Market insights and analysis

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

3rd Quarter | 2020

Market insights and analysis

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

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The ETF Deathwatch decreased in size in June. Twenty-six exchange-traded products (“ETPs”) were added to the list, and 14 funds were removed. Ten of those removals were due to increased health, and four were due to asset managers closing their funds. The number of additions to the Deathwatch in June was unexpected, considering the strong performance of the major U.S. indexes for the month.

The funds added to the list in June 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 June 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 index-tracking funds, some tracking individual sectors. The removal of index-tracking ETFs makes sense since the markets continued their rally last month. Three oil and energy funds were also removed from Deathwatch after those sectors rallied in June.

Forty-five 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 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 $6.85 million to $7.15 million, and 56 products had less than $2 million in assets. The average age of products on the list increased from 52.16 months to 53.21 months, and the number of products more than 5 years of age increased from 109 to 116. The largest ETF on the list had an AUM of $23.42 million, while the smallest had assets of just $357,500.

Here is the Complete List of 381 ETFs and ETNs on ETF Deathwatch for June 2020 compiled using the objective ETF Deathwatch Criteria.

The 26 ETFs/ETNs added to ETF Deathwatch for June:

  1. iShares MSCI Argentina and Global Exposure ETF (AGT)
  2. Global X FTSE Southeast Asia ETF (ASEA)
  3. BMO Elkhorn DWA MLP Select Index ETN (BMLP)
  4. Global X MSCI China Communication Services ETF (CHIC)
  5. ProShares UltraShort Australian Dollar ETF (CROC)
  6. IM Dbi Hedge Strategy ETF (DBEH)
  7. ETRACS Bloomberg Commodity Index Total Return ETN (DJCI)
  8. Global X MSCI SuperDividend EAFE ETF (EFAS)
  9. iShares Emerging Markets Infrastructure ETF (EMIF)
  10. FI Enhanced Europe 50 ETN/UBS (FIEE)
  11. First Trust Asia Pacific ex-Japan AlphaDEX Fund (FPA)
  12. Cambria Foreign Shareholder Yield ETF (FYLD)
  13. Global Beta Smart Income ETF (GBDV)
  14. Hull Tactical US ETF (HTUS)
  15. Legg Mason Global Infrastructure ETF (INFR)
  16. Leuthold Core ETF (LCR)
  17. VanEck Vectors Municipal Allocation ETF (MAAX)
  18. First Trust Municipal CEF Income Opportunity ETF (MCEF)
  19. MicroSectors Cannabis 2X Leveraged ETN (MJO)
  20. Principal Price Setters Index ETF (PSET)
  21. PIMCO RAFI ESG US ETF (RAFE)
  22. Direxion MSCI CYC/DEF (RWCD)
  23. First Trust SMID Cap Rising Dividend Achievers ETF (SDVY)
  24. Cambria Sovereign Bond ETF (SOVB)
  25. EquityCompass Tactical Risk Manager ETF (TERM)
  26. Global X TargetIncome Plus 2 ETF (TFLT)

The 4 ETFs/ETNs that were closed:

    1. JPMorgan Long/Short ETF (JPLS)
    2. Credit Suisse X-Links Multi-Asset High Income ETN (MLTI)
    3. LHA Market State US Tactical ETF (MSUS)
    4. Xtrackers MSCI Latin America Pacific Alliance ETF (PACA)

The 10 ETFs/ETNs removed from ETF Deathwatch due to improved health:

    1. iPath Pure Beta Crude Oil ETN (OLEM)
    2. Pacific Global US Equity Income ETF (USDY)
    3. MicroSectors US Big Banks Index -3X Inverse Leveraged ETN (BNKD)
    4. MicroSectors US Big Banks Index 3X Leveraged ETN (BNKU)
    5. First Trust Dow Jones Intl (FDNI)
    6. First Trust Nasdaq Transportation ETF (FTXR)
    7. ProShares UltraShort MidCap400 (MZZ)
    8. Invesco Dynamic Oil & Gas Services ETF (PXJ)
    9. Direxion Daily Comm Bull 3X (TAWK)
    10. American Energy Independence ETF (USAI)



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