ETF Deathwatch For December 2017

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Includes: BVAL, CALF, CHOC, CMDT, GMFL, ICOW, NUSA, PPLN, RNEM, RNMC, RNSC, TTAI, USMF, VESH, VSMV
by: Invest With An Edge

By Daniel Rangel

ETF Deathwatch for December had 15 additions and nine exits. All of the funds exiting the Deathwatch list were due to improved health. One fund within the Deathwatch list, the Tierra XP Latin America Real Estate ETF (LARE), was closed for the month of December. The membership tally increased to 463. Only two of the funds added to the list were ETNs, iPath Pure Beta Cocoa ETN (NYSEARCA:CHOC) and JP Morgan Cushing 30 MLP Index ETNS (NYSEARCA:PPLN). All other removals and additions were ETFs. The presence of ETNs (typically more financially creative products) in the additions indicates a market appetite for less risk.

Half of the new additions to the list were young funds, having just come out of the six-month grace period given to all new ETFs. Since they haven't had much time to attract investor interest, they still have a good chance of coming off the list down the road; however, only one addition, CHOC, was older than 5 years, which is indicative of declining interest. These are the most likely to be vulnerable to closure. All but three were added to the list due to low trading volume rather than a decrease in assets under management (AUM). The Mid Cap US Equity Select ETF (NASDAQ:RNMC) and WisdomTree US Multifactor Fund (BATS:USMF) were the two ETF additions with insufficient AUM, and CHOC was the sole ETN addition with insufficient AUM. All additions were niche products ranging from commodities, such as cocoa, to mid-cap U.S. equity. Each product services a small portion of the market, indicating that these narrowly focused products may not be as popular as originally expected.

With one closure this month, it appears that some fund managers feel a desire to reduce costs in exchange for the potential future profit that troubled products may bring in the future. The finance industry tends to slow down a bit during the holiday season before the end of the year. This, coupled with a healthy domestic equity market, may have temporarily curbed several closures; however, the Tierra XP Latin America Real Estate ETF (LARE) did not make it.

There are 38 ETFs and ETNs on Deathwatch this month that have been in the market for more than 10 years. That is a long time to wait for investor interest to kick in. The BLDRS Asia 50 ADR Index Fund (NASDAQ:ADRA) and BLDRS Europe 100 ADR Index Fund (NASDAQ:ADRU) are the most extreme examples still on the list. The Goldman Sachs Claymore CEF Index-Linked G ETN hits 10 years this month, with assets of only $7.51 million. Product offerings such as this tend to service tactical traders rather than those seeking long-term holdings (a niche where ProFunds has excelled, historically).

The average asset level of the threatened ETFs on ETF Deathwatch rose slightly from $7 million to $7.45 million, and the number of products with less than $2 million in assets increased from 83 to 85. The average age rose from 53.38 to 53.43 months, and the number of products more than 5 years of age stayed the same at 177. The largest ETF on the list had an AUM of $24.88 million, while the smallest had assets of just $215,760.

Here is the Complete List of 463 ETFs and ETNs on ETF Deathwatch for December 2017 compiled using the objective ETF Deathwatch Criteria.

The 13 ETFs added to ETF Deathwatch for December:

  1. Brand Value ETF (NYSEARCA:BVAL)
  2. Pacer US Small Cap Cash Cows (BATS:CALF)
  3. iShares Commodity Optimized Trust (NYSEARCA:CMDT)
  4. Guggenheim Multi-Factor Large Cap ETF (GMFL)
  5. Pacer Developed Markets International Cash Cows 100 ETF (BATS:ICOW)
  6. NuShares Enhanced Yield 1-5 Year U.S. Aggregate Bond ETF (NYSEARCA:NUSA)
  7. Emerging Markets Equity Select ETF (NASDAQ:RNEM)
  8. Mid Cap US Equity Select ETF (RNMC)
  9. Small Cap US Equity Select ETF (NASDAQ:RNSC)
  10. TrimTabs All Cap International Free-Cash-Flow ETF (BATS:TTAI)
  11. WisdomTree US Multifactor Fund (USMF)
  12. Virtus Enhanced Short U.S. Equity ETF (NYSEARCA:VESH)
  13. VictoryShares US Multi-Factor Minimum Volatility ETF (NASDAQ:VSMV)

The 2 ETNs added to ETF Deathwatch for December:

  1. iPath Pure Beta Cocoa ETN
  2. JP Morgan Cushing 30 MLP Index ETNS

The 9 ETFs removed from ETF Deathwatch due to improved health:

  1. Tierra XP Latin America Real Estate ETF (LARE)
  2. John Hancock Multifactor Materials ETF (NYSEARCA:JHMA)
  3. John Hancock Multifactor Consumer Staples ETF (NYSEARCA:JHMS)
  4. ProShares UltraShort Australian Dollar ETF (NYSEARCA:CROC)
  5. Guggenheim Dow Jones Industrial Average Dividend ETF (NYSEARCA:DJD)
  6. iShares MSCI USA ESG Optimized ETF (NASDAQ:ESGU)
  7. First Trust Nasdaq Smartphone Index Fund (FONE)
  8. WisdomTree International Quality Dividend Growth Fund (BATS:IQDG)
  9. ProShares K-1 Free Crude Oil Strategy ETF (BATS:OILK)

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.