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Thanks to unique strategies, creativity, transparency, diversification benefits, enhanced tax competences, low turnover and low cost, the global ETF industry has seen explosive growth, snapping up a large market share from mutual funds and hedge funds. In fact, overcoming all the odds and uncertainties in the market, the ETF industry surpassed hedge funds for the first time this year (read: How ETFs Are Overtaking Hedge Funds ). Low cost has been one of the biggest crowd pullers into the ETF world. Globally, the industry has over 6,000 products with AUM of more than $3 trillion from 271 providers listed on 63 exchanges in 51 countries at the end of October, as per ETFGI . It has gathered $287.3 billion in new capital in the first 10 months of the year, up 22.3% year over year. About 60.8% ($174.8 billion) of the total inflows came from the U.S. ETFs while 23.8% came from Europe. Canada and Japan products account for $10.1 billion and $35 billion of inflows, respectively. The rapid growth can primarily be attributed to currency hedging strategies, smart beta and factor investing. In particular, currency hedging is the most sought after ETF strategy of this year due to strength in U.S. dollar brought about by the global monetary easing policies against the Fed tightening policy. This is because the currency hedged funds look to strip out currency exposure to a foreign economy via the use of currency forwards or other instruments that bet against the non-dollar currency while at the same time offer exposure to foreign stocks. After that, investors are embracing smart stock-selection techniques and strategies to alleviate the risks in the market through smart beta products. The smart beta strategy helps to capture market inefficiencies in a transparent way by adding extra metrics like dividends, volatility, revenue, earnings, momentum, equal weight and other fundamental factors to the market cap or rules-based indices. It takes specific factors from the active management universe at a lower cost and instills it in a passive listed fund (read: 5 Smart Beta ETFs to Beat the Choppy Market ). Given this, we have highlighted four ETFs that are enjoying incredible AUM growth this year. Deutsche X-trackers MSCI EAFE Hedged Equity ETF (NYSEARCA: DBEF ) – AUM Growth: 93.2% This ETF, with an asset base of around $13.7 billion and average daily volume of more than 3.9 million shares, emerged as the biggest winner in the currency hedge space. It has pulled in about $12.8 billion in capital so far this year. This fund targets the developed international stock market with no currency risk and tracks the MSCI EAFE US Dollar Hedged Index. In total, the product holds 917 securities in its basket with none holding more than 1.93% share. However, it is skewed toward the financial sector, which makes up for one-fourth of the portfolio, while consumer discretionary, industrials, consumer staples and health care round off the top five with double-digit exposure each. Among countries, Japan takes the top spot at 23%, closely followed by United Kingdom (18%), France (10%) and Switzerland (10%). The fund charges 35 bps in fees per year from investors and has gained 6.1% so far this year. It has a Zacks ETF Rank of 3 or ‘Hold’ rating. QuantShares U.S. Market Neutral Anti-Beta ETF (NYSEARCA: BTAL ) – AUM Growth: 90.7% This fund invests in low beta securities and simultaneously in short high beta stocks of approximately equal dollar amounts within each sector. It seeks to deliver the spread return between low and high beta stocks. This can easily be done by tracking the Dow Jones U.S. Thematic Market Neutral Anti-Beta Index. This approach results in long and short positions in 200 stocks, in equal proportions. The fund is expensive, charging 1.49% in fees per year and trades in a good volume of about 142,000 shares per day. BTAL is unpopular having AUM of $9 million, out of which $8.16 million has been scooped up this year. The fund is down 2.9% in the year-to-date timeframe. WisdomTree Europe Hedged Equity Index ETF (NYSEARCA: HEDJ ) – AUM Growth: 75.8% HEDJ has gathered about $15.7 billion in capital since the start of 2015 that has boosted its asset base to over $20.7 billion. The ETF tracks the WisdomTree Europe Hedged Equity Index holding 128 securities with each security holding no more than 6.08% of assets. It is also pretty well spread across a number of sectors with consumer staples, industrials, consumer discretionary, financials and health care taking double-digit exposure each. Among countries, Germany (25.9%), France (24.5%), the Netherlands (17.1%) and Spain (16.6%) dominate the holdings’ list. The fund charges 58 bps in annual fees and sees an average daily volume of about 4.9 million shares. It has surged 11.7% in the year-to-date timeframe and has a Zacks ETF Rank of 3 or ‘Hold’ rating. First Trust Dorsey Wright Focus 5 ETF (NASDAQ: FV ) – AUM Growth: 72.8% This ETF tracks the Dorsey Wright Focus Five Index, which provides targeted exposure to the five First Trust sector and industry-based ETFs that Dorsey, Wright & Associates (DWA) believes have the maximum chance of outperforming the other ETFs in the selection universe. Securities with high relative strength scores (strong momentum) are given higher weights. Currently, the product has the highest exposure to the biotech sector via the First Trust NYSE Arca Biotechnology Index ETF (NYSEARCA: FBT ) at 24.8%, followed by the First Trust DJ Internet Index ETF (NYSEARCA: FDN ) and the First Trust Health Care AlphaDEX ETF (NYSEARCA: FXH ) at 21.3% and 19.4%, respectively. It has attracted over $3.2 billion, propelling its total AUM to $4.4 billion. FV trades in solid volumes of more than 2.1 million shares a day on average but charges a higher 94 bps in fees. The ETF has returned 4.2% in the year-to-date timeframe. Link to the original post on Zacks.com Scalper1 News
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