Market insights and analysis

How dynamic, risk-managed investment solutions are performing in the current market environment

1st Quarter | 2022

Market insights and analysis


Updates on how dynamic, risk-managed investment solutions are performing in the current market environment.

The ETF Deathwatch decreased in size in April. Twenty exchange-traded products (“ETPs”) were added to the list, and 34 funds were removed. Twenty-five of those funds were removed due to increased health and nine were due to asset managers closing their funds. That so many funds were removed from the Deathwatch in April was no surprise, considering how strong the major U.S. indexes performed for the month.

The funds added to the list in April were a mix of niche products, most of which were actively managed or hedged strategies. Three were added because they had low assets under management (“AUM”) for three consecutive months. The rest were added due to a low average daily volume for the past three months. These additions may have enough AUM to keep them from closure; however, our system takes into account both AUM and volume, so it’s likely that should volume and interest remain low, these funds may be considered for closure.

The low volume in these funds could be due to the nature of their investment product. Many of the funds on the Deathwatch list are niche funds, which makes sense given the current environment. Equity markets rallied in April after the U.S. government released relief funds and the Federal Reserve added to overall liquidity in the markets. People tend to prefer to be in passively managed funds in this type of environment, which explains the addition of niche products such as long/short equity ETFs to the Deathwatch list. Several dividend and equity income funds were also added. As companies start to lower their dividend payouts in response to the current economic uncertainty, it would make sense that these ETFs would not perform well.

Most of the removals from the Deathwatch due to improved health were bond funds or sector funds. The removal of bond funds may be because investors are seeking a safe-haven asset during these uncertain times. As COVID-19 has continued to affect the economy, risk-averse investors may be apprehensive about allocating to equities, and fund managers likely shifted their money over to bond funds during the initial downturn. A genomics and biotechnology ETF has also been removed from the list. Investors may be placing their faith in this sector as we continue to search for a cure for the coronavirus. An inverse real estate ETF was also removed. Fund managers may be realizing that this sector has typically lagged equity markets and might think it is a good time to short it.

Forty-nine ETFs and ETNs on Deathwatch this month have been in the market for more than 10 years. This is a long time for ETPs to exist while remaining on our Deathwatch list. Leveraged and short ETF instruments, as well as several commodity ETPs, dominate our list of funds older than 10 years. The fund companies managing these products may continue to allow them to remain active, as they may play a larger role for clients interested in active management.

The average asset level of the threatened ETFs on ETF Deathwatch increased from $6.35 million to $6.82 million, and 68 products had less than $2 million in assets. The average age of products on the list increased from 53.79 months to 53.89 months, and the number of products more than 5 years of age decreased from 122 to 116. The largest ETF on the list had an AUM of $24.78 million, while the smallest had assets of just $403,200.

Here is the Complete List of 385 ETFs and ETNs on ETF Deathwatch for April 2020 compiled using the objective ETF Deathwatch Criteria.

The 20 ETFs/ETNs added to ETF Deathwatch for April:

  1. ETRACS 2xMonthly Leveraged Wells Fargo Diversified BDC Index ETN Series B (BDCY)
  2. MicroSectors US Big Banks Index 2X Leveraged ETN (BNKO)
  3. C-Tracks Exchange-Traded Notes Miller/Howard Strategic Dividend Reinvestor (DIVC)
  4. Fidelity Stocks for Inflation ETF (FCPI)
  5. Pacific Global Focused High Yield ETF (FJNK)
  6. iShares Focused Value Factor ETF (FOVL)
  7. Pacific Global International Equity Income ETF (IDY)
  8. JPMorgan Long/Short ETF (JPLS)
  9. ETRACS Monthly Pay 2xLeveraged Wells Fargo MLP Ex-Energy ETN Series B (LMLB)
  10. MicroSectors US Big Oil Index 2X Leveraged ETNs (NRGO)
  11. Overlay Shares Small Cap Equity ETF (OVS)
  12. IQ Leaders GTAA Tracker ETF (QGTA)
  13. Columbia Research Enhanced Value ETF (REVS)
  16. iPath Silver ETN (SBUG)
  17. ProShares Russell US Dividend Growers ETF (TMDV)
  18. ProShares Ultra FTSE Europe (UPV)
  19. Pacific Global US Equity Income ETF (USDY)
  20. Direxion Daily Dow Jones Internet Bear 3x Shares ETF (WEBS)

The 25 ETFs/ETNs removed from ETF Deathwatch due to improved health:

  1. Innovator S&P 500 Buffer ETF June (BJUN)
  2. Innovator S&P Investment Grade Preferred ETF (EPRF)
  3. Franklin Liberty International Aggregate Bond ETF (FLIA)
  4. First Trust Morningstar Managed Futures Strategy Fund (FMF)
  5. Global X Genomics & Biotechnology ETF (GNOM)
  6. Innovator S&P 500 Power Buffer ETF - September (PSEP)
  7. ProShares Short Real Estate (REK)
  8. ELEMENTS Linked to the Rogers International Commodity Index - Metals Tot Return (RJZ)
  9. Breakwave Dry Bulk Shipping ETF (BDRY)
  10. First Trust NASDAQ Global Auto Index Fund (CARZ)
  11. Change Finance US Large Cap Fossil Fuel Free ETF (CHGX)
  12. Reality Shares DIVCON Dividend Defender ETF (DFND)
  14. ProShares UltraShort MSCI Japan (EWV)
  15. Goldman Sachs Motif Manufacturing Revolution ETF (GMAN)
  16. iShares iBonds 2022 Term High Yield and Income ETF (IBHB)
  17. iShares iBonds 2023 Term High Yield and Income ETF (IBHC)
  18. iShares iBonds 2025 Term High Yield and Income ETF (IBHE)
  19. Virtus Newfleet Multi-Sector Bond ETF (NFLT)
  20. Invesco S&P SmallCap Materials ETF (PSCM)
  21. ProShares UltraShort Technology (REW)
  23. ProShares UltraShort Basic Materials (SMN)
  24. ProShares Trust S&P 500 EX-Energy ETF (SPXE)
  25. SPDR Solactive United Kingdom ETF (ZGBR)

The 9 ETFs/ETNs that were closed:

  1. USCF SummerHaven SHPEN Index Fund (BUYN)
  2. VelocityShares Short LIBOR ETN (DLBR)
  3. Arrow Dogs of the World ETF (DOGS)
  4. VelocityShares 1x Long VSTOXX Futures ETN (EVIX)
  5. FLAG-Forensic Accounting Long-Short ETF (FLAG)
  6. ETRACS S&P GSCI Crude Oil Total Return Index ETN (OILX)
  7. AdvisorShares Cornerstone Small Cap ETF (SCAP)
  8. VelocityShares Long LIBOR ETN (ULBR)
  9. Market Vectors Double Long Euro ETN (URR)

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