In the second quarter, equity exchange-traded funds managed to string together their fourth consecutive quarter of plus-side returns, albeit with only a 0.31% gain.
Despite the increased market optimism, the top-performing equity ETF classifications reflected investors' concern about signals from the Federal Reserve's that it intends to begin removing some of its easy-money provisions eventually. Consumer services funds, health/biotechnology funds and financial services funds were among the best-performing ETF groups during the quarter.
At the top of the leader board were select global natural resources funds and natural resources funds with a renewable energy twist. At the head of the class was the $109.5 million Guggenheim Invest Solar ETF (TAN), with an average trading volume of 236,850 shares per day for the quarter and a return of 46.96% for the three-month period ended June 30. The $14.3 million Market Vectors Solar Energy ETF (KWT), which added 27.75% to its first-quarter-ending value, came in second.
The global markets remained in a semi-funk during the quarter as investors pondered the news that the eurozone still was bogged down in recession and that the Chinese purchasing managers' index was at a nine-month low, signaling slowing growth in China. However, Japanese funds were a bright spot for world equity funds. Wisdom Tree Japan Hedged Equity Fund (DXJ) and iShares' MSCI Japan ETF (EWJ), attracted the largest inflows for the quarter, taking in a net $4 billion and $3.5 billion, respectively.
Meanwhile, the onetime darling of the group, SPDR Gold Shares (GLD), suffered the largest net redemptions, handing back some $11.8 billion for the quarter. iShares' MSCI Emerging Markets ETF (EEM) witnessed net outflows to the tune of $7.6 billion.
Rising interest rates hammered some of the spread products and dividend payers late in the quarter. Nonetheless, seven of the 22 new offerings brought to market by ETF sponsors during the quarter were equity-income focused, with Cambria Shareholder Yield ETF (SYLD) experiencing the largest average trading volume (157,182 shares per day) for this group of newbies. It is interesting to note that despite the global concerns, 11 of the new ETF offerings were internationally focused.
Tom Roseen is head of research services for Lipper Inc.