ETF Deathwatch For June 2016: Currency-Hedged Zombies

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Includes: AXJV, ICOL, LKOR, QINC, UBR
by: Ron Rowland

Anyone looking for evidence of "trendiness" in ETF launch activity can find it in the recent land rush by sponsors trying to stake their claim in a currency-hedged country. Five years ago, there were only two currency-hedged ETFs listed in the U.S., and the quantity increased by just nine over the two subsequent years. Today, the category has mushroomed to 103 such funds, and the oversaturation has created 52 currency-hedged zombies on ETF Deathwatch. Additionally, two currency-hedged ETFs have already bit the dust.

For the 103 currency-hedged ETFs listed for trading at the end of May, 67 of them arrived on the market after the U.S. dollar peaked in value in March 2015. Therefore, the majority of the product launches occurred when the theme they were trying to exploit - a strengthening dollar - had already exhausted itself for that cycle. In percentage terms, 65% of the currency-hedged ETFs were late to the party, and 50% are already on Deathwatch.

Thirty-two new names joined the ETF Deathwatch list this month, including seven that use currency hedging. Five ETFs escaped due to improved health, and five more left via the ETF graveyard. The net increase of 22 funds pushes the tally even higher into record territory. For June, the membership count stands at 472 (361 ETFs and 111 ETNs). This does not include any of the 115 products brought to market in the past six months, because all new funds receive a half-year grace period to establish themselves.

Nearly 25% (472 of 1,902) of all ETFs and ETNs are now on ETF Deathwatch, and their lack of liquidity continues to be one of the primary concerns. Twenty-four products went the entire month of May without a single trade, and 251 had zero volume on the last day of the month. Trading concerns are not limited to just these ETFs, because many others also have their weak moments. In fact, 725 ETFs (38% of all listings) had at least one zero-volume day in May.

The average asset level of products on ETF Deathwatch increased from $6.8 million to $7.0 million, and the quantity of products with less than $2 million in assets fell from 96 to 92. The average age increased from 46.8 to 47.2 months, and the number of products more than 5 years old jumped from 177 to 187. Although many newer ETFs are on the list, the statistics point to a problem with older funds. The average member is closing in on 4 years of age, and 39.6% have been on the market five years or more. Two of the ETFs have been around for 13.5 years - that is a long time for a sponsor to subsidize a losing product and makes it difficult to forecast a closing date for any these funds.

Here is the Complete List of 472 ETFs and ETNs on ETF Deathwatch for June 2016 compiled using the objective ETF Deathwatch Criteria.

The 32 ETFs and ETNs added to ETF Deathwatch for June:

  1. Alerian Energy Infrastructure (NYSEARCA:ENFR)
  2. AlphaClone International (NYSEARCA:ALFI)
  3. BlueStar TA-BIGTech Israel Technology (NASDAQ:ITEQ)
  4. Deutsche X-trackers FTSE Developed ex US Comprehensive Factor (NYSE:DEEF)
  5. Deutsche X-trackers Russell 1000 Comprehensive Factor (NYSE:DEUS)
  6. Direxion iBillionaire Index (NYSEARCA:IBLN)
  7. EGShares EM Strategic Opportunities (EMSO)
  8. Etho Climate Leadership U.S. (NYSEARCA:ETHO)
  9. ETRACS Alerian MLP Index Series B ETN (NYSEARCA:AMUB)
  10. ETRACS Mth 2x ISE Exclusively Homebuilders ETN (NYSEARCA:HOML)
  11. ETRACS Mthly Pay 2x DJ Intl Real Estate ETN (NYSEARCA:RWXL)
  12. First Trust Heitman Global Prime Real Estate (NYSEARCA:PRME)
  13. First Trust SSI Strategic Convertible Securities (NASDAQ:FCVT)
  14. FlexShares Currency Hedged Morningstar DM ex-US Factor Tilt (NYSEARCA:TLDH)
  15. FlexShares Real Assets Allocation Index Fund (NASDAQ:ASET)
  16. iPath Bloomberg Agriculture ETN (NYSEARCA:JJA)
  17. iShares Currency Hedged MSCI Europe Small-Cap (BATS:HEUS)
  18. iShares Currency Hedged JPX-Nikkei 400 (NYSEARCA:HJPX)
  19. iShares Edge MSCI Min Vol EAFE Currency Hedged (BATS:HEFV)
  20. iShares Edge MSCI Min Vol Europe Currency Hedged (BATS:HEUV)
  21. iShares Edge MSCI Min Vol Global Currency Hedged (BATS:HACV)
  22. iShares Enhanced U.S. Small-Cap (NYSEARCA:IESM)
  23. Oppenheimer ADR Revenue (NYSEARCA:RTR)
  24. Oppenheimer Financials Sector Revenue (NYSEARCA:RWW)
  25. PowerShares Global Agriculture (NASDAQ:PAGG)
  26. ProShares Ultra S&P Regional Banking (NYSEARCA:KRU)
  27. ProShares UltraShort Industrials (NYSEARCA:SIJ)
  28. ProShares UltraShort Technology (NYSEARCA:REW)
  29. SPDR S&P Russia (NYSEARCA:RBL)
  30. VanEck Vectors ChinaAMC China Bond (NYSEARCA:CBON)
  31. WisdomTree Japan Hedged Quality Dividend Growth (NYSEARCA:JHDG)
  32. WisdomTree Strong Dollar Emerging Markets Equity (BATS:EMSD)

The 5 ETPs removed from ETF Deathwatch due to improved health:

  1. First Trust RBA Quality Income (NASDAQ:QINC)
  2. FlexShares Credit-Scored US Long Corp Bond (NASDAQ:LKOR)
  3. iShares Edge MSCI Min Vol Asia ex Japan (NYSEARCA:AXJV)
  4. iShares MSCI Colombia Capped (NYSEARCA:ICOL)
  5. ProShares Ultra MSCI Brazil Capped (NYSEARCA:UBR)

The 5 ETFs removed from ETF Deathwatch due to delisting:

  1. Horizons Korea KOSPI 200 (NYSEARCA:HKOR)
  2. ProShares CDS North American HY Credit (BATS:TYTE)
  3. Direxion Daily MSCI Europe Currency Hedged Bull 2x (NYSEARCA:HEGE)
  4. Direxion Daily MSCI Japan Currency Hedged Bull 2x (NYSEARCA:HEGJ)
  5. C-Tracks Citi Volatility Index TR ETN (NYSEARCA:CVOL)

ETF Deathwatch Archives

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