Like the elves in Santa’s workshop who toil year-round making gifts for well-behaved children, providers of exchange-traded funds have been hard at work this year hammering together a wide variety of new funds in hopes that investors will begin stuffing them into their portfolios.
Among the new ETFs hitting the market are several actively managed ETFs, sector and small cap ETFs for foreign markets, and exchange-traded notes (ETNs) that track shares in master limited partnerships (MLPs).
As of the end of June 2010, there were 872 U.S.-listed ETFs, according to Investment Company Institute data, with combined assets of $772 billion, a 9% increase from the 797 ETFs trading at the end of 2009, and 20% more than the 725 ETFs trading at the end of June 2009. Of the net 75 new ETFs that opened for business in 2010, emerging markets saw the greatest gain, with a net increase of 22 ETFs. Corporate and municipal bond ETFs also showed strong growth, with net gains of nine and seven funds respectively.
The initial appearance of ETFs using active, rather than index-tracking, management in 2008 and subsequent launch of several more actively-managed ETFs in 2009 raised expectations that many more such funds would soon begin trading, but so far only a handful have actually made it to listing. Bethesda, Maryland-based AdvisorShares launched two actively-managed ETFs in July 2010 – the WCM/BNY Mellon Focused Growth ADR ETF, which employs a portfolio management team to invest in large cap American Depositary Receipts, and the Mars Hill Relative Value ETF, which establishes long equity positions in regional markets expected to outperform the global equity market and short positions in regions expected to underperform. Also, Allianz’s PIMCO unit launched the PIMCO Short Term Municipal Bond Strategy Fund in February.
Filling a niche among highly popular international ETFs, iShares listed nine new ETFs based on the MSCI ACWI family of sector indices, including consumer staples, consumer discretionary, energy, health care, utilities, telecom, materials, information technology and industrials. These are the first sector funds that combine developed and emerging markets, iShares said. The new funds bring iShares total fund count to 205.