Meet the ETF Class of 2016

Meet the ETF Class of 2016
Most are majoring in smart beta.
JAN 26, 2017
As the exchange-traded fund industry gears up for the Inside ETFs conference in Hollywood, Fla., a look at last year's new funds provides some insights as to what's hot and what's not. Morningstar (MORN) lists 239 ETFs that made their debut in 2016, vs. 483 in 2015. Total assets of the Class of 2016: $5.3 billion. The largest new fund: Wisdom Tree Dynamic Currency Hedged International Equity (DDWM), with $307 million in assets. The fund, which attempts to reduce the currency effect for U.S. investors, gained 12.2% since its Jan. 7, 2016 inception and the end of 2016. A couple of lessons from the newest funds: Unusual investment angles can work, sometimes. SPDR SSGA Gender Diversity ETF (SHE), is the second-largest fund of 2016, with $275.6 million in assets. According to Morningstar, the fund "seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the SSGA Gender Diversity Index, which tracks U.S. companies that are leaders in advancing women through gender diversity on their boards of directors and in management.” It gained 10.6% last year. It helps to have a big sponsor. Franklin LibertyQ Emerging Markets (FLQE) ranked third in assets among last year's new funds, with $262.6 million in assets and a 3.68% gain. The fund was part of Franklin's June entry into the smart-beta ETF market. Vanguard's two new offerings also attracted lots of attention. Vanguard International Dividend Appreciation Index ETF (VIGI) has $244.2 million in assets, while Vanguard International High Dividend Yield (VYMI) has $243.4 million in assets. Those funds debuted in February. Fidelity Dividend ETF for Rising Rates (FDRR), launched in September, has $58.8 million. Smart beta was the single largest trend: The industry rolled out 103 smart-beta funds last year, by Morningstar's reckoning. Of those, 87 were return oriented – that is, they aimed to outperform their benchmarks by using various investment strategies, such as momentum or dividends. Just seven aimed at reducing risk. (The rest fall into Morningstar's “uncategorized” buckets.)
The five largest exchange-traded funds that made their debut in 2016, ranked by assets
Fund Ticker Category Assets($M) Gain since inception
WisdomTree Dynamic Currency Hedged Intl Equity ETF DDWM Foreign Large Value $306.9 12.15
SPDR® SSGA Gender Diversity ETF SHE Large Blend $275.6 10.59
Franklin LibertyQ Emerging Markets ETF FLQE Diversified Emerging Mkts $262.6 3.68
First Trust Dorsey Wright Dynamic Foc 5 FVC Mid-Cap Blend $262.5 N/A
Principal US Small Cap ETF PSC Small Blend $247.0 10.74
Source: Morningstar
Note: Dividends, gains reinvested through 12/31/2016.
Overall, the most popular fund categories were large-company U.S. stocks, with 42 new offerings, foreign large-company stocks, with 20, and emerging markets, with 15. And the industry's fondness for punny ticker symbols continues apace. Last year saw the debut of USCF Restaurant Leaders (MENU), The WEAR ETF (WEAR), a fashion-oriented ETF, Global X Health & Fitness (BFIT), Direxion Daily Gold Miners Bear 1X (MELT) and Direxion Daily Silver Miners Bear 2x (DULL).

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