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.

ETF Deathwatch

The ETF Deathwatch increased in size in July. Nineteen exchange-traded products (“ETPs”) were added to the list, and nine funds were removed. Eight of those removals were due to increased health, and one was due to asset managers closing their funds. The number of additions to the Deathwatch in July was unexpected, considering the strong performance of the major U.S. indexes for the month.

The funds added to the list in July were a mix of niche products, including global funds, actively managed funds, and leveraged 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 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. Lower-than-expected jobless claims throughout July combined with the number of rehires in the service and retail industries have given investors confidence in the markets. In addition, the three major indexes have rallied since the bottom in March. People 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 smart-beta funds, hedged funds, and index-tracking funds. The removal of index-tracking ETFs makes sense since the markets continued their rally last month. The removal of some smart-beta and hedged funds from the Deathwatch could be due to increased market and economic risk resulting from the pandemic. Fund managers who opted for these funds during the bull market may now want to dial down risk.

Forty-seven ETFs and exchange-traded notes (“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 allow them to remain active, as they likely play a larger role for clients interested in active management.

The average asset level of the threatened ETFs on ETF Deathwatch increased from $7.15 million to $7.44 million, and 53 products had less than $2 million in assets. The average age of products on the list increased from 53.21 months to 53.76 months, and the number of products more than 5 years of age increased from 116 to 125. The largest ETF on the list had an AUM of $24.49 million, while the smallest had assets of just $285,395.

Here is the Complete List of 391 ETFs and ETNs on ETF Deathwatch for July 2020 compiled using the objective ETF Deathwatch Criteria.

The 19 ETFs/ETNs added to ETF Deathwatch for July:

  1. iPath Series B Bloomberg Cotton Subindex Total Return ETN (BAL)
  2. Fidelity Targeted Emerging Markets Factor ETF (FDEM)
  3. Fidelity International Value Factor ETF (FIVA)
  4. iShares Currency Hedged MSCI United Kingdom ETF (HEWU)
  5. CP High Yield Trend ETF (HYTR)
  6. Pacer Developed Markets International Cash Cows 100 ETF (ICOW)
  7. C-Tracks ETNs based on Performance of Miller/Howard MLP Fundamental Index (MLPC)
  8. Virtus Newfleet Multi-Sector Bond ETF (NFLT)
  9. Global X MSCI Portugal ETF (PGAL)
  10. ProShares Inflation Expectations ETF (RINF)
  11. ELEMENTS Linked to Rogers International Commodity Index - Metals Tot Return (RJZ)
  12. Syntax Stratified MidCap ETF (SMDY)
  13. ProShares UltraShort Basic Materials (SMN)
  14. iShares Factors US Growth Style ETF (STLG)
  15. iShares Factors US Value Style ETF (STLV)
  16. Innovator S&P 500 Ultra Buffer ETF - November (UNOV)
  17. Invesco Russell 1000 Low Beta Equal Weight ETF (USLB)
  18. Virtus WMC Global Factor Opportunities ETF (VWID)
  19. SPDR Solactive United Kingdom ETF (ZGBR)

The 8 ETFs/ETNs removed from ETF Deathwatch due to improved health:

  1. Renaissance International IPO ETF (IPOS)
  2. John Hancock Multifactor Energy ETF (JHME)
  3. AGFiQ US Market Neutral Momentum Fund (MOM)
  4. Direxion RUSSELL V/G (RWVG)
  5. Credit Suisse X-Links Silver Shares Covered Call ETN (SLVO)
  6. SPDR Solactive Canada ETF (ZCAN)
  7. SPDR Solactive Germany ETF (ZDEU)
  8. SPDR Solactive Japan ETF (ZJPN)

The 1 ETF/ETN that was closed:

  1. Virtus WMC Global Factor Opportunities ETF (VGFO)

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