There has been a tectonic shift in ETF launches over the last few years. The tactics of plain-vanilla bond ETFs does not seem to work anymore, compelling issuers to focusing more on active and smart-beta ETFs.
This is because the financial landscape has changed drastically since the financial crisis. The central banks are adopting pretty divergent monetary policies. Oil prices have been seesawing over the last five years. Geopolitical risks have scaled up. Trade war tensions have creeped in and are likely to deal a blow to global economic growth in the coming days.
So, fund issuers have to make their products saleable amid uncertainties. The products need to be aligned with the above-said economic and geopolitical issues. So, the rollout of smart-beta or multi-factors is rampant. These products normally have the ability to cut losses during difficult times to some extent, if not completely avert them.
SPDR S&P 500 ETF SPY is up 15.6% this year, while SPDR Portfolio S&P 500 Growth ETF ( SPYG Quick Quote SPYG - Free Report) has added 17.8%. The concept has been so popular over the years that 58% asset owners have opted for it in 2019, an all-time high, per FTSE Russell. The adoption of multi-factor has more than tripled (71%) in the last four years.
Investors should note that the past month has been fraught with trade tensions between the United States and China as well as Mexico. Though the conflict with Mexico has cooled down of late, things with China are yet to be resolved. The S&P 500-based fund SPY is up 0.3% in the past month (as of Jun 10, 2019).
Against this backdrop, investors may be interested to find out which smart-beta ETFs have navigated trade tantrums in the past month and have managed to beat the broader market by a wide margin. We have presented charts for the winning ETFs comparing them with the broader market ETF SPY and with the concerned sectors’ biggest funds.
iPath Series B Bloomberg Grains Subindex Total Return ETN JJG — Up 14.1%
The underlying Bloomberg Grains Subindex Total Return reflects returns that are potentially available through an unleveraged investment in the futures contracts on grain commodities. It charges 45 bps in fees (read:
4 Agricultural Commodity ETFs Surging Double Digits in May). Arrow DOGS of the World ETF DOGS — Up 7.2%
The underlying AI Dogs of the World Index (ex-USA) selects securities based on a contrarian approach that looks for value in securities where a return reversal is expected during a rolling 12-month period for markets that previously experienced negative relative performance. The expense ratio is 2.04%.
Invesco DWA Healthcare Momentum ETF PTH — Up 7.0%
The underlying DWA Healthcare Technical Leaders Index identifies companies that are showing relative strength and are composed of at least 30 common stocks from a universe of approximately 3,000 common stocks traded on U.S. exchanges. It charges 60 bps in fees (read:
ETF Winners & Losers of Last Week). ETFMG Prime Mobile Payments ETF — Up 6.1% IPAY
The underlying Prime Mobile Payments Index provides a benchmark for investors interested in tracking the mobile and electronic payments industry, specifically focusing on credit card networks, payment infrastructure and software services, payment processing services, and payment solutions. The fund charges 75 bps in fees (read:
5 Tech ETFs Braving Trade Tensions in May). Alpha Architect U.S. Quantitative Momentum ETF QMOM — Up 4.4%
The Alpha Architect Quantitative Momentum Index uses a five-step, quantitative, rules-based methodology to identify a portfolio of approximately 40-50 U.S. equity securities with positive momentum. The all-cap growth fund charges 49 bps in fees.
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