The future (of exchange-traded funds) is female, according to Tom Lydon.
More than 100 new ETFs come to market each year, and Inside ETFs gathered five of the top ETF experts to debate their pick for 2016’s best new ETF.
The experts – Matt Hougan, CEO of Inside ETFs; Ben Johnson, director of global ETF research for Morningstar; Lydon, editor and publisher of ETF Trends; Dave Nadig, CEO of ETF.com; and Todd Rosenbluth, director of ETF and mutual fund research for CFRA – each picked two ETFs, and the overall winner was then decided by audience participation.
After rousing cheers from the audience, the SPDR SSGA Gender Diversity Index ETF (SHE) was crowned the Best New ETF of 2016.
Nominated by Lydon, editor and publisher of ETF Trends, SHE tracks the performance of the SSGA Gender Diversity Index. This index contains listed U.S. large-cap companies with the highest levels within their sectors of gender diversity on their boards of directors and in their senior leadership.
“We have a problem, obviously, in corporate governance,” Lydon said. “We don’t have enough gender diversity for sure. … Financial services does not have enough females.”
This need for more gender diversity is the reason why Lydon nominated the ETF this year.
“The fact that only less than 5% of S&P 500 CEOs are women and less than 20% of boards on the S&P 500 have a woman on them is ridiculous in this date and time,” he said.
When SHE launched in March 2016, the California State Teachers’ Retirement System (CalSTRS) seeded the ETF with an initial $250 million. Because of this, Lydon has high hopes for the ETF’s future.
“It’s a great ETF because of the underlying 184 companies all representative with women at the board level, at the CEO level, at the upper-level management level … and with this index over time and with a pension plan like CalSTRS behind it, I think we’re going to see a lot more interest as we move forward.”
SHE’s expense ratio is 0.20%.
Here are all the ETFs that were nominated for Best New ETF of 2016:
Deutsche X-trackers USD High Yield Corporate Bond ETF (HYLB)
For investors, HYLB can offer dollar-denominated high-yield debt exposure. HYLB seeks investment results that correspond generally to the performance, before fees and expenses, of the Solactive USD High Yield Corporates Total Market Index.
Matt Hougan of Inside ETFs nominated HYLB, which came in second place.
The high yield bond positions included in the underlying index are designed to represent a more liquid selection of bonds than the universe of high yield bonds in the United States not included in the underlying index.
HYLB launched in December, and the expense ratio is 0.25%.
Vanguard International High Dividend Yield ETF (VYMI)
VYMI uses a passively managed sampling strategy and tracks the performance of the FTSE All-World ex US High Dividend Yield Index.
Ben Johnson of Morningstar, who nominated the ETF, called VYMI a “fantastic bet for a diversified balance of dividend-paying stocks outside the U.S.”
“This ETF tracks the FTSE All-World ex US High Dividend Yield Index; what that does is look at all the stocks outside the U.S. and takes the half of that universe that has the highest forward-looking yield and – voila – there is your portfolio.”
According to Vanguard, VYMI can provide a convenient way to get exposure to international stocks that are forecasted to have above-average dividend yields.
“When you look at the state of product development in this industry, what we see is a greater trend toward complexity … higher costs,” Johnson said. “VYMI bucks this trend in a real meaningful way.”
VYMI launched in March and has an expense ratio of 0.30%.
WisdomTree Dynamic Currency Hedged International Equity Fund (DDWM)
With DDWM, investors can gain exposure to dividend-paying companies in the developed international world, ex-U.S. and Canada, while dynamically hedging currency exposure.
According to Dave Nadig of ETF.com, who nominated DDWM, the ETF “switches the currency hedge when it’s going to work for you and taking the hedge off when it doesn’t.”
DDWM uses a rules-based process that uses a combination of momentum, value and interest rate factors to help determine the currency hedge ratio.
DDWM launched in January 2016 and has an expense ratio of 0.35%.
Vanguard International Dividend Appreciation ETF (VIGI)
VIGI seeks to track the performance of the Nasdaq International Dividend Achievers Select Index.
“What it’s doing is focusing on dividend growth,” said Todd Rosenbluth of CFRA, who nominated the fund. “Instead of focusing on the companies that have the highest yield characteristics.”
According to Vanguard, VIGI provides a convenient way to get exposure across developed and emerging non-U.S. equity securities around the world that have a history of increasing dividends
“These are companies that are consistently raising dividend in parts of the world that you want to have exposure to outside the United States,” Rosenbluth explained. “That includes Canada, that includes Switzerland. It does have emerging market characteristics like India.”
Rosenbluth called VIGI, which launched in February 2016 with an expense ratio of 0.25%, “the better looking sibling” to VYMI.
NuShares Enhanced Yield U.S. Aggregate Bond ETF (NUAG)
NUAG seeks to track the investment results, before fees and expenses, of the BofA Merrill Lynch Enhanced Yield US Broad Bond Index, which is designed to broadly capture the U.S investment grade fixed income market.
The fund, which was nominated by Hougan, invests primarily in U.S. government securities, debt securities issued by U.S. corporations, residential and commercial mortgage-backed securities, asset-based securities and U.S. dollar-denominated debt securities issued by non-U.S. governments and corporations.
NUAG was launched in September and has an expense ratio of 0.20%.
Fidelity Dividend ETF For Rising Rates (FDRR)
The FDRR corresponds to the performance of the Fidelity Dividend Index for Rising Rates, which is designed to reflect the performance of stocks of large- and mid-cap dividend-paying companies that are expected to continue to pay and grow their dividends and have a positive correlation of returns to increasing 10-year U.S. Treasury yields.
According to Nadig, who nominated the fund, “this is a very straightforward fund that is looking for stocks that both pay high dividends and have good yield and have positive correlations to the 10-year yield.”
Launched in September, the ETF has an expense ratio of 0.29%.
iShares MSCI EAFE ESG Optimized ETF (ESGD)
With ESGD, investors gain access to large- and mid-cap stocks in Europe, Australia, Asia, and the Far East with positive environmental, social and governance (ESG) characteristics.
ESGD seeks risk and return similar to the MSCI EAFE Index while obtaining greater exposure to higher rated ESG companies, according to iShares.
“People I think have historically thought of doing well financially and doing good for the environment or governance concerns or social concerns as being mutually exclusive,” Johnson, who nominated ESGD, said.
He added that with the ESGD ETF, investors aren’t giving up performance.
ESGD launched in June of 2016 with an expense ratio of 0.40%.
Looking at the Morningstar Sustainability Rating, ESGD receives five globes.
“It’s in the top decile of its Morningstar category because it’s been successful in doing exactly what it set out to do,” Johnson said.
The Obesity ETF (SLIM)
The Obesity ETF (SLIM) by Janus seeks investment results that correspond generally, before fees and expenses, to the performance of the Solactive Obesity Index.
The Obesity ETF, which launched in June, seeks exposure to companies globally that could benefit as they fight the global obesity epidemic.
These companies include biotechnology, pharmaceutical, health care and medical device companies whose business is focused on obesity and obesity-related disease, including diabetes, high blood pressure, cholesterol, heart disease, stroke and sleep apnea, and companies focused on weight loss programs and supplements, and plus-sized apparel.
Lydon, who nominated the ETF, said “we always look at cancer and cancer research; we don’t spend enough time on obesity. More people die of heart disease than cancer.”
SLIM has an expense ratio of 0.50%.
Guggenheim S&P 100Equal Weight ETF (OEW)
OEW is a strategic beta ETF that offers equal weight exposure to 100 major blue-chip companies found in the S&P 500® Index. OEW gives equal weight exposure without bias to all equities in the S&P 100 EWI index.
“Instead of having a large weighting in Apple or Exxon or Chevron or GE, you’ve got a 1% weight give-or-take in all of these stocks,” Rosenbluth, who nominated OEW, said.
OEW offers an alternative to traditional S&P 100® cap-weighted strategies through more diversified opportunities, disciplined rebalancing and performance potential.
OEW launched in June and has an expense ratio of 0.40%.
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