The ETF industry has tasted success so far this year with an array of products entering into the space targeting a variety of segments. It also hasn’t hurt that, besides a recent bout of volatility, markets have been pretty strong this year, attracting a ton of investors to the markets (read: Are Low Volatility ETFs Capable of Big Gains?).
In this environment, several ETFs experienced massive inflows and posted double-digit gains buoyed by positive sentiments. However, there were also quite a few closures. While 60 ETFs entered into the arena, 30 funds closed their doors since start of this year.
Among those new funds though, investors have clearly embraced a few of the names in the group, piling fresh capital into these new ETFs. Below, we take a closer look at the top three new players that have gathered solid assets under management since their recent launches:
SPDR Blackstone/GSO Senior Loan ETF (SRLN - ETF report)
Senior Loan ETFs have gained immense popularity in recent months by providing investors with yield and protection against a rise in interest rates. Plus, due to their junk security focus, they can out-yield similar duration securities by a pretty wide margin.
The concerns over the growing interest rates were looming large across the globe, encouraging investors to flock to these funds. At the latest FOMC meeting, the Fed committed to taper the pace of bond purchases by as soon as the end of the year and possibly close down the program around the middle of the next year.
Investors looking for higher yields, but concerned about the potential rise in interest rates have shown increased interest in senior loan ETFs, in particular SRLN. The fund has gathered over $279 million in AUM since its debut in April this year (read: State Street Launches Senior Loan ETF).
SRLN is the first actively managed ETF in this space. Instead of tracking an index it seeks to beat the Markit iBoxx U.S. Leveraged Loan 100 Index through superior security selection. This is done by partaking in credit analysis, and timely sales and buys of senior loans.
Overall, the fund holds 144 securities and charges a slightly high 90 bps a year in fees. Trading volume is also solid with more than 143,000 shares per day (see more in the Zacks ETF Center).
Barclays ETN+ Select MLP ETN (ATMP - ETF report)
MLPs represent an attractive investment option for income-focused investors in the current rock bottom interest rate environment. In addition to high yields, MLPs have relatively stable cash flows and a solid growth potential (read: MLP ETF Investing: The Surge Continues).
As structured pass-through entities, MLPs do not pay taxes at the entity level and are thus able to pay out most of their earnings to investors. These have low correlations with many other asset classes including equities and commodities and thus add diversification benefits to the portfolio.
As the energy industry continues to evolve with revolutionary developments in the field of unconventional energy, MLPs present a great way to benefit from the growth (read: Behind the Rebound in Energy ETFs).
In such a backdrop, the new ATMP has accumulated $136.5 million in AUM since its launch in March this year and has a dividend yield of 1.03%.
The ETN tracks the Volume-Weighted Average price level of the Atlantic Trust Select MLP Index. This benchmark is designed to provide investors exposure to midstream American and Canadian master limited partnerships, LLCs, and corporations in the MLP space.
These must trade on major U.S. exchanges and meet certain eligibility criteria such as long-term credit ratings, cash flow percentage derived from midstream operations and average daily trading value. The note consists of both limited partnership interests and general partner interests with a ceiling of 8% and 4%, respectively.
The product charges investors 95 basis points a year in fees, in line with other products in the space.
AdvisorShares Newfleet Multi-Sector Income ETF (MINC - ETF report)
It seems that the ‘Great Rotation’ is not from bonds to equities, but from long-duration fixed income to shorter-duration securities. Amid concerns about higher interest rates crushing returns, shorter duration securities in the fixed income world have become popular among investors due to their low interest rate risk levels, steadiness, and ability to generate income (read: Buy These ETFs to Profit from The Great Duration Rotation).
With regard to this, MINC has seen a great deal of investors’ interest and attracted assets worth $84.45 million since its launch this March.
The ETF has an average duration of one to three years, potentially making the fund a low interest rate risk choice. This could be especially beneficial if rates suddenly rise thanks to Fed actions, as these types of securities tend to do better in a rising rate environment.
The portfolio zeros in on high quality investment grade debt. In fact, non-investment grade securities only account for 20% of the portfolio, while non-American securities make up for 30%, suggesting its focus on domestic high quality bonds (read: Forget BOND, Focus on These Junk Bond ETFs Instead).
Investors should note that the ETF actively rotates among various bond sectors. This process seeks to overweight undervalued bond sectors, and shun those that are overvalued, a strategy that adds value to the portfolio.
The current yield to maturity is 2.72%, while the 30-Day SEC yield is 2.55%. This is pretty good considering the high quality focus of the ETF, and the ultra low duration which comes in at just 2.64 years. MINC charges 75 bps in fees a year from investors.
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