Updates on how dynamic, risk-managed investment solutions are performing in the current market environment.
The ETF Deathwatch decreased in size in August compared to July. Twenty-six exchange-traded products (“ETPs”) were added to the list, and 40 funds were removed, making August a busier month in terms of removals. Of those that were removed, 13 were due to increased health and 27 were due to asset managers closing their funds. The high number of additions to the Deathwatch in August was expected, considering the strong performance of the major U.S. indexes for the month.
The funds added to the list in August were a mix of products, including global funds, actively managed funds, hedged/leveraged funds, and niche funds. One was added because it had low assets under management (“AUM”) for three consecutive months. The rest were added because they had a low average daily volume for the past three months. These additions may have enough AUM and volume 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 funds on the Deathwatch list are niche products, which makes sense given the current market environment. The Technology sector continued its momentum in August, and the NASDAQ 100 gained almost 10%. Investors remain confident in the overall markets. Along with the momentum in equities, bond yields remain low, as the Federal Reserve has been patient about raising interest rates. Federal Reserve Chairman Jerome Powell mentioned that the Fed is not concerned about surpassing the 2% inflation target, leaving the Fed more room to conduct monetary policy. Given the momentum in the equity markets combined with low interest rates, it makes sense that there are a lot of treasury, bond, and hedged funds added to the Deathwatch list. Also, investors and fund managers prefer to be in passively managed funds during these types of periods, which may explain the uptick in niche products on the list.
Most of the removals from the Deathwatch due to improved health were equity, commodity, and niche products. The removal of commodity ETFs makes sense since most commodity prices increased last month. The removal of a few equity funds also makes sense given the market rally and the rise in overall investor sentiment. A thematic fund for minority empowerment was also removed from the list in August, which makes sense as more people allocate money to causes meant to help minorities in light of the racial tensions in the U.S.
Forty-six ETFs and exchange-traded notes (“ETNS”) on Deathwatch this month that 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 allow them to remain active, as they likely play a larger role for their clients interested in active management.
The average asset level of the threatened ETFs on the ETF Deathwatch increased from $7.44 million to $8.01 million, and 49 products had less than $2 million in assets. The average age of products on the list decreased from 53.76 months to 52.02 months, and the number of products more than 5 years of age decreased from 125 to 112. The largest ETF on the list had an AUM of $24.37 million, while the smallest had assets of just $214,014.
Here is the Complete List of 377 ETFs and ETNs on ETF Deathwatch for August 2020 compiled using the objective ETF Deathwatch Criteria.
The 26 ETF/ETNs added to ETF Deathwatch for August:
The 13 ETF/ETNs removed from ETF Deathwatch due to improved health:
The 27 ETFs/ ETN that were closed: