The Grand Parade of New ETFs

New exchange-traded funds are launching almost every week. By my count, U.S. investors have access to more than 250 new ETFs and ETNs so far this year.

I talked about some of the newer players a few months ago in Nine New ETFs Rising Above the Noise. Today I want to look at a few more that have come out since then. As you’ll see, the pace of innovation is not slowing down even in the face of a weak stock market.

New Families Moving In

By now you’re familiar with the big ETF sponsors: iShares, PowerShares, and SPDRs. They are the Smiths and Joneses of the ETF world.

The neighborhood is filling up with new ETF families.

But have you heard about FlexShares, QuantShares, and GEMS? Probably not. They’re new to the neighborhood and haven’t met everyone yet. Let me introduce you …

FlexShares come from Northern Trust, a venerable and well-known name in the investment world. The firm’s previous ETF venture, NETS, ended in early 2009 with the closure of 17 funds. Most tracked major foreign market indexes. Marketing efforts were almost non-existent, and most investors didn’t know the NETS funds existed.

Northern Trust hopes to learn from its previous attempt. This time around they’ve distinguished their line-up by tracking stock indexes from Morningstar and fixed-income indexes by iBoxx. The first four FlexShares ETFs are:

• FlexShares Morningstar Global Upstream Natural Resources Index Fund (GUNR)
• FlexShares Morningstar U.S. Market Factor Tilt Index Fund (TILT)
• FlexShares iBoxx 3-Year Target Duration TIPS Index Fund (TDTT)
• FlexShares iBoxx 5-Year Target Duration TIPS Index Fund (TDTF)

QuantShares has its home base in Boston. This new ETF family introduced seven “market neutral” ETFs in September. The goal is to match long and short positions so that other factors like momentum, size and quality are isolated.

It’s too soon to say how well it will work, but the idea is interesting. Here is what QuantShares offers so far:

• QuantShares U.S. Market Neutral Momentum Fund (MOM)
• QuantShares U.S. Market Neutral Anti-Momentum Fund (NOMO)
• QuantShares U.S. Market Neutral Beta Fund (BTAH)
• QuantShares U.S. Market Neutral Anti-Beta Fund (BTAL)
• QuantShares U.S. Market Neutral Value Fund (CHEP)
• QuantShares U.S. Market Neutral Size Fund (SIZ)
• QuantShares U.S. Market Neutral Quality Fund (QLT)

GEMS is the new name for a suite of Global Emerging Market Sector ETFs from Emerging Global Advisors. If you like emerging markets, and you like sectors, then you might like GEMS. The suite includes ten sector ETFs and one composite emerging markets ETF.

Emerging markets have some new GEMS.

•   Composite GEMS (AGEM)

•   Financials GEMS (FGEM)

•   Consumer Goods GEMS (GGEM)

•   Health Care GEMS (HGEM)

•   Industrials GEMS (IGEM)

•   Basic Materials GEMS (LGEM)

•   Energy GEMS (OGEM)

•   Technology GEMS (QGEM)

•   Telecom GEMS (TGEM)

•   Utilities GEMS (UGEM)

•   Consumer Services GEMS (VGEM)

Three of these (AGEM, OGEM, and FGEM) were previously available under the EGShares brand with different ticker symbols. The other eight came out in June of this year.

Some Singles and Couples, Too

Not all the action comes from new players. Existing ETF families are expanding as well.

SPDR added three new industry-focused ETFs. In this context, “industry” is a narrower category than “sector.” The Health Care sector, for instance, consists of several industries like pharmaceuticals, biotechnology, etc. Industry-level ETFs offer ways to zero in deeper on a niche you think will outperform. The new offerings are SPDR S&P Aerospace & Defense (XAR), SPDR S&P Health Care Services (XHS), and SPDR Software & Services (XSW).

iShares is aggressively expanding into new areas, too. Recent launches include iShares MSCI Emerging Markets Small Cap (EEMS), iShares Floating Rate Note Fund (FLOT), iShares Global TIPS (GTIP) and iShares International TIPS (ITIP).

Van Eck targets millions of income-starved investors with the Market Vectors Mortgage REIT Income ETF (MORT), available as of August 17.

Global X SuperDividend ETF (SDIV) is another new income-oriented fund. SDIV intends to provide investors with exposure to 100 of the highest yielding stocks in the world.

Rydex rounded out its equal-weight index ETF family with the addition of Rydex S&P MidCap 400 Equal Weight (EWMD) and Rydex S&P SmallCap 600 Equal Weight ETF (EWSM).

Direxion has been busy, too. The firm launched 3x leveraged long and inverse ETFs tracking the Materials and Health Care sectors, two more focused on Agribusiness, and two more covering Russia. And just to keep us guessing, they also came out with an unleveraged total-market inverse ETF. Here’s the full list:

• Direxion Daily Basic Materials Bull 3x Shares (MATL)
• Direxion Daily Basic Materials Bear 3x Shares (MATS)
• Direxion Daily Healthcare Bull 3x Shares (CURE)
• Direxion Daily Healthcare Bear 3x Shares (SICK)
• Direxion Daily Agribusiness Bull 3x Shares (COWL)
• Direxion Daily Agribusiness Bear 3x Shares (COWS)
• Direxion Daily Russia Bull 3x Shares (RUSL)
• Direxion Daily Russia Bear 3x Shares (RUSS)
• Direxion Daily Total Market Bear 1x Shares (TOTS)

PowerShares unveiled two new currency ETNs: PowerShares DB 3x Long U.S. Dollar Index Futures ETN (UUPT) and PowerShares DB 3x Short U.S. Dollar Index Futures ETN (UDNT). These are, to my knowledge, the first 3x leveraged currency products offered to individual investors in the U.S.

Now you can make a 3x bet on agribusiness.

UUPT and UDNT reset their leverage on a monthly basis instead of daily as is done in most cases (the Direxion ETFs above, for instance). This softens, but does not eliminate, the compounding leverage effect I’ve discussed before.

Whew! That’s quite a list — and I could have given you more — many more. Of course I’m not suggesting you run out and buy them all. So which ones are set to take off? Sorry, I only give specific buy and sell instructions to my International ETF Trader members.

The point to remember is that ETFs and ETNs are still in a dynamic growth phase. And as big as this revolution is, it’s just getting started. Just reading this column puts you way ahead the curve. I’m excited for what the future will bring.

Best wishes,

Ron