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Though the global stock market saw a tumultuous beginning to 2016 thanks to persistent worries in China and an oil price collapse, the end was quite smooth. This is especially true given that iShares MSCI ACWI ETF (ACWI - Free Report) , targeting the global stock market, gained 8.4% last year (read: 4 Best Single-Country ETFs of 2016).
Most of the gains were credited to stabilizing oil and commodity prices, a rebound in currencies and global easing policies. In particular, the optimism induced by President-elect Donald Trump continues to drive the U.S. stock market to new highs. Trump’s pro-growth economic policies of increased government spending, reduced regulations, and increased tax cuts will likely boost economic growth and create more jobs in the country that will likely flood companies with excess cash and earnings growth.
As a result, 2016 has been the record-breaker year in terms of ETF asset gathering. Overall, ETFs gathered about $282 billion capital, surpassing the previous record of $244 billion inflows in 2014.
Currency Hedged ETFs Hot Once Again
Currency hedging became the most popular strategy in 2016 once again given the strength in the U.S. dollar and diverging monetary policies. Notably, the dollar index, which measures the greenback against a basket of six major rivals, gained 4.9% last year. While monetary easing made international investment a compelling opportunity for U.S. investors, a strong dollar was a drag pushing the investment into red when repatriated in U.S. dollar terms. As a result, investors flocked to the currency hedged ETFs to tap the bullish international fundamentals dodging the effects of a strong greenback.
The ultra-popular European fund – WisdomTree Europe Hedged Equity Fund (HEDJ - Free Report) – led the way gathering around $13.9 billion in capital last year. This boosted the fund’s asset base to over $9.2 billion. The fund tracks the WisdomTree Europe Hedged Equity Index. In total, the fund holds a well-diversified portfolio of 133 stocks with each holding less than 5.2% share. However, it is pretty well spread across a number of sectors with industrials, consumer discretionary, consumer staples and financials taking double-digit exposure each.
Among countries, Germany (26.3%), France (25.1%), Spain (18.2%) and the Netherlands (15.9%) dominate the holdings list. The fund charges 58 bps in annual fees and sees an average daily volume of more than 2.2 million shares. It surged about 10% in 2016 and has a Zacks ETF Rank of 3 or ‘Hold’ rating with a Medium risk outlook (read: Profit from Currency Hedged ETFs If Euro Falls to Parity).
Another currency hedged fund – Deutsche X-trackers MSCI EAFE Hedged Equity ETF (DBEF - Free Report) – with an asset base of around $7.8 billion and average daily volume of more than 3.5 million shares, has pulled in about $12.5 billion in capital. This fund targets the developed international stock market with no currency risk and tracks the MSCI EAFE US Dollar Hedged Index. In total, the product holds 932 securities in its basket with none holding more than 1.83% share. Among countries, Japan takes the top spot at 24%, closely followed by United Kingdom (16%) and France (10%). The fund charges 35 bps in fees per year from investors and gained 6.3% last year. It has a Zacks ETF Rank of 3 with a Medium risk outlook.
International ETFs Rock
In this category, iShares MSCI EAFE Index (EFA - Free Report) was the most popular fund of 2016 with inflows of $9.3 million. The fund offers exposure to stocks in Europe, Australia, Asia and the Far East by tracking the MSCI EAFE Index. It holds 936 securities in its basket with each holding less than 1.9% of assets. Japan, United Kingdom and France make up for the top two countries with double-digit exposure each. From a sector look, financials takes the top spot at 21% while industrials, consumer discretionary, consumer staples and health care round off the top five. The product has amassed $59.3 billion in AUM and trades in heavy volume of 19 million shares a day on average. Expense ratio came in at 0.32%. The ETF added 1.4% in 2016 and has a Zacks ETF Rank of 3 with a Medium risk outlook.
While the ultra-popular SPDR S&P 500 (SPY - Free Report) was the most hated ETF of 2016 with massive outflows of more than $30.1 billion, a few large cap ETFs garnered immense investor attention especially on Trump’s pro-growth policies. Vanguard S&P 500 (VOO - Free Report) was the top asset gainer in this category, having accumulated nearly $13 billion in its asset base. This took the fund’s total AUM to $56.7 billion. The ETF tracks the S&P 500 index, and holds 510 stocks in its basket with none accounting for more than 3.1% of assets. The fund is also widely spread across a number of sectors. It is the low cost choice in the space, charging only 5 bps in fees per year, and increasing 12.2% in 2016. It has a Zacks ETF Rank of 3 with a Medium risk outlook.
Vanguard Total Stock Market ETF (VTI - Free Report) , which provides broad exposure to the U.S. equity market with diversification benefits across a number of sectors, market cap and securities, accumulated $7.6 billion in 2015. The ETF gained 12.8% last year.
Emerging Market ETFs Saw Huge Outflows
While emerging market stocks recorded the best annual rally since 2012 with MSCI's emerging equity index rising 8.5%, the ETFs saw huge outflows driven by strong dollar, rate hike concerns and uneven global growth (read: 10 Actively Traded ETFs of 2016).
In fact, the two ultra-popular ETFs – iShares MSCI Emerging Markets ETF (EEM - Free Report) and Vanguard FTSE Emerging Markets ETF (VWO - Free Report) – saw huge outflows of $6 billion and $3.2 billion, respectively. China dominates the portfolio of both funds with nearly one-fourth share. Both EEM and VWO have a diverse approach to a number of components with financials as the top sector. EEM charges 68 bps in annual fees from investors while VWO is one of the cheap emerging market ETFs with expense ratio of 0.15%. Both have a Zacks ETF Rank of 3 with a Medium risk outlook and gained in double-digits last year.
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Most Loved and Hated ETFs of 2016
Though the global stock market saw a tumultuous beginning to 2016 thanks to persistent worries in China and an oil price collapse, the end was quite smooth. This is especially true given that iShares MSCI ACWI ETF (ACWI - Free Report) , targeting the global stock market, gained 8.4% last year (read: 4 Best Single-Country ETFs of 2016).
Most of the gains were credited to stabilizing oil and commodity prices, a rebound in currencies and global easing policies. In particular, the optimism induced by President-elect Donald Trump continues to drive the U.S. stock market to new highs. Trump’s pro-growth economic policies of increased government spending, reduced regulations, and increased tax cuts will likely boost economic growth and create more jobs in the country that will likely flood companies with excess cash and earnings growth.
As a result, 2016 has been the record-breaker year in terms of ETF asset gathering. Overall, ETFs gathered about $282 billion capital, surpassing the previous record of $244 billion inflows in 2014.
Currency Hedged ETFs Hot Once Again
Currency hedging became the most popular strategy in 2016 once again given the strength in the U.S. dollar and diverging monetary policies. Notably, the dollar index, which measures the greenback against a basket of six major rivals, gained 4.9% last year. While monetary easing made international investment a compelling opportunity for U.S. investors, a strong dollar was a drag pushing the investment into red when repatriated in U.S. dollar terms. As a result, investors flocked to the currency hedged ETFs to tap the bullish international fundamentals dodging the effects of a strong greenback.
The ultra-popular European fund – WisdomTree Europe Hedged Equity Fund (HEDJ - Free Report) – led the way gathering around $13.9 billion in capital last year. This boosted the fund’s asset base to over $9.2 billion. The fund tracks the WisdomTree Europe Hedged Equity Index. In total, the fund holds a well-diversified portfolio of 133 stocks with each holding less than 5.2% share. However, it is pretty well spread across a number of sectors with industrials, consumer discretionary, consumer staples and financials taking double-digit exposure each.
Among countries, Germany (26.3%), France (25.1%), Spain (18.2%) and the Netherlands (15.9%) dominate the holdings list. The fund charges 58 bps in annual fees and sees an average daily volume of more than 2.2 million shares. It surged about 10% in 2016 and has a Zacks ETF Rank of 3 or ‘Hold’ rating with a Medium risk outlook (read: Profit from Currency Hedged ETFs If Euro Falls to Parity).
