Market insights and analysis

How dynamic, risk-managed investment solutions are performing in the current market environment

3rd Quarter | 2020

Market insights and analysis

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Updates on how dynamic, risk-managed investment solutions are performing in the current market environment.

The ETF Deathwatch decreased in size in August compared to July. Twenty-six exchange-traded products (“ETPs”) were added to the list, and 40 funds were removed, making August a busier month in terms of removals. Of those that were removed, 13 were due to increased health and 27 were due to asset managers closing their funds. The high number of additions to the Deathwatch in August was expected, considering the strong performance of the major U.S. indexes for the month. 

The funds added to the list in August were a mix of products, including global funds, actively managed funds, hedged/leveraged funds, and niche funds. One was added because it had low assets under management (“AUM”) for three consecutive months. The rest were added because they had a low average daily volume for the past three months. These additions may have enough AUM and volume to keep them from closure; however, our system takes into account both AUM and volume, so it’s likely that should volume and interest remain low, these funds may be considered for closure.

The low volume in these funds could be due to the nature of their investment product. Many funds on the Deathwatch list are niche products, which makes sense given the current market environment. The Technology sector continued its momentum in August, and the NASDAQ 100 gained almost 10%. Investors remain confident in the overall markets. Along with the momentum in equities, bond yields remain low, as the Federal Reserve has been patient about raising interest rates. Federal Reserve Chairman Jerome Powell mentioned that the Fed is not concerned about surpassing the 2% inflation target, leaving the Fed more room to conduct monetary policy. Given the momentum in the equity markets combined with low interest rates, it makes sense that there are a lot of treasury, bond, and hedged funds added to the Deathwatch list. Also, investors and fund managers prefer to be in passively managed funds during these types of periods, which may explain the uptick in niche products on the list.

Most of the removals from the Deathwatch due to improved health were equity, commodity, and niche products. The removal of commodity ETFs makes sense since most commodity prices increased last month. The removal of a few equity funds also makes sense given the market rally and the rise in overall investor sentiment. A thematic fund for minority empowerment was also removed from the list in August, which makes sense as more people allocate money to causes meant to help minorities in light of the racial tensions in the U.S.

Forty-six ETFs and exchange-traded notes (“ETNS”) on Deathwatch this month that have been in the market for more than 10 years. This is a long time for ETPs to exist while remaining on our Deathwatch list. Leveraged and short ETF instruments, as well as several commodity ETPs, dominate our list of funds older than 10 years. The fund companies managing these products may allow them to remain active, as they likely play a larger role for their clients interested in active management.  

The average asset level of the threatened ETFs on the ETF Deathwatch increased from $7.44 million to $8.01 million, and 49 products had less than $2 million in assets. The average age of products on the list decreased from 53.76 months to 52.02 months, and the number of products more than 5 years of age decreased from 125 to 112. The largest ETF on the list had an AUM of $24.37 million, while the smallest had assets of just $214,014.

Here is the Complete List of 377 ETFs and ETNs on ETF Deathwatch for August 2020 compiled using the objective ETF Deathwatch Criteria.

The 26 ETF/ETNs added to ETF Deathwatch for August:

