2013 has been another significant year for the ETF industry. With 134 new products launched this year, the total number of products now stands at 1531, while assets under management have increased to $1.67 trillion.
Most of the products launched this year are designed to follow the popular strategies that have worked so far, whereas few others offer unique, innovative investing opportunities that were earlier unavailable to regular investors. However not all new products will be successful; some will flourish while some will languish due to lack of investor interest.
Below we have highlighted four ETFs launched this year that stand out from the rest and in our view, will emerge as big winners in the long-term. (Read: 3 ETFs for the Holiday Season)
iShares MSCI US Quality Factor ETF (QUAL)
This year has been great for most equity ETFs thanks mainly to Fed’s easy money policies but when the QE begins to fade away, only the ‘high-quality’ stocks and ETFs will shine. (Read: 3 Niche ETFs Crushing the SPY)
QUAL tracks the MSCI USA Index, which is comprised of high quality stocks, identifying stocks with high quality scores based on three main fundamental variables: high return on equity (ROE), stable year-over-year earnings growth and low financial leverage. It charges a low expense ratio of 15 basis points.
The product holds 124 securities in its portfolio with Apple, Google and Johnson & Johnson being the top three holdings. In terms of sectors, Technology takes about 40% of the asset base, while Consumer Discretionary, Energy, and Healthcare also get double digit allocations.
The fund has a SEC yield of 1.62%.Launched in July this year, this product has already attracted an impressive $210 million in assets so far.Looking at the five-year performance history (total return) of the index–S&P 500 High Quality Rankings Index had a total return of 21.8% handily beating the S&P 500 Index total return of 18.8%.
Cambria Shareholder Yield ETF (SYLD)
SYLD is an actively managed fund based on the research that free cash flow is a key predictor of a company’s strength.
This product invests in companies that show strong characteristics in returning free cash flow to their shareholders by way of cash dividends, share repurchases, or by reducing their leverage.
SYLD has a diversified portfolio of 100 stocks with market caps greater than $200 million, with a tilt towards large cap stocks that currently comprise 56% of the portfolio. Consumer Discretionary, Financials and Information Technology occupy the top three spots in terms of sector exposure.
Expense ratio of 0.59% looks pretty reasonable for an actively manage fund. The product made its debut in May this year and has returned 15.6% in the past 26 weeks compared with 11.0% for SPY during the same period.
Harvest CSI 300 China A-Shares Fund (ASHR)
Investing in Chinese equities known as China A shares directly was not easy for foreign investors due to restrictions by the Chinese Government. A-shares are equity securities issued by companies incorporated in mainland China and are denominated and traded in renminbi on the Shenzhen and Shanghai stock exchanges.
In the past, sponsors have found many innovative ways to gain exposure to the equity market of the world’s second largest and one of the fastest growing economies, including using derivatives. ASHR is the first ETF that offers direct access to the China A-shares universe. (See: China A-Shares ETFs Explained)
ASHR has been able to offer access to China A shares via its tie up with Harvest Global Advisors. Harvest Global Investments was amongst the first few Chinese asset managers in Hong Kong to obtain renminbi Qualified Foreign Institutional Investor (RQFII) status in China. Holders of these RQFII licenses can use renminbi that they hold overseas to invest directly in domestic Chinese assets.
The product tracks the CSI 300 Index which is composed of the 300 largest and most liquid stocks in the China A-share market. It is a bit expensive though with an annual fees of 1.08%.
The fund currently has AUM of $172 million and trades in decent volumes of more than 600,000 shares per day. (Read: How Pure Strategies Crushed the Market)
In terms of the portfolio, financials account for almost 40% of the asset base, but Industrials, Consumer Discretionary and Consumer Staples also receive double digit allocations.
ProShares S&P 500 Aristocrats ETF (NOBL)
There was no dearth of dividend ETFs available to the investors but new products continue to be launched in this very popular space. I prefer dividend growth ETFs over high dividend yield ETFs, particularly from the point of view of long term investing.
Launched in October, NOBL follows the S&P 500 Dividend Aristocrats index that targets companies which have increased dividend payments each year for at least 25 years, and meet certain market capitalization and liquidity requirements. The index weights its holdings equally and each sector’s weight is capped at 30% of the index weight.
Top sectors currently are Consumer Staples, Industrials, Materials and Healthcare. It has minimal exposure (less than 2%) to Utilities and telecom.
The product has an expense ratio of 35 basis points and the index currently has an attractive dividend yield of 2.57%.
While the ETF was launched very recently, the index has been consistently beating broader market index with lower volatility since its inception in 2005. S&P Dividend Aristocrats index had an annualized return of 9.76% with 20.6% volatility versus a return of 6.72% for the S&P 500 index with 21.8% volatility.
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DB-HRVST CSI300 (ASHR): ETF Research Reports
PRO-SP5 ARISTOC (NOBL): ETF Research Reports
ISHARS-MS US QF (QUAL): ETF Research Reports
CAMBRIA SH YLD (SYLD): ETF Research Reports
