Despite financial headlines touting record inflows into ETFs, market gains continue to dominate total industry growth. February market gains increased assets by $61.4 billion, while inflows accounted for the other $49.3 billion of February's $110.7 billion jump in assets for the U.S. ETF industry. Year to date, market gains contributed $114.6 billion and net inflows added $90.2 billion.
A dozen new ETFs came to market in February, and only one closed. The net increase of 11 puts the count at 1,989, consisting of 1,798 ETFs and 191 ETNs. February launches include five actively managed funds and five smart-beta ETFs. These increases push the actively managed count to 169, and the quantity of smart-beta ETFs now tops 700.
The actively managed additions include the First Trust TCW Opportunistic Fixed Income ETF (NASDAQ:FIXD) and four multi-asset allocation fund-of-funds from PowerShares. PowerShares is charging just a 0.05% management fee on these offerings, with the underlying "acquired fund" fees pushing the final expense ratios to a range of 0.37% to 0.39%.
The Low Volatility investment factor is not just for stocks anymore, as the new IQ S&P High Yield Low Volatility Bond ETF (NYSEARCA:HYLV) brings the concept and methodology to the fixed-income world. I think it is now a foregone conclusion that we will see many new factor-based bond ETFs coming to market.
Two other "first of their kind" ETFs launched in February. The InfraCap REIT Preferred ETF (NYSEARCA:PFFR) is the first to focus on the preferred securities of REITs, and Global X Founder-Run Companies (BOSS) is the first with a "founders" theme.
The introduction of the WisdomTree Global Ex-Mexico Equity Fund (BATS:XMX) is a head-scratcher since it only excludes 0.4% of the world's equity markets. I cannot envision much of a need or demand for such a product with a U.S. listing, except perhaps as a political statement. The product may have some appeal in Mexico as a one-stop shopping option for investors looking to diversify away from their home country holdings. However, if diversification is the goal, is there really much difference between a global fund and a global fund that excludes 0.4% of the world's stocks?
Trading activity declined 12.7% in February after dropping 9.1% in January. The notional value of all ETFs traded in February totaled just $1.27 trillion, the lowest level in more than two years. With the growing quantity of ETFs, this implies the average ETF is seeing an even larger decline in trading activity.
ETF Stats for February 2017
|February 2017 Month End||ETFs||ETNs||Total|
|Currently Listed U.S.||1,798||191||1,989|
|Listed as of 12/31/2016||1,774||190||1,964|
|New Introductions for Month||12||0||12|
|Delistings/Closures for Month||1||0||1|
|Net Change for Month||+11||0||+11|
|New Introductions 6 Months||119||7||126|
|New Introductions YTD||27||2||29|
|Net Change YTD||+24||+1||+25|
|Assets Under Management||$2,722 B||$23.1 B||$2,746 B|
|% Change in Assets for Month||+4.2%||+3.0%||+4.2%|
|% Change in Assets YTD||+8.1%||+6.8%||+8.1%|
|Qty AUM > $10 Billion||61||0||61|
|Qty AUM > $1 Billion||311||5||316|
|Qty AUM > $100 Million||866||37||903|
|% with AUM > $100 Million||48.2%||19.4%||45.4%|
|AUM Flows for Month||+$48.7 B||+$0.6 B||+$49.3 B|
|AUM Flows YTD||+$88.9 B||+$1.3 B||+$90.2 B|
|Monthly $ Volume||$1,221 B||$47.6 B||$1,268 B|
|% Change in Monthly $ Volume||-12.9%||-7.7%||-12.7%|
|Avg Daily $ Volume > $1 Billion||7||0||7|
|Avg Daily $ Volume > $100 Million||86||5||91|
|Avg Daily $ Volume > $10 Million||337||10||347|
|Actively Managed ETF Count (w/ change)||169||+5 mth||+6 ytd|
|Actively Managed AUM||$32.3 B||+4.4% mth||+7.7% 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 February (sorted by launch date):
- InfraCap REIT Preferred ETF, launched 2/8/17, seeks to track the INDXX REIT Preferred Stock Index, a market-cap-weighted index designed to provide diversified exposure to high-yielding liquid preferred securities issued by U.S.-listed Real Estate Investment Trusts ("REITs"). It has an estimated yield of 6.3% and an expense ratio of 0.45% (PFFR overview).
- WisdomTree Global Ex-Mexico Equity Fund (XMX), launched 2/10/17, seeks to track the performance of the largest companies operating across diversified sectors in developed and emerging markets throughout the world, excluding Mexico. Mexico represents less than 0.4% of the world's equity markets. Its expense ratio is capped at 0.30% (XMX overview).
- First Trust TCW Opportunistic Fixed Income ETF, launched 2/15/17, is an actively managed ETF that seeks to maximize long-term total return by investing in U.S. fixed-income securities of any credit quality. The ETF uses a value-oriented fixed-income strategy focused on generating alpha primarily through sector allocation and security selection. It seeks to control risk through a disciplined application of dollar-cost-averaged exposure across duration, yield curve, sectors, and securities. It caps its expense ratio at 0.55% (FIXD overview).
- Global X Founder-Run Companies ETF, launched 2/15/17, will track the Solactive U.S. Founder-Run Companies Index of 100 equal-weighted constituents. It offers exposure to U.S. mid- and large-cap companies that are led by their founder(s), and it carries an expense ratio of 0.65% (BOSS overview).
