funds that have debuted since Jan. 1 have aggregate assets of about $3 billion -- an impressive haul in such a short period of time.
But upon further review, the new crop of ETFs has been a few big hits scattered among mostly unimpressive debuts. A single ETF represents more than half of all assets garnered by new 2012 launches, a situation that mirrors the top-heavy nature of the broader industry quite nicely. The vast majority of the new ETFs that have begun trading in 2012 have assets of less than $25 million, and well more than half have not yet crossed the $10 million mark.
It’s interesting to note the popularity of fixed income products that have debuted recently; 2012 may very well go down as the year of the bond ETF. The four new ETFs with the highest asset bases all target fixed income, covering very different corners of that market.
Below, we highlight the five new ETFs that have accumulated the largest asset bases so far in 2012:
5. Yorkville High Income MLP ETF (NYSEARCA:YMLP)
Earlier this year, YMLP became the second exchange-traded fund to offer exposure to MLPs, following in the footsteps of the ultra-successful AMLP (Global X has since added MLPA). This ETF was launched as a partnership between Exchange-Traded Concepts and Yorkville, offering a way for investors to tap into this corner of the energy market through the exchange-traded wrapper. Most competing products are structured as ETNs, which results in very different tax treatments for some investors.
YMLP has attracted about $40 million in assets in a relatively short period of time, generating interest among those looking for the relatively stable yields that MLPs can provide.
4. WisdomTree Emerging Markets Corporate Bond Fund (NASDAQ:EMCB)
|ETFdb Category||Emerging Markets Bonds|
EMCB, which is actively managed, debuted earlier this year as an ETF composed of international bonds. More specifically, EMCB offers exposure to debt of emerging markets issuers in the form of corporate bonds. As interest rates remain depressed in the U.S. market, investors seeking more material yields have begun to look overseas. EMCB offers an opportunity to tap into corporate debt markets in emerging economies, potentially rounding out exposure to the developing world.
EMCB holds dollar-denominated debt, as the market for corporate bonds overseas has not yet evolved to include substantial local currency issues.
3. State Street SPDR Barclays Capital Short Term High Yield Bond ETF (NYSEARCA:SJNK)
|ETFdb Category||High Yield Bonds|
Keeping on the theme of meaningful yield, SJNK seeks to give investors exposure to short-term publicly issued U.S dollar-denominated high yield corporate bonds. In other words, it allows investors to capture a meaningful yield through exposure to credit risk, while minimizing interest rate risk. Though these bonds contain a significant amount of credit risk due to their lower quality, investors can rest assured that the short maturity spectrum will help limit the ETF's sensitivity to changes in interest rates.
Though SJNK can be expected to deliver lower yields than broad-based funds such as HYG and JNK, it offers a way for yield hungry investors to boost their current returns.
2. Barclays U.S. Treasury Bond Fund (NYSEARCA:GOVT)
|ETFdb Category||Government Bonds|
GOVT, which launched in March, offers investors broad-based exposure to U.S. Treasuries with varying maturities. Differing from other fixed income products such as AGG, GOVT focuses exclusively on Treasuries and shies away from agency and corporate bonds.
GOVT is composed of U.S. Treasuries with remaining maturities of one year or more. Its strong start in 2012 reveals its appeal as a safe treasury investment with a relatively low expense ratio. Though GOVT is heaviest at the short end of the maturity spectrum (about 80% of holding have less than 10 years to maturity), it does include some longer-dated bonds as well.
1. PIMCO Total Return Exchange-Traded Fund (NYSEARCA:BOND)
|ETFdb Category||Total Bond Market|
BOND, which is actively managed, debuted earlier this year to much fanfare. Originally launched under the ticker TRXT, this highly anticipated fund is an ETF version of PIMCO's Total Return mutual fund, which has hundreds of billions of dollars in assets. BOND has been the one runaway success among ETFs launched in 2012; it’s already joined the billion dollar club, and could be well on its way to becoming one of the largest fixed income ETFs out there.
BOND generally offers exposure to investment grade U.S. bonds, including Treasuries and corporate debt. Thanks in part to a hot start, BOND has hauled in a massive amount of assets in a short period of time. It’s already become one of the most popular ETFs in the Total Bond Market ETFdb Category (though it's still considerably smaller than AGG or BND).
Disclosure: Long EMCB.
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