This Week's ETF Launches: A Kick To The Core, A Reboot and An Emerging Dividend Play
With the final month of 2016 quickly approaching, the number of new exchange-traded funds (ETFs) has slowed to a crawl.
However, that hasn’t stopped issuers from releasing some interesting products. This week featured two new ETFs, as well as one reissue. The three new products managed to cover a lot of ground – equities, bonds and commodities. Not to mention straight-up indexing, smart beta and active management styles. While it was a slow week, it was still pretty impressive.
For a list of all the new ETF launches, take a look at our ETF Launch Center.
Ticker | Name | Issuer | ETFdb Category | Expense Ratio |
|---|---|---|---|---|
(BNDC n/a) | FlexShares Core Select Bond Fund | Northern Trust | Total Bond Market | 0.35% |
(LVHE n/a) | Legg Mason Emerging Markets Low Volatility High Dividend ETF | Legg Mason | Emerging Market Equities | 0.50% |
(OILB n/a) | iPath Series B S&P GSCI Crude Oil Total Return Index ETN | Barclay’s | Commodities | 0.45% |
Northern Trust Goes Active
Most people don’t realize it, but mutual fund and ETF sponsor Northern Trust is one of the largest indexers on the planet. So when it does an actively managed fund, investors should take notice. In this case, Northern Trust chose to take an active approach to core bond exposure through its very successful FlexShares line of ETFs.
Use our Head-to-Head Comparison tool to compare two ETFs issued by Northern Trust and see which one makes more sense for your portfolio.
Just like the name implies, FlexShares Core Select Bond Fund (BNDC n/a) is designed to be a core or one-stop-shop bond fund for investors and their portfolios. As a total bond fund, BNDC will invest in a variety of U.S. IOUs. This can include Treasury/government debt, corporate bonds and junk/high-yield bonds. Perhaps more importantly, the fund can invest in a variety of maturities and durations to limit interest rate risk. Using Northern Trust’s own credit research team, BNDC’s holdings will shift in reaction to interest rate levels, the shape of the yield curve and credit spread relationships. The goal will be a high level of total return – dividends and capital gains on the underlying holdings.
And speaking of those holdings, BDNC will hold other ETFs, rather than individual bonds. Although, it does currently hold individual Treasury bonds as it waits to grow its assets. By using other ETFs, BNDC will be able to shift its underlying holdings with ease as market conditions change. Choosing very liquid fixed-income ETFS – such as current holdings FlexShares Disciplined Duration MB ETF (MBSD ) or iShares 3-7 Year Treasury Bond ETF (IEI A-) – also helps it to reduce trading costs, which is a major hurdle for active ETFs.
Expenses for BNDC run a cheap at 0.35% or just $35 per $10,000. That makes it an ideal way for investors to add bond exposure without any of the hassles that go into credit or interest rate research.
Legg Mason Completes Its Suite
Like many traditional mutual fund managers, Legg Mason has seen the writing on the wall. In order to compete with cheap index ETFs, managers have to offer some sort of ETFs in their product lines. Legg Mason has chosen to go the smart beta route, and it has been pretty successful at gaining assets. Its latest addition completes its set of low beta, high dividend products.
Want to see how many ETFs Legg Mason has? What about other issuers? Then, take a peek at our Issuers page.
Already featuring ETFs that use the concept in the U.S. (LVHD ) and the developed international world (LVHI ), Legg Mason has launched the Legg Mason Emerging Markets Low Volatility High Dividend ETF (LVHE n/a).
LVHE will track the QS Emerging Markets Low Volatility High Dividend Index. Like its sister funds, the new ETF will screen for stocks that have high dividend yields as well as low price and earnings volatility, but this time turning its attention towards emerging market stocks. These screens allow investors to score a high yield, but have the earnings and price action to back up that yield. You’re not getting firms in trouble. The ETF gives investors access to a relatively ignored segment of the dividend marketplace.
Expenses for LVHE run at 0.50%.
Barclay’s Gets Oily… Again
Exchange-traded notes (ETNs) have been hit with a wave of closures and suspensions in recent months. Major issuer Barclay’s followed the herd and did so with the popular iPath Crude Oil Futures ETN (OIL B+). The real reasons behind the suspension in new shares of OIL were not made clear, but since the announcement the ETN has drifted wildly from its NAV.
And like a lot of recent suspensions, Barclay’s has followed with a reissue of the closed products under a different ticker and name. The iPath Series B S&P GSCI Crude Oil Total Return Index ETN (OILB n/a) is basically the same fund and it will track the same index: the S&P GSCI Crude Oil Total Return Index. This provides exposure to near-dated West Texas Intermediate crude oil futures. The only difference is OILB will feature a lower expense ratio of 0.45%.
Expenses matter. BlackRock gets that fact. Read BlackRock Lowers Expenses for 15 ETFs for more information.
The Bottom Line
While the end of the year has slowed ETF issuance, what has been issued continues to be quality funds. The three new ETFs should find a home in many portfolios and become successful in their own right.
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