This discussion compares recent year performance of some mainstream well known Mid Cap Core ETFs, as well as the lesser known, lightly traded offerings. We chose the last 4 years as a convenient timeframe for comparison which represents a volatile period for comparison of these MidCap ETF funds' performance. These funds being "Core" Mid Cap slices of the market, will have holdings that exhibit characteristics and holdings of both "Value" and "Growth" companies. This period of course included the 2008 stock market meltdown bust, right through recovery of the full 2009's risk on rally - to the more recent choppiness of 2010 and 2011.
From the data table we can readily see the effects of wealth destruction and the eventual recovery in performance for these selected Mid Cap Core ETFs. Some highlights and points worth mentioning about the funds include:
- There are 3 ETFs that track the S&P MidCap 400. The most popular of which is the SPDR MDY. Also, Vanguard's lightly traded IVOO and the iShares IJH. One aspect a buyer could consider with three choices of essentially the same investment would come down to which fund has the lowest expenses. Vanguard's offering has that edge with , at an expense ratio of 0.17%.
- Rydex offers an Equal Weight version for the S&P MidCap 400, EWMD. It's new and has been trading only since August of 2011 but we wanted this list to be comprehensive and inclusive. The Equal Weighting will give the smaller constituents a bigger impact on performance. Rydex is a leader in Equal Weight niche ETF products.
- I omitted "theme" based ETF's such as Guggenheim's Insider Sentiment NFO even though it's portfolio is classified as a MidCap "Blend" or "Core" by some fund data providers. Theme based funds are not exactly a fair comparison for Market Cap funds, but may be a nice exercise for a future article.
- Lesser known Quant type ETFs such as Guggenheim's MidCap Core CZA and First Trust's Mid Cap Core AlphaDEX Fund FNX are of course included here, and judging by their healthy performance they make a nice case for their proprietary selection methodologies. The former is linked to the Zacks MidCap Core Index and the latter uses the Defined MidCap Core Index. Also the WisdomTree fundamentally weighted MidCap Earnings Fund EZM revealed some outperformance as well.
Judging from the past 4 year performance of this MidCap list, there is in my opinion some very good candidates for a buy and hold investor. Lack of liquidity aside, I favor the following funds as deserving of further due diligence if I was investing in this ETF style sector: CZA, FNX, EZM and JKG. I'm especially partial to funds with the lesser amount of holdings as many funds with a great deal of holdings tend to just mimic the market and are not as beholden to any selection acumen.
The first to market and very popular SPDR MDY is a terrific fund too, it's been around since 1995. But if you are not day trading Mid Cap funds, then the slight lack of liquidity in these lesser know funds should have little or no bearing for a long term buy and hold investor.
Sometimes the popular funds may not be the best of breed in certain performance metrics, expenses, etc. So It may be advantageous looking at the whole menu and examining all the ETF choices out there. After all, we are all seeking alpha.
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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.