ETF Stats For May 2015 - Spot Failures And Extreme Makeovers

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Includes: BAR-OLD, CAPX, CNTR, DHVW, EQWL, FXEU, GDAY, GUSH, JDG, LABD, LABU, LRET, SCID, SCIJ, SCIU, SCIX, VXDN, VXUP, YLCO
by: Ron Rowland

Sixteen new products were introduced in May and five were closed. Both the launch and closure counts should have been higher by ten, but Invesco PowerShares decided to perform an extreme-makeover on ten of its ETFs. Additionally, new entrant AccuShares fails to learn from history and launches ETFs it claims will track spot prices.

The month of May ended with 1,714 active listings, consisting of 1,506 ETFs and 208 ETNs. The quantity of actively managed ETFs held steady at 126. Industry assets crept 0.6% higher, and the $2.1 trillion now being held in ETFs and ETNs represents a 7.2% increase since the year began.

Invesco PowerShares decided to change directions with ten ETFs in its lineup. The firm fired Research Affiliates and removed the RAFI fundamental indexing from nine style-box ETFs. Russell Equal Weight and Pure Style indexes replaced them. Instead of closing the PowerShares Fundamental Pure Large Core Portfolio (PXLC) and launching the PowerShares Russell Top 200 Equal Weight Portfolio (NYSE:EQWL), Invesco decided to merely transpose the fund from fundamental to equal weighting while changing its stock selection universe, name, ticker symbol, and objective.

The small and mid-cap PowerShares funds underwent similar changes. The six ETFs with growth and value designations changed from RAFI Fundamental indexes to Russell Pure Style indexes but kept their same ticker symbols. The tenth ETF underwent the most extreme transformation, as PowerShares NYSE Century Portfolio (NYCC) is now the PowerShares Dow Jones US Contrarian Opportunities Portfolio (NYSEARCA:CNTR). For it, nothing is the same except for the PowerShares brand. In all cases, the former performance history is now useless.

AccuShares Spot CBOE VIX Fund Up (NASDAQ:VXUP) and AccuShares Spot CBOE VIX Fund Down (NASDAQ:VXDN) were launched amid a heap of positive praise on May 19. However, the performance of the two funds has not been anywhere near that of spot VIX. They do not invest in the VIX, and they do not invest in VIX futures. Instead, they sit in cash, with the NAVs moving against each other in a teeter-totter fashion. In short, they smell just like MacroShares, those teeter-totter pairs that arrived with high praise but soon flamed out.

The underlying NAVs might be tracking VIX spot prices, but since the funds do not have a valid and functioning creation/redemption mechanism, trading prices have been subject to extreme premiums and discounts, just like closed-end funds. There is no way to arbitrage the trading price to NAV on a daily basis, but fund literature claims it may happen once a month when they make a distribution. Another problem is that the "Up shares" and "Down shares" can only be issued in tandem, even though their supply and demand will hardly ever be identical. The funds are seeing some trading action, but it is probably futures traders trying to arbitrage the price to VIX futures. These funds do not track spot prices. So far, they are tracking VIX futures.

May 2015 Month End ETFs ETNs Total
Currently Listed U.S. 1,506 208 1,714
Listed as of 12/31/2014 1,451 211 1,662
New Introductions for Month 15 1 16
Delistings/Closures for Month 5 0 5
Net Change for Month +10 +1 +11
New Introductions 6 Months 102 6 108
New Introductions YTD 89 4 93
Delistings/Closures YTD 34 7 41
Net Change YTD +55 -3 +52
Assets Under Mgmt ($ billion) $2,114 $28.3 $2,142
% Change in Assets for Month +0.6% -1.6% +0.6%
% Change in Assets YTD +7.2% +5.4% +7.2%
Qty AUM > $10 Billion 52 0 52
Qty AUM > $1 Billion 267 7 274
Qty AUM > $100 Million 791 42 833
% with AUM > $100 Million 52.5% 20.2% 48.6%
Monthly $ Volume ($ billion) $1,245 $41.4 $1,286
% Change in Monthly $ Volume -7.6% -10.4% -7.7%
Avg Daily $ Volume > $1 Billion 8 0 8
Avg Daily $ Volume > $100 Million 79 4 83
Avg Daily $ Volume > $10 Million 301 10 311
Actively Managed ETF Count (w/ change) 126 +0 mth +1 ytd
Actively Managed AUM ($ billion) $20.4 +1.5% mth +18.3% ytd

Data sources: Daily prices and volume of individual ETPs from Norgate Premium Data. Fund counts and all other information compiled by Invest With An Edge.

