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An ETF Crystal Ball

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“Build them and they will come” seems to be the motto of many ETF issuers. And it has proven true. ETFs and ETNs have amassed over $600 billion in assets. The past quarter has seen approximately 30 new ETFs/ETNs unveiled every month.

Currently there are over 450 ETFs and ETNs with prospectuses filed at the SEC, despite a rocky stock market. It does, however, seem that some companies appear to be betting on quantity rather than quality to attract new assets.

XShares Advisors, which recently had to close seven ETFs due to insufficient assets, is trying its luck again with some 50 filings pending. One ETF in the XShares’ series is called StateShares, which offers investors state-specific exposure (i.e. StateShares California 50).

Rydex and ProShares combined have over 200 registrations pending. These range from double levered to inverse, currency to commodity, sector to broad market, and some in between.

RevenueShares will be adding the nine sub-sectors of the S&P to its current line up of small-, mid-and large-cap RevenueShares ETFs.

Since its launch on Feb. 22, 2008, the Large Cap Revenue Shares (RWL) has underperformed the S&P 500 SPDRs (SPY) by approximately 5 percent. Both indexes consist of the same holdings. Unlike the market-cap weighted SPDRs, however, RevenueShares ETFs are weighted by revenue. One look at the performance shows that the weighting methodology does matter.

One of State Street Global’s more intriguing filing is an ETF based on the S&P LeisureTime Index. The “new SPDR” will represent the leisure sub-industry portion of the S&P TMI.

Soon, with over 1,000 ETFs, there will be a flavor for everyone’s investment taste. Research will become more important as the ETF world becomes more confusing, and we’ll see a “survival of the fittest” marketplace.