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ETF Stats For December 2015: Actively Managed ETF Assets Overtake ETNs

Assets in actively managed ETFs climbed 3.3% to $22.9 billion in December, while assets in ETNs dropped 4.5% to $21.5 billion. This is a significant milestone for actively managed ETFs, marking the first time that their asset levels have surpassed those of ETNs. Overall U.S. industry assets shrunk 1.1% in December to end the year at $2.12 trillion, producing a 6.0% one-year growth. December saw 23 new introductions and two closures. The month and year ended with 1,845 U.S.-listed products, consisting of 1,644 ETFs and 201 ETNs. For the year, the 284 launches and 101 closures resulted in a net increase of 183 products. Product quantity and asset levels have historically tracked relatively closely at about $1 billion in assets for every ETF. Calendar year 2015 ended with an average of $1.15 billion per product, down from $1.20 billion a year ago. The quantity of actively managed ETFs increased by only 9.6% during 2015, growing from 125 to 137. This belies the 33.0% surge in assets, which shot from $17.3 billion to $22.9 billion. As mentioned earlier, this is the first time actively managed ETF assets have been greater than ETN assets, even though ETNs outnumber actively managed ETFs 201 to 137. Fund-of-fund ETFs also saw growth in 2015, increasing from 44 to 77 with assets surging to $14.8 billion (an increase of more than 224%). Much of 2015’s growth was spurred by new currency-hedged international ETFs, which buy an unhedged ETF and then add a currency overlay. Although the 77 fund-of-fund ETFs are included in the industry product counts, their reported asset levels are excluded. If they were included, it would result in double counting because the assets in these ETFs are already reflected in the asset levels of the funds they purchase. The quantity of funds with more than $10 billion in assets decreased from 52 to 51 for December, but this tiny 2.8% of the products hold 59.4% of the assets. The number of products with at least $1 billion in assets increased by two to 256, and they account for 89.9% of the assets. Just 814 ETFs and ETNs can claim an asset level above $100 million, a level some analysts believe is required for profitability, leaving 1,031 (55.9%) in a questionable state. Trading activity surged 38.9% in December to $1.86 trillion. This represents a turnover ratio ($ volume / industry assets) of 87.8% for the month. There were 13 funds averaging more than $1 billion in daily trading during December, and they accounted for 57.6% of the industry trading activity. The quantity of ETFs and ETNs with more than $100 million in average daily dollar volume was 107, and 364 posted more than $10 million in daily trading activity. Liquidity remains a concern for many products, with 236 not trading on the last day of the year and 19 going the entire month with zero volume. December 2015 Month End ETFs ETNs Total Currently Listed U.S. 1,644 201 1,845 Listed as of 12/31/2014 1,451 211 1,662 New Introductions for Month 23 0 23 Delistings/Closures for Month 2 0 2 Net Change for Month +21 0 +21 New Introductions 6 Months 153 8 161 New Introductions YTD 272 12 284 Delistings/Closures YTD 79 22 101 Net Change YTD +193 -10 +183 Assets Under Mgmt ($ billion) $2,097 $21.5 $2,118 % Change in Assets for Month -1.0% -4.5% -1.1% % Change in Assets YTD +6.3% -20.2% +6.0% Qty AUM > $10 Billion 51 0 51 Qty AUM > $1 Billion 251 5 256 Qty AUM > $100 Million 778 36 814 % with AUM > $100 Million 47.3% 17.9% 44.1% Monthly $ Volume ($ billion) $1,786 $74.0 $1,860 % Change in Monthly $ Volume +38.8% +41.5% +38.9% Avg Daily $ Volume > $1 Billion 12 1 13 Avg Daily $ Volume > $100 Million 100 7 107 Avg Daily $ Volume > $10 Million 348 16 364 Actively Managed ETF Count (w/ change) 137 +2 mth +12 ytd Actively Managed AUM ($ billion) $22.9 +3.3% mth +33.0% ytd Data sources: Daily prices and volume of individual ETPs from Norgate Premium Data. Fund counts and all other information compiled by Invest With An Edge. New products launched in December (sorted by launch date): SPDR S&P 500 Fossil Fuel Free ETF ( SPYX ) , launched 12/1/15, will target S&P 500 companies that do not own fossil fuel reserves, which currently excludes 25 stocks. The fund uses capitalization weighting, has a yield of 1.9%, and an expense ratio of 0.20% ( SPYX overview ). MomentumShares U.S. Quantitative Momentum ETF (BATS: QMOM ) , launched 12/2/15, is an actively managed ETF that selects stocks using its Quantitative Momentum Process that includes trend quality and seasonality. It typically concentrates its portfolio at around 60 holdings and has an expense ratio of 0.79% ( QMOM overview ). Direxion Daily Healthcare Bear 3x Shares (NYSEARCA: SICK ) , launched 12/3/15, seeks to provide 300% of the inverse daily performance of the Health Care Select Sector Index. This is the second life for