ETF Deathwatch for November 2015: Investors Shun Smart Beta

new etfsRon Rowland:  ETF Deathwatch membership rolls increased by eight for November, with 21 additions and 13 removals.  Eight of the funds were removed from the list because they went out of business in October.  Five others were discharged due to improved health, a more honorable way to get off the list.  The net increase leaves the count at 343: 246 ETFs and 97 ETNs.

Thirteen of the 21 (62%) additions this month are smart-beta funds.  “Smart beta” is the industry terminology applied to ETFs that weight each stock using factors other than mThirteen of the 21 (62%) additions this month are smart-beta funds.arket capitalization.  These alternative factors might include volatility, yield, momentum, value, earnings, revenue, or a combination of these and other factors.

The ETF industry is currently enamored with smart-beta funds, and many new products coming to market carry the smart beta label.  The reason for this is easy to see because nearly all of the traditional market-capitalization-weighted indexes are already well-represented in the ETF space.  Smart-beta approaches can use a virtually unlimited combination of factors to produce a unique ETF.  It is much easier to claim an investment vehicle is “new” when it is not based on a traditional capitalization index.

However, despite the industry push and hype surrounding smart beta, ETF investors have been slow to embrace many of these vehicles.  We categorize ETFs into seven broad categories.  Unleveraged equity ETFs and ETNs are classified as either a sector, international, or a style & strategy ETF.  There are currently 65 ETFs from our style & strategy classification on ETF Deathwatch.  All 65 of these funds carry the smart beta label.  Within the international classification, 52 of the 72 funds on Deathwatch are smart-beta funds.  With 100% of the style & strategy funds and 72% of the international funds on ETF Deathwatch categorized as smart-beta funds, it is easy to see that investors have not fully embraced this corner of the ETF universe.

Liquidity is a major concern when trying to buy or sell any ETF or ETN on ETF Deathwatch.  Only 16 traded every day in October.  The other 327 (95%) had at least one day with zero volume.  In a true display of illiquidity, 15 of these ETFs and ETNs went the entire month of October without a single trade.

The average asset level of products on ETF Deathwatch increased from $6.3 million to $6.8 million, and the quantity of products with less than $2 million decreased from 76 to 73.  The average age decreased from 48.8 to 48.0 months, and the number of products more than five years old held steady at 114.

Here is the Complete List of 343 Products on ETF Deathwatch for November 2015 compiled using the objective ETF Deathwatch Criteria.

The 21 ETPs added to ETF Deathwatch for November:

  1. AlphaMark Actively Managed Small Cap (SMCP)
  2. ALPS STOXX Europe 600 ETF (STXX)
  3. Barclays Inverse U.S. Treasury Aggregate ETN (TAPR)
  4. DB 3x Japanese Govt Bond Futures ETN (JGBT)
  5. Deutsche X-trackers DJ Hedged Intl Real Estate (DBRE)
  6. Deutsche X-trackers S&P Hedged Global Infrastructure (DBIF)
  7. EGShares EM Quality Dividend ETF (HILO)
  8. First Trust Eurozone AlphaDEX ETF (FEUZ)
  9. Global X Guru Activist ETF (ACTX)
  10. iShares Commodity Optimized Trust (CMDT)
  11. iShares FactorSelect MSCI Global (ACWF)
  12. iShares FactorSelect MSCI International (INTF)
  13. iShares FactorSelect MSCI International Small-Cap (ISCF)
  14. iShares FactorSelect MSCI USA Small-Cap (SMLF)
  15. PowerShares Multi-Strategy Alternative (LALT)
  16. PowerShares S&P International Developed High Beta (IDHB)
  17. PowerShares Wilderhill Progressive Energy (PUW)
  18. ProShares Ultra MSCI Brazil Capped (UBR)
  19. Recon Capital FTSE 100 ETF (UK)
  20. RevenueShares ADR (RTR)
  21. SPDR MSCI USA Quality Mix (QUS)

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

  1. BLDRS Asia 50 ADR (ADRA)
  2. IQ Hedge Market Neutral Tracker (QMN)
  3. ProShares Short Oil & Gas (DDG)
  4. ProShares UltraShort Industrials (SIJ)
  5. ProShares UltraShort MSCI EAFE (EFU)

The 8 ETPs removed from ETF Deathwatch due to delisting:

  1. AdvisorShares Pring Turner Business Cycle (DBIZ)
  2. Global X Brazil Financials (BRAF)
  3. Global X Central Asia & Mongolia Index ETF (AZIA)
  4. Global X Guru Small Cap Index ETF (GURX)
  5. Global X Junior Miners (JUNR)
  6. Direxion Daily 7-10 Year Treasury Bull 2x (SYTL)
  7. Direxion Daily Basic Materials Bull 3x (MATL)
  8. Direxion Daily Mid Cap Bull 2x (MDLL)

ETF Deathwatch Archives

This article is brought to you courtesy of Ron Rowland from Invest With an Edge.

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