Another currency hedged fund – Deutsche X-trackers MSCI EAFE Hedged Equity ETF (DBEF - Free Report) – with an asset base of around $7.8 billion and average daily volume of more than 3.5 million shares, has pulled in about $12.5 billion in capital. This fund targets the developed international stock market with no currency risk and tracks the MSCI EAFE US Dollar Hedged Index. In total, the product holds 932 securities in its basket with none holding more than 1.83% share. Among countries, Japan takes the top spot at 24%, closely followed by United Kingdom (16%) and France (10%). The fund charges 35 bps in fees per year from investors and gained 6.3% last year. It has a Zacks ETF Rank of 3 with a Medium risk outlook.
International ETFs Rock
In this category, iShares MSCI EAFE Index (EFA - Free Report) was the most popular fund of 2016 with inflows of $9.3 million. The fund offers exposure to stocks in Europe, Australia, Asia and the Far East by tracking the MSCI EAFE Index. It holds 936 securities in its basket with each holding less than 1.9% of assets. Japan, United Kingdom and France make up for the top two countries with double-digit exposure each. From a sector look, financials takes the top spot at 21% while industrials, consumer discretionary, consumer staples and health care round off the top five. The product has amassed $59.3 billion in AUM and trades in heavy volume of 19 million shares a day on average. Expense ratio came in at 0.32%. The ETF added 1.4% in 2016 and has a Zacks ETF Rank of 3 with a Medium risk outlook.
Other ETFs like iShares MSCI Eurozone ETF (EZU - Free Report) ,iShares Core MSCI EAFE ETF (IEFA - Free Report) andVanguard FTSE Developed Markets ETF (VEA - Free Report) gathered $7.5 billion, $6.7 billion and $6.3 billion, respectively (read: 5 Market Beating Broad International ETFs of 2016).
A Few U.S. Equity ETFs Won
While the ultra-popular SPDR S&P 500 (SPY - Free Report) was the most hated ETF of 2016 with massive outflows of more than $30.1 billion, a few large cap ETFs garnered immense investor attention especially on Trump’s pro-growth policies. Vanguard S&P 500 (VOO - Free Report) was the top asset gainer in this category, having accumulated nearly $13 billion in its asset base. This took the fund’s total AUM to $56.7 billion. The ETF tracks the S&P 500 index, and holds 510 stocks in its basket with none accounting for more than 3.1% of assets. The fund is also widely spread across a number of sectors. It is the low cost choice in the space, charging only 5 bps in fees per year, and increasing 12.2% in 2016. It has a Zacks ETF Rank of 3 with a Medium risk outlook.
Vanguard Total Stock Market ETF (VTI - Free Report) , which provides broad exposure to the U.S. equity market with diversification benefits across a number of sectors, market cap and securities, accumulated $7.6 billion in 2015. The ETF gained 12.8% last year.
Emerging Market ETFs Saw Huge Outflows
While emerging market stocks recorded the best annual rally since 2012 with MSCI's emerging equity index rising 8.5%, the ETFs saw huge outflows driven by strong dollar, rate hike concerns and uneven global growth (read: 10 Actively Traded ETFs of 2016).
In fact, the two ultra-popular ETFs – iShares MSCI Emerging Markets ETF (EEM - Free Report) and Vanguard FTSE Emerging Markets ETF (VWO - Free Report) – saw huge outflows of $6 billion and $3.2 billion, respectively. China dominates the portfolio of both funds with nearly one-fourth share. Both EEM and VWO have a diverse approach to a number of components with financials as the top sector. EEM charges 68 bps in annual fees from investors while VWO is one of the cheap emerging market ETFs with expense ratio of 0.15%. Both have a Zacks ETF Rank of 3 with a Medium risk outlook and gained in double-digits last year.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>