  1. Armor US Equity Index ETF (ARMR)
  2. iPath Series B US Treasury 10-year Bear ETN (BTYS)
  3. VictoryShares US Small Cap Volatility Wtd ETF (CSA)
  4. Xtrackers MSCI Eurozone Hedged Equity ETF (DBEZ)
  5. Tortoise Global Water ESG Fund (EBLU)
  6. TrueShares ESG Active Opportunities ETF (ECOZ)
  7. X-Trackers Investment Grade Bond-Interest Rate Hedged ETF (ESCR)
  8. Direxion MSCI USA ESG - Leaders vs Laggards ETF (ESNG)
  9. Barclays ETN+ FI Enhanced Europe 50 Exchange Traded Notes Series C (FFEU)
  10. Franklin FTSE Australia ETF (FLAU)
  11. Franklin FTSE Asia ex Japan ETF (FLAX)
  12. Claymore CEF GS Connect ETN (GCEC)
  13. Qraft AI-Enhanced US High Dividend ETF (HDIV)
  14. Franklin Genomic Advancements ETF (HELX)
  15. iShares iBonds Dec 2022 Term Treasury ETF (IBTB)
  16. iShares iBonds Dec 2023 Term Treasury ETF (IBTD)
  17. iShares iBonds Dec 2024 Term Treasury ETF (IBTE)
  18. iShares iBonds Dec 2025 Term Treasury ETF (IBTF)
  19. iShares iBonds Dec 2026 Term Treasury ETF (IBTG)
  20. Invesco FTSE International Low Beta Equal Weight ETF (IDLB)
  21. Franklin Intelligent Machines ETF (IQM)
  22. KraneShares Zacks New China ETF (KFYP)
  23. First Trust Merger Arbitrage ETF (MARB)
  24. MicroSectors US Big Oil Index -2X Inverse Leveraged ETNs (NRGZ)
  25. ETRACS CMCI Total Return ETN (UCI)
  26. Western Asset Short Duration Income ETF (WINC)

The 13 ETF/ETNs removed from ETF Deathwatch due to improved health:

  1. Invesco DB Silver Fund (DBS)
  2. Franklin LibertyQ US Mid Cap Equity ETF (FLQM)
  3. Global X Thematic Growth ETF (GXTG)
  4. Pacific Global International Equity Income ETF (IDY)
  5. GLOBAL X MSCI CHINA HEALTH (CHIH)
  6. GBL X MSCI CHINA CONSUMER ST (CHIS)
  7. ProShares Short Oil & Gas (DDG)
  8. SPDR Kensho Smart Mobility ETF (HAIL)
  9. Impact Shares NAACP Minority Empowerment ETF (NACP)
  10. SPDR Kensho Final Frontiers ETF (ROKT)
  11. DIREXION MSCI EM/DM (RWED)
  12. ProShares Ultra MSCI Brazil Capped (UBR)
  13. AMPLIFY INTL ONLINE RETAIL (XBUY)

The 27 ETFs/ ETN that were closed:

  1. IQ Global Agribusiness Small Cap ETF (CROP)
  2. iPath US Treasury 2-year Bull ETN (DTUL)
  3. iPath US Treasury 2-year Bear ETN (DTUS)
  4. iPath US Treasury 10-year Bull ETN (DTYL)
  5. iPath US Treasury Flattener ETN (FLAT)
  6. Claymore CEF GS Connect ETN (GCE)
  7. iShares Currency Hedged MSCI Australia ETF (HAUD)
  8. iShares Currency Hedged MSCI Italy ETF (HEWI)
  9. iShares Currency Hedged MSCI Switzerland ETF (HEWL)
  10. iShares Currency Hedged MSCI Spain ETF (HEWP)
  11. iShares Currency Hedged MSCI South Korea ETF (HEWY)
  12. IndexIQ ETF Trust - IQ 50 Percent Hedged FTSE Europe ETF (HFXE)
  13. IndexIQ ETF Trust - IQ 50 Percent Hedged FTSE Japan ETF (HFXJ)
  14. Invesco Strategic Developed ex-US Small Company ETF (ISDS)
  15. Hartford Multifactor Low Volatility US Equity ETF (LVUS)
  16. Nationwide Maximum Diversification Emerging Markets Core Equity ETF (MXDE)
  17. Principal Sustainable Momentum Index ETF (PMOM)
  18. Principal Contrarian Value Index ETF (PVAL)
  19. IQ Leaders GTAA Tracker ETF (QGTA)
  20. Hartford Multifactor REIT ETF (RORE)
  21. Global X Scientific Beta Europe ETF (SCID)
  22. Global X Scientific Beta Japan ETF (SCIJ)
  23. Global X Scientific Beta Asia ex-Japan ETF (SCIX)
  24. IQ-ST DURR EHD CORE BOND US (SDAG)
  25. Global X Fertilizers/Potash ETF (SOIL)
  26. iPath US Treasury Steepener ETN (STPP)
  27. Barclays ETN+ ETNs Linked to the S&P 500 Dynamic VEQTORTM TotaL Return Index (VQT)



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