With over 670 new ETFs in filings with the SEC and more being filed every week, there are bound to be a number of duds. Still, there are a few exciting funds in the pipeline I’m keeping an eye on.
Last week, I blogged about fund closures and came up with a list of surprising fund closures . With so many niche markets and strategies already covered, the chances of success are becoming increasingly slim for issuers.
As expected, the recent wave of new fund launches has brought its fair share of yawners—I won’t even single out any funds here, because there are simply so many. Some launches look like “Hail Mary” attempts, while others look promising, only to go unnoticed, collecting dust and few assets.
Simply put, I think ETF investors are getting “launch fatigue” and harder to impress.
But as I said, some in registration look interesting. When I say "interesting," I mean some have blockbuster potential, while others are the first of their kind and I have no idea how the investing public will respond.
For example, one filing on my radar with blockbuster potential is the iShares MSCI Frontier 100 Index Fund (NYSEArca:FM), which looks to be launching soon.
This will be the first global frontier markets ETF to hold local shares and will include frontier countries such as Kuwait, Qatar, Vietnam, Pakistan, Nigeria and Kazakhstan. The other global frontier ETF, the Guggenheim Frontier Markets ETF (FRN), is severely limited in scope, holding only depositary receipts.
Going out on a limb, I’d say FM should be a sort of frontier markets equivalent to the $33 billion iShares MSCI Emerging Markets Index Fund (EEM).
While we’re on the subject of emerging markets, I wouldn’t be surprised to see the Global X Next 11 ETF (NYSEArca:NXTE) to launch in the near future.
The “next eleven” are a combination of 11 emerging and frontier countries considered by Goldman Sachs’ Jim O’Neill—made famous for coining the acronym BRIC back in 2001—to have higher-than-average growth potential in the coming decades.
While I’m not sure how the markets will respond to this launch, it’s the first of its kind and an interesting theme.
Merk’s Hard Currency, The ETF Version
Merk Investments’ ETF version of its flagship mutual fund, the Merk Hard Currency Fund (MERKX), is another launch I’m excited about. This actively managed fund will target currencies of countries with sound monetary policies to protect investors against a downside move in the dollar.
The Merk Hard Currency ETF (NYSEArca:HRD) will also have an allocation to gold, which makes the fund more than a simple currency product. In our current zero-interest rate environment and the odds for QE3 increasing, I’m thinking I’m not alone in finding this fund interesting.
MERKX currently has $500 million in assets, so we’ll see how the ETF version does. HRD might also get some competition from Pimco and US Commodity Funds, which have their own currency strategy ETFs in filings—the Pimco Foreign Currency Strategy ETF and the U.S. Golden Currency Fund (NYSEArca:HARD).
While we’re discussing Pimco, another fund worth watching on their filings list is the Pimco Real Return ETF, another actively managed fund that looks to use a mix of fixed-income securities from around the globe, for a real return strategy.
Where’s The Second-Tier EM ETF?
Before diving into my list, I want to reiterate my shock that there’s no ETF filing for a “second tier” emerging markets ETF. I’ve blogged about this before.
Second-tier emerging markets would be those countries seen toward the bottom of EEM and its competitor, the Vanguard MSCI Emerging Markets ETF (VWO). These countries get overshadowed by the larger markets and get no love.
They are categorized as the “others,” according to iShares’ EEM fact sheet, and include fast-growing smaller emerging markets countries like Indonesia, Thailand, Chile, Turkey, Poland, Colombia and the Philippines.
Wouldn’t a straight cap-weighted fund incorporating these second-tier emerging markets under a single ETF wrapper have a strong investor base? Each of these countries mentioned has single-country-exposure ETFs listed. When their assets are combined, they currently have over $2.7 billion under management.
It’s something to think about, and for my money, if there were a second-tier emerging markets ETF in filing, it would be No. 1 on my list, hands down.
The 10 Top Upcoming Launches
10. IQ Physical Diamond Trust – For filing details, see my colleague Ana Kostioukova’s blog .
9. CurrencyShares Singapore Dollar Trust
8. JP Morgan Physical Copper Shares ETF
7. Global X Next 11 ETF (NYSEArca:NXTE)
6. Global X Sri Lanka ETF
5. iShares MSCI Vietnam Investable Market Index Fund
4. Guggenheim China Consumer ETF (NYSEArca:RAO)
3. Pimco Real Return ETF
2. Merk Hard Currency ETF (NYSEArca:HRD)
1. iShares MSCI Frontier Markets ETF (NYSEArca:FM)
At the time this article was written, the author had no positions in the securities mentioned.
Contact Dennis Hudachek at dhudachek@indexuniverse.com.
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