New products launched in May (sorted by launch date):

  1. ETRACS Monthly Pay 2xLeveraged MSCI US REIT Index ETN due 5/5/45 (NYSEARCA:LRET), launched 5/6/15, is an exchange-traded note linked to the monthly compounded 2X leveraged performance of the MSCI US REIT Index. Its monthly dividends should have an initial yield of 6.6% after the 0.85% expense ratio (LRET overview).
  2. PowerShares Europe Currency Hedged Low Volatility Portfolio (NYSEARCA:FXEU), launched 5/7/15, tracks an underlying index composed of 80 stocks exhibiting low volatility characteristics. Constituents are weighted relative to the inverse of their volatility, and the holdings are then 100% currency hedged to the US dollar using rolling one month forward contracts. It has an expense ratio of 0.25% (FXEU overview).
  3. Diamond Hill Valuation-Weighted 500 ETF (NYSEARCA:DHVW), launched 5/12/15, tracks an underlying index composed of about 500 of the largest US-listed equities weighted by intrinsic value capitalization, using a proprietary, patent-pending valuation methodology. The ETF claims an inception date of 12/30/2011, based on the commencement of the Diamond Hill Valuation-Weighted 500, L.P. The assets of the Partnership were converted into assets of the fund upon the commencement of operation of the fund. The underlying index has only been in existence since sometime in 2013. Therefore, the Partnership's past performance is not necessarily an indication of how the ETF will perform. The expense ratio is capped at 0.10% through April 2016 (DHVW overview).
  4. Global X Scientific Beta Asia ex-Japan ETF (NYSEARCA:SCIX), launched 5/13/15, seeks to track the Scientific Beta Developed Asia-Pacific ex Japan Multi-Beta Multi-Strategy Equal Risk Contribution Index. The underlying index selects securities by the four factors of value, size, volatility, and momentum. It then uses a multi-step process that combines multiple weighting methodologies to diversify the risks associated with any one weighting scheme. The ETF has an expense ratio of 0.38% (SCIX overview).
  5. Global X Scientific Beta Europe ETF (NYSEARCA:SCID), launched 5/13/15, seeks to track the Scientific Beta Extended Europe Multi-Beta Multi-Strategy Equal Risk Contribution Index. The underlying index selects securities by the four factors of value, size, volatility, and momentum. It then uses a multi-step process that combines multiple weighting methodologies to diversify the risks associated with any one weighting scheme. The ETF has an expense ratio of 0.38% (SCID overview).
  6. Global X Scientific Beta Japan ETF (NYSEARCA:SCIJ), launched 5/13/15, seeks to track the Scientific Beta Japan Multi-Beta Multi-Strategy Equal Risk Contribution Index. The underlying index selects securities by the four factors of value, size, volatility, and momentum. It then uses a multi-step process that combines multiple weighting methodologies to diversify the risks associated with any one weighting scheme. The ETF has an expense ratio of 0.38% (SCIJ overview).
  7. Global X Scientific Beta US ETF (NYSEARCA:SCIU), launched 5/13/15, seeks to track the Scientific Beta United States Multi-Beta Multi-Strategy Equal Risk Contribution Index. The underlying index selects securities by the four factors of value, size, volatility, and momentum. It then uses a multi-step process that combines multiple weighting methodologies to diversify the risks associated with any one weighting scheme. The ETF has an expense ratio of 0.35% (SCIU overview).
  8. AccuShares Spot CBOE VIX Down Shares, launched 5/19/15, are designed to track the inverse changes in the CBOE Volatility Index (price volatility of the S&P 500 Index) between fund distributions (or measuring periods). The fund will not invest in anything. Instead, it will engage principally in cash distributions and potentially paired share distributions in an attempt to deliver the economic exposure inverse of the CBOE VIX. Such distributions may not represent any income or gains and may represent a return of capital. Each fund will issue its shares in offsetting pairs, where one constituent of the pair is positively linked to the fund's underlying index ("Up Shares") and the other constituent is negatively linked to the fund's underlying index ("Down Shares"). Therefore, the fund will only issue, distribute, maintain, and redeem equal quantities of Up and Down shares at all times. VXDN will have an expense ratio of 0.95% (VXDN overview).
  9. AccuShares Spot CBOE VIX Up Shares, launched 5/19/15, are designed to track the changes in the CBOE Volatility Index (price volatility of the S&P 500 Index) between fund distributions (or measuring periods). The fund will not invest in anything. Instead, it will engage principally in cash distributions and potentially paired share distributions to deliver the economic exposure of the CBOE VIX. Such distributions may not represent any income or gains and may represent a return of capital. Each fund will issue its shares in offsetting pairs, where one constituent of the pair is positively linked to the fund's underlying index ("Up Shares") and the other constituent is negatively linked to the fund's underlying index ("Down Shares"). Therefore, the fund will only issue, distribute, maintain, and redeem equal quantities of Up and Down shares at all times. VXUP will have an expense ratio of 0.95% (VXUP overview).
  10. Elkhorn S&P 500 Capital Expenditures Portfolio (NASDAQ:CAPX), launched 5/27/15, will track the S&P 500 Capex Efficiency Index, which is designed to provide exposure to constituents that have exhibited strong capital discipline in the form of efficient capital expenditures. Capital expenditures (capex) are the reinvestment of capital back into the business in order to increase efficiencies, innovation, and growth. Capex-efficient companies maximize the amount of sales per dollar of capital expenditures. The ETF will hold 100 equally weighted stocks, yield about 1.6%, and have an expense ratio of 0.29% (CAPX overview).
  11. Direxion Daily S&P Biotech Bear 3x Shares (NYSEARCA:LABD), launched 5/28/15, seeks daily investment results, before fees and expenses, that are 300% of the inverse daily performance of the S&P Biotechnology Select Industry Index with an expense ratio of 0.95% (LABD overview).
  12. Direxion Daily S&P Biotech Bull 3x Shares (NYSEARCA:LABU), launched 5/28/15, seeks daily investment results, before fees and expenses, that are 300% the daily performance of the S&P Biotechnology Select Industry Index with an expense ratio of 0.95% (LABU overview).
  13. Direxion Daily S&P Oil & Gas Exploration & Production Bear 3x Shares (NYSEARCA:DRIP), launched 5/28/15, seeks daily investment results, before fees and expenses, that are 300% of the inverse daily performance of the S&P Oil & Gas Exploration & Production Select Industry Index with an expense ratio of 0.95% (DRIP overview).
  14. Direxion Daily S&P Oil & Gas Exploration & Production Bull 3x Shares (NYSEARCA:GUSH), launched 5/28/15, seeks daily investment results, before fees and expenses, that are 300% of the daily performance of the S&P Oil & Gas Exploration & Production Select Industry Index with an expense ratio of 0.95% (GUSH overview).
  15. Global X YieldCo Index ETF (NASDAQ:YLCO), launched 5/13/15, will track an underlying index of YieldCos, companies in a relatively new asset class in the renewable energy space that are structured similar to MLPs. Renewable energy companies are often risky since the technology is often unproven and cash flows are uncertain. Share prices can be volatile, leading investors to require a higher level of returns for accepting such risks. By design, YieldCos have significantly lower risk profiles than their parent companies, as they typically contain only stable energy producing assets with predictable cash flows, and they are not involved in the riskier business of bringing new projects online. Additionally, their primary focus is on distributing available cash flows to shareholders, rather than reinvesting in new technologies or building new projects. This ETF will have an expense ratio of 0.65% (YLCO overview).
  16. WisdomTree Japan Dividend Growth Fund (NYSEARCA:JDG), launched 5/13/15, tracks an index of Japanese growth stocks weighted by dividends. Like the currency-hedged version (NYSEARCA:JHDG) launched last month, it is not a dividend growth fund. It has an expense ratio of 0.43% (JDG overview).