- IQ S&P High Yield Low Volatility Bond ETF, launched 2/15/17, seeks investment results that track the S&P U.S. High Yield Low Volatility Corporate Bond Index. The ETF invests in U.S. dollar denominated high-yield corporate bonds. It seeks to identify securities that, taken together, are expected to have lower volatility. Its expense ratio is capped at 0.40% (HYLV overview).
- Tortoise Water Fund (BATS:TBLU), launched 2/15/17, tracks the Tortoise Water Index, which provides exposure to the water infrastructure, management, and treatment companies that appear poised to benefit from the expected investment in rebuilding existing infrastructure, constructing new infrastructure, and better managing water resources. It follows a proprietary, rules-based, research-driven methodology and a fundamental weighting technique. This water ETF has an expense ratio of 0.40% (TBLU overview).
- PowerShares Growth Multi-Asset Allocation Portfolio (BATS:PSMG), launched 2/23/17, is an actively managed fund-of-funds ETF. Its target allocations are 60% to 80% in equity ETFs, 20% to 40% in fixed-income ETFs, and 20% to 30% in ETFs that invest in foreign stocks, foreign bonds, American depositary receipts ("ADRs"), and global depositary receipts ("GDRs"). The ETF has an expense ratio of 0.39% (PSMG overview).
- PowerShares Balanced Multi-Asset Allocation Portfolio (BATS:PSMB), launched 2/23/17, is an actively managed fund-of-funds ETF. Its target allocations are 50% to 70% in equity ETFs, 30% to 50% in fixed-income ETFs, and 10% to 25% in ETFs that invest in foreign stocks, foreign bonds, ADRs, and GDRs. It has an expense ratio of 0.39% (PSMB overview).
- PowerShares Moderately Conservative Multi-Asset Allocation Portfolio (BATS:PSMM), launched 2/23/17, is an actively managed fund-of-funds ETF. Its target allocations are 20% to 50% in equity ETFs, 50% to 80% in fixed-income ETFs, and 5% to 15% in ETFs that invest in foreign stocks, foreign bonds, ADRs, and GDRs. PSMM has an expense ratio of 0.38% (PSMM overview).
- PowerShares Conservative Multi-Asset Allocation Portfolio (BATS:PSMC), launched 2/23/17, is an actively managed fund-of-funds ETF. Its target allocations are 20% to 50% in equity ETFs, 50% to 80% in fixed-income ETFs, and 5% to 10% in ETFs that invest in foreign stocks, foreign bonds, ADRs, and GDRs. The ETF has an expense ratio of 0.37% (PSMC overview).
- Inspire Global Hope Large Cap ETF (NYSEARCA:BLES), launched 2/28/17, tracks the Inspire Global Hope Large Cap Equal Weight Index of 400 of the "most inspiring" large-cap companies from around the globe. Constituents are determined by the Inspire Impact Score methodology, which measures a company's positive impact on the world. It will typically be composed of 50% U.S. large-cap companies, 40% international developed large-cap companies, and 10% emerging market large-cap companies using equal weighting. BLES has an expense ratio of 0.65% (BLES overview).
- Inspire Small/Mid Cap Impact ETF (NYSEARCA:ISMD), launched 2/28/17, tracks the Inspire Small/Mid Cap Impact Equal Weight Index of 500 of the "most inspiring" small- and mid-cap companies in the U.S., using the Inspire Impact Score methodology. The ETF is typically composed of 50% U.S. mid-cap companies and 50% U.S. small-cap companies using an equal-weighting approach. ISMD has an expense ratio of 0.65% (ISMD overview).
Product closures in February and last day of listed trading:
- GaveKal Knowledge Leaders Emerging Markets (KLEM), 2/10/17
Product changes in February:
Announced product changes for coming months:
- Oppenheimer ADR Revenue ETF (NYSEARCA:RTR) and Oppenheimer Global Growth Revenue ETF (NYSEARCA:RGRO) will close and liquidate with a last day of trading on March 9.
- WisdomTree will close and liquidate seven ETFs, with March 22 being the last day of trading. The closing funds are WisdomTree Australia & New Zealand Debt (NYSEARCA:AUNZ), WisdomTree Indian Rupee Strategy (NYSEARCA:ICN), WisdomTree International Hedged Equity (HDWM), WisdomTree International Hedged SmallCap Dividend (NYSEARCA:HDLS), WisdomTree Japan Hedged Tech, Media and Telecom (NYSEARCA:DXJT), WisdomTree Japan Quality Dividend Growth (NYSEARCA:JDG), and WisdomTree Korea Hedged Equity (NASDAQ:DXKW).
- Direxion will close and liquidate three ETFs, with March 31 being the last day of trading. The affected funds are Direxion Daily Cyber Security & IT Bear 2x (NYSEARCA:HAKD), Direxion Daily Pharmaceutical & Med Bear 2x (NYSEARCA:PILS), and Direxion Daily Pharmaceutical & Med Bull 2x (NYSEARCA:PILL).
- PIMCO will close and liquidate the PIMCO Diversified Income Active ETF (NYSEARCA:DI) and the PIMCO Global Advantage Inflation-Linked Bond Active ETF (NYSEARCA:ILB), with March 31 being the last day of trading. At the time of the announcement, DI had $42.5 million in assets and ILB held $79.8 million.
- Horizons ETF Management announced that it intends to acquire the four Recon Capital ETFs (DAX, QYLD, USMR, and BMLA), with the transition expected to be finalized in 1Q 2017.
Disclosure: Author has no positions in any of the securities, 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.