Three Year Check: AGEM, EQL, CSM

ETF Database

The ETF industry has certainly come a long way since SPY made its debut as the first exchange-traded fund in 1993. With over 1,400 products to chose from, investors of all walks can now have cheap and easy access to nearly every corner of the investable universe. From plain vanilla funds to the more complex and intriguing products, issuers continue to pump out innovative ETPs year after year. Although there are numerous new funds already in the pipeline, taking a step back and looking at the performance of  ETFs that have been on the market for a while paints a vivid picture of just how far the industry has come [see also 5 Worst ETF Strategies Of The Last 5 Years].

This month marks the three-year anniversary of three offerings from issuers EG Shares, ALPS and ProShares. Since July of 2009, the emerging market fund AGEM, the sector weighted EQL, and the alternative 130/30 ETF CSM have certainly established themselves as some of the most popular and useful investment vehicles available on the market. Combined, these funds have accumulated over $171.5 million and counting in total assets over the last three years.

Below we check on the three year performance of these ETFs:

GEMS Composite ETF (AGEM)

When it comes to emerging market investing, there is a common debate among investors about which countries should actually be included in the “emerging” bucket. Powerhouse economies such as South Korea and Taiwan have grossly surpassed other developing nations, and are sometimes referred to as “quasi-developed.” To address this issue, EG Shares introduced a product that allows investors to make a more “pure play” approach to the emerging market space by steering clear of these “quasi-developed” nations [see also 3 Reasons Why Mexico Is The New Brazil].

Since its inception in 2009, AGEM has been able to make a name for itself among investors, further solidifying its usefulness in the financial universe. But in comparison to other broad-based emerging market ETFs, the fund remains on the small side of the size scale; AGEM currently holds a little under $13.2 million in total assets under management. Despite its small size, the fund has been able to deliver some impressive returns since its debut, gaining over 9.8% in just three years.

Equal Sector Weight ETF (EQL)

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In the universe of equity ETFs, market capitalization weighting strategies are incredibly dominant. But in recent years, several alternative weighting methodologies have been gaining traction. ALPS’ EQL is one of these products that employs a unique weighting strategy, allowing investors to gain well-rounded and diversified exposure to the equities space, but with a slight twist.

EQL is designed to assign equal weights to each of the nine major sectors of the U.S. economy. This approach may be appealing for those who want to prevent establishing big allocations to sector-specific “bubbles” (sounds familiar?). And with its debut in 2009, EQL had perfect timing, as many investors began to look for ways to avoid over-weighting in specific segments. Taking a close look at the returns of this fund goes to show how this strategy is worth its salt: EQL is currently up a whopping 47.85% on its three-year return.

Credit Suisse 130/30 Profile (CSM)

One of the most interesting twists in the world of S&P 500 ETFs came in 2009 with the introduction of ProShares’ CSM, the first ETF to offer the popular 130/30 investing strategy. Although this concept is nothing new in the financial world,  its easy availability to all walks of investors has made CSM one of the most popular funds among S&P investors [see also Cheapskate Hedge Fund ETFdb Portfolio].

CSM strategy involves using limited shorting and leverage in an attempt to take advantage of both positive and negative movements in stock prices. The goal is to short index components expected to generate negative alpha, and use the proceeds to establish overweight positions in those that will generate positive alpha. If this objective is accomplished, a 130/30 fund will likely outperform the long-only related benchmark. And with an incredible 47.85% three-year return, CSM has surely proven its potential.

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Disclosure: No positions at time of writing.

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