Product closures/delistings in May:

  1. Deutsche X-trackers In-Target Date (NYSEARCA:TDX)
  2. Deutsche X-trackers 2010 Target Date (NYSEARCA:TDD)
  3. Deutsche X-trackers 2020 Target Date (NYSEARCA:TDH)
  4. Deutsche X-trackers 2030 Target Date (NYSEARCA:TDN)
  5. Deutsche X-trackers 2040 Target Date (NYSEARCA:TDV)

Product changes in May:

  1. Credit Suisse rebranded many of its ETNs the X-Links ETNs (X-Links press release) effective May 4.
  2. The SPDR BofA Merrill Lynch Crossover Corporate Bond ETF changed its ticker symbol form XOVR to CJNK effective May 12.
  3. Direxion had reverse splits on eight ETFs and forward splits on eleven ETFs effective May 20 (press release).
  4. ProShares had reverse splits on nine ETFs and forward splits on twelve ETFs effective May 20 (press release).
  5. PowerShares fired Research Affiliates, LLC as the index provider for its fundamental style-box ETFs. The Frank Russell Company was hired as the new index provider, and the funds no longer pursue the same objectives. Rather than closing 10 ETFs and launching new ones, PowerShares chose the "extreme-makeover" path, making their historical performance irrelevant and confusing investors. See the PowerShares press release for additional information on these changes that took effect May 26.

Announced Product Changes for Coming Months:

  1. ProShares Ultra Australian Dollar (NYSEARCA:GDAY) will have its last day of trading June 18 and then be closed and liquidated.
  2. Direxion Daily Gold Bull 3x Shares (NYSEARCA:BAR-OLD) will have its last day of trading June 19 and then be closed and liquidated.

Disclosure covering writer: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.