this ETF, as it was previously launched on 6/15/11 and subsequently closed on 9/5/12. Its expense ratio will be capped at 0.95% ( SICK overview ). Direxion Daily Natural Gas Related Bear 3x Shares (NYSEARCA: GASX ) , launched 12/3/15, seeks to provide 300% of the inverse daily performance of the ISE-Revere Natural Gas Index. This is the second life for this ETF, as it was previously launched on 7/14/10 and subsequently closed on 9/23/14. Its expense ratio will be capped at 0.95% ( GASX overview ). Direxion Daily S&P Biotech Bear 1x Shares (NYSEARCA: LABS ) , launched 12/3/15, seeks to provide the daily inverse return of the S&P Biotechnology Select Industry Index and has an expense ratio of 0.45% ( LABS overview ). SPDR Russell 1000 Low Volatility Focus ETF (NYSEARCA: ONEV ) , launched 12/3/15, tracks a smart-beta index using multiple factors (value, quality, and size) with a focus on low volatility. It has an expense ratio of 0.20% ( ONEV overview ). SPDR Russell 1000 Momentum Focus ETF (NYSEARCA: ONEO ) , launched 12/3/15, tracks a smart-beta index using multiple factors (value, quality, and size) with a focus on high momentum. It has an expense ratio of 0.20% ( ONEO overview ). SPDR Russell 1000 Yield Focus ETF (NYSEARCA: ONEY ) , launched 12/3/15, tracks a smart-beta index using multiple factors (value, quality, and size) with a focus on high yield. It has an expense ratio of 0.20% ( ONEY overview ). Tierra XP Latin America Real Estate ETF (NYSEARCA: LARE ) , launched 12/3/15, tracks the performance of all major listed companies in the real estate industry in Latin America. The underlying index is comprised of 52 locally listed equities ranked overall by market capitalization, dividend yield, and liquidity. Its expense ratio is 0.79% ( LARE overview ). Elkhorn FTSE RAFI U.S. Equity Income ETF (BATS: ELKU ) , launched 12/10/15, is designed to track the performance of high-yield stocks in the U.S. that have been screened to target sustainable income. Index constituents are selected and weighted using four fundamental factors, and the fund sports a 0.39% expense ratio ( ELKU overview ). iShares FactorSelect MSCI Emerging ETF (BATS: EMGF ) , launched 12/10/15, seeks to track the investment results of an index composed of stocks of large- and mid-capitalization companies in emerging markets that have favorable exposure to quality, value, size, and momentum factors. Its expense ratio is capped at 0.65% through 12/31/2016 ( EMGF overview ). Pacer Autopilot Hedged European Index ETF (BATS: PAEU ) , launched 12/15/15, uses a dynamic currency hedge on a static portfolio of stocks tracking the FTSE Eurobloc Index. The currency hedge is based on a 20-day and 130-day moving average crossover of the euro and U.S. dollar relative strength. The fund has an expense ratio of 0.65% ( PAEU overview ). Pacer Trendpilot European Index ETF (BATS: PTEU ) , launched 12/15/15, alternates between 100% exposure to the FTSE Eurobloc Index, 100% exposure to 3-month T-bills, and a 50/50 exposure between the two based on the relationship of the FTSE Eurobloc Index to its 200-day moving average. PTEU has an expense ratio of 0.65% ( PTEU overview ). Guggenheim Dow Jones Industrial Average Dividend ETF (NYSEARCA: DJD ) , launched 12/16/15, offers an alternative, strategic beta approach to the 30 stocks of the Dow Jones Industrial Average by weighting each security by its dividend yield, rather than price. The ETF has an initial yield of 2.7% and an expense ratio 0.30% ( DJD overview ). SPDR S&P North American Natural Resources ETF (NYSEARCA: NANR ) , launched 12/16/15, tracks an index of large- and mid-cap U.S. and Canadian companies in the natural resources and commodities businesses that have energy, materials, or agriculture classifications. It has 59 holdings, a current yield of 2.7%, and an expense ratio 0.35% ( NANR overview ). JPMorgan Diversified Return Europe Equity ETF (NYSEARCA: JPEU ) , launched 12/21/15, provides developed Europe equity exposure across 10 equally weighted sectors. The underlying index selects stocks using a bottom-up multi-factor stock-ranking process that combines value, quality, and momentum factors. The new ETF has an expense ratio of 0.43% ( JPEU overview ). MomentumShares International Quantitative Momentum ETF (NYSEMKT: IMOM ) , launched 12/23/15, is an actively managed ETF that selects international stocks using its Quantitative Momentum Process that includes trend quality and seasonality. It typically concentrates its portfolio at around 60 equally weighted holdings and has an expense ratio of 0.99% ( IMOM overview ). WisdomTree Dynamic Bearish U.S. Equity Fund (NYSEMKT: DYB ) , launched 12/23/15, tracks an index that can range between 0% to 100% long U.S. large-cap low-volatility equities and is hedged with a 75%-100% bearish position consisting of short positons in large-cap cap-weighted stocks (and U.S. Treasury securities). The net equity exposure of this ETF can range from -100% to +25%, and it has an expense ratio of 0.48% ( DYB overview ). WisdomTree Dynamic Long/Short U.S. Equity Fund (NYSEMKT: DYLS ) , launched 12/23/15, tracks an index that is 100% long U.S. large-cap low-volatility equities and then hedged with a 0%-100% bearish position consisting of short positons in large-cap cap-weighted stocks (and U.S. Treasury securities). The net equity exposure of this ETF can range from 0% to +100%, and it has an expense ratio of 0.48% ( DYLS overview ). Legg Mason Developed ex-US Diversified Core ETF (NASDAQ: DDBI ) , launched 12/29/15, uses a proprietary diversification method designed to provide broad exposure balanced across developed international markets. It aims to be a core holding that can complement cap-weighted products and has an expense ratio of 0.40% ( DDBI overview ). Legg Mason Emerging Markets Diversified Core ETF (NASDAQ: EDBI ) , launched 12/29/15, uses a proprietary diversification method designed to provide broad exposure balanced across emerging markets. It aims to be a core holding that can complement cap-weighted products and has an expense ratio of 0.50% ( EDBI overview ). Legg Mason Low Volatility High Dividend ETF (NASDAQ: LVHD ) , launched 12/29/15, seeks income from sustainable dividends from U.S. stocks to provide a more reliable income stream, reduced volatility, and the potential for appreciation with an expense ratio of 0.30% ( LVHD overview ). Legg Mason US Diversified Core ETF (NASDAQ: UDBI ) , launched 12/29/15, uses a proprietary diversification method designed to provide broad exposure balanced across U.S. equities. It aims to be a core holding that can complement cap-weighted products and has an expense ratio of 0.30% ( UDBI overview ) Product closures in December and last day of listing : Guggenheim BulletShares 2015 Corporate Bond ETF (NYSEARCA: BSCF ) 12/30/15 Guggenheim BulletShares 2015 High Yield Corporate Bond ETF (NYSEARCA: BSJF ) 12/30/15 Product changes in December: OppenheimerFunds, Inc. acquired VTL Associates and its RevenueShares ETFs effective December 2, 2015. The eight affected ETFs were rebranded as Oppenheimer ETFs. The First Trust Global Copper ETF (NASDAQ: CU ) underwent an extreme makeover, becoming the First Trust Indxx Global Natural Resources Income ETF (FTRI) effective December 21, 2015. The First Trust Global Platinum ETF (NASDAQ: PLTM ) underwent an extreme makeover, becoming the First Trust Indxx Global Agriculture ETF (FTAG) effective December 21, 2015. Announced Product Changes for Coming Months: WisdomTree will close on its acquisition of Greenhaven Commodity Services and its two ETFs with an effective date of January 4, 2016. The fund names will change from Greenhaven to WisdomTree, becoming the WisdomTree Continuous Commodity Index Fund (NYSEARCA: GCC ) and the WisdomTree Coal Fund (NYSEARCA: TONS ). Guggenheim Russell 1000 Equal Weight ETF (NYSEARCA: EWRI ) will cease to exist January 27, 2016. At that time, any remaining assets in the fund will be merged into the Guggenheim S&P 500 Equal Weight ETF (NYSEARCA: RSP ). Guggenheim will change the name and underlying indexes for three of its ETFs effective January 27, 2016. Guggenheim Russell 2000 Equal Weight ETF (NYSEARCA: EWRS ) will become Guggenheim S&P SmallCap 600 Equal Weight ETF (EWSC), Guggenheim Russell MidCap Equal Weight ETF (NYSEARCA: EWRM ) will become Guggenheim S&P MidCap 400 Equal Weight ETF (EWMC), and Guggenheim Russell Top 50 Mega Cap ETF (NYSEARCA: XLG ) will become Guggenheim S&P 500 Top 50 ETF ( XLG ). Van Eck Global plans to acquire Yorkville MLP ETFs and hoped to close the transaction in the fourth quarter. The plans were approved on December 17, 2015 and the reorganizations are now expected to close on February 8, 2016 . Previous monthly ETF statistics reports are available here . Disclosure: Author has no positions in any of the securities, companies, or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) is received from, or on behalf of, any of the companies or ETF sponsors mentioned.

Why Good News And Bad News Are Not Helping Stocks Anymore

Since the Great Recession’s inception, whenever the stock market dropped like a steel anvil or the U.S. economy showed signs of weakness, the Federal Reserve acted to inspire investor confidence. For example, in November of 2008, when the Fed announced its first quantitative easing (QE1) program to buy mortgage-backed securities (MBS), stocks rocketed 10% in two weeks. The enthusiasm wore off quickly. In March of 2009, the central bank of the United States “doubled down” on the MBS dollar amount and simultaneously expanded its reach with a decision to acquire $300 billion of longer-term Treasury bonds. The 1-year program correlated with stock market gains of 70%. Could the Fed have stopped there? At the end of the first quarter in 2010? The Fed could have. However, when the S&P 500 lost 16% over the next few months, