Some ETF Second Acts are Worth Viewing
Some investors that have been following the exchange traded funds business for a while are familiar with the term “me too ETF.” That is an ETF from one issuer that is younger than but bears a striking resemblance to another issuer’s product.
Not to be confused with me too ETFs are ETF sequels, or the scenario where a fund sponsor looks to capitalize on a concept that has proven successful with a similar but still noticeably different fund. Insert witty movie sequel evaluations here, but the fact is some ETF sequels have proven popular while others have struggled to gain traction.
A prime example of a successful ETF is the SPDR Barclays Short Term High Yield Bond ETF (SJNK) , the follow up to the SPDR Barclays High Yield Bond ETF (JNK) , the second-largest high-yield bond ETF. [Investors Flock to Junk Bond ETFs]
“SJNK, like the original, holds junk bonds, just with shorter maturities. That gives it about half the interest rate risk as JNK. Does that mean its return and yield take a similar cut? Nope. SJNK has returned 16 percent since its March 2012 inception, compared to 18 percent for JNK. It yields 5.2 percent, a smidgen less than the original. That explains why investors plowed $2.5 billion into SJNK last year — the same amount they took out of JNK,” reports Eric Balchunas for Bloomberg.
SJNK has proven to be such a successful sequel to JNK that State Street recently added a global junk play, the SPDR Barclays International High Yield Bond ETF (IJNK) . [New Global Junk Bond ETF Debuts]
There is an impressive sequel in the mining arena: The Market Vectors Junior Gold Miners ETF (GDXJ) , the follow up to the Market Vectors Gold Miners ETF (GDX) , the largest mining ETF. GDXJ has plenty of fans of its own.
“In two months this year, GDXJ, which was launched in 2009, doubled in size to $2 billion. That was thanks to strong inflows — it took in $570 million to GDX’s $450 million for the year so far — and the surprise rally in gold-mining stocks,” writes Balchunas. [Mining ETFs Finally Beating Bullion]
The fixed income space has another successful ETF sequel: The Vanguard Total International Bond ETF (BNDX) , the international answer to the wildly popular Vanguard Total Bond Market ETF (BND) . BNDX “tracks 2,300 investment-grade international bonds in 50 countries and charges an expense ratio of 0.20 percent, by far the cheapest among international bond ETFs,” according to Bloomberg. BNDX is one of the most successful new ETFs to have debuted in 2013. [These New eTFs Got Big Fast]
Market Vectors Junior Gold Miners ETF
ETF Trends editorial team contributed to this post. Tom Lydon’s clients own shares of JNK.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.
