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.

ETF deathwatch

  

The ETF Deathwatch decreased in size in September. Sixteen exchange-traded products (“ETPs”) were added to the list, and 29 funds were removed. Fifteen of those removals were due to increased health, which, considering the negative performance of the major U.S. indexes for the month, was unexpected. Fourteen were due to asset managers closing their funds, which makes sense due to the record number of ETF closures we’ve seen this year.

The funds added to the list in September were a mix of international funds (many belonging to specific countries), actively managed funds, and hedged/leveraged funds. All of the funds were added because they had a low average daily volume for the past three months. These additions may have enough assets under management (“AUM”) to keep them from closure; however, our system takes into account both AUM and volume, so it’s likely that should volume and/or interest remain low, these funds may be considered for closure.

All but two of the funds added to the Deathwatch this month track equities, which makes sense given the poor performance of equities in September. Seven of the funds added to the Deathwatch in September held international exposure. As COVID-19 cases continued to rise globally last month, many investors may have become concerned about the economic outlook internationally. It’s also possible that investors and advisors fled to safe-haven assets given the state of equities in September, which may explain why only one high-yield corporate-bond fund (which are typically correlated with equities) was added to the Deathwatch.

The removals from the Deathwatch due to improved health included equity, fixed-income, commodity, and niche products. The removal of commodity ETFs comes as a surprise as most major trading commodities remained slightly negative. However, the removal of the bond funds makes sense as investors may have opted to move their money toward safer assets such as municipal bonds.

Forty-eight 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 decreased from $8.01 million to $7.98 million, and 48 products had less than $2 million in assets. The average age of products on the list increased from 52.02 months to 55.06 months, and the number of products more than 5 years of age increased from 112 to 117. The largest ETF on the list had an AUM of $24.10 million, while the smallest had assets of just $309,760.

Here is the Complete List of 364 ETFs and ETNs on ETF Deathwatch for September 2020 compiled using the objective ETF Deathwatch Criteria.

 

The 16 ETFs/ETNs added to ETF Deathwatch for September:

  1. WisdomTree Emerging Currency Strategy Fund (CEW)
  2. AdvisorShares Focused Equity ETF (CWS)
  3. VanEck Vectors Egypt Index ETF (EGPT)
  4. Xtrackers High Yield Corp Bond-Interest Rate Hedged ETF (ESHY)
  5. First Trust Brazil AlphaDEX Fund (FBZ)
  6. First Trust Latin America AlphaDEX Fund (FLN)
  7. iShares Currency Hedged MSCI Canada ETF (HEWC)
  8. John Hancock Multifactor Utilities ETF (JHMU)
  9. Invesco S&P SmallCap Materials ETF (PSCM)
  10. Invesco Dynamic Oil & Gas Services ETF (PXJ)
  11. Direxion S&P 500 High Minus Low Quality ETF (QMJ)
  12. First Trust RiverFront Dynamic Europe ETF (RFEU)
  13. ETRACS Monthly Pay 2xLeveraged S&P Dividend ETN (SDYL)
  14. SPDR EURO STOXX Small Cap ETF (SMEZ)
  15. American Energy Independence ETF (USAI)
  16. SPDR Solactive Hong Kong ETF (ZHOK)

 

The 15 ETFs/ETNs removed from ETF Deathwatch due to improved health:

  1. Innovator S&P 500 Buffer ETF - September (BSEP)
  2. C-Tracks Exchange-Traded Notes Miller/Howard Strategic Dividend Reinvestor (DIVC)
  3. Franklin Liberty Intermediate Municipal Opportunities ETF (FLMI)
  4. C-Tracks ETNs on the Miller/Howard MLP Fundamental Index Series B Due July 13 (MLPE)
  5. MicroSectors US Big Oil Index -2X Inverse Leveraged ETNs (NRGZ)
  6. Principal International Multi-Factor Core Index ETF (PDEV)
  7. Amplify Advanced Battery Metals & Materials ETF (BATT)
  8. Invesco BulletShares 2026 Municipal Bond ETF (BSMQ)
  9. Invesco BulletShares 2027 Municipal Bond ETF (BSMR)
  10. VanEck Vectors ChinaAMC China (CBON)
  11. Sofi Gig Economy ETF (GIGE)
  12. iPath Series B Bloomberg Nickel Subindex Total Return ETN (JJN)
  13. Innovation Shares NextGen Protocol ETF (KOIN)
  14. IQ Hedge Market Neutral Tracker ETF (QMN)
  15. United States 12 Month Natural Gas Fund LP (UNL)

 

The 14 ETFs/ETNs that were closed:

  1. Claymore CEF GS Connect ETN (GCEC)
  2. PortfolioPlus Developed Markets ETF (PPDM)
  3. PortfolioPlus Emerging Markets ETF (PPEM)
  4. PortfolioPlus S&P Mid Cap ETF (PPMC)
  5. PortfolioPlus S&P Small Cap ETF (PPSC)
  6. Direxion MSCI CYC/DEF (RWCD)
  7. Direxion MSCI DEF/CYC (RWDC)
  8. Direxion MSCI DM/EM (RWDE)
  9. Direxion FTSE/RUSSELL INT/US (RWIU)
  10. Direxion RUSSELL LARGE/SMALL (RWLS)
  11. Direxion RUSSELL SMALL/LARGE (RWSL)
  12. Direxion FTSE/RUSSELL US/INT (RWUI)
  13. Direxion Daily Small Cap Bull 2X Shares (SMLL)
  14. Direxion Daily 20+ Year Treasury Bear 1x Shares (TYBS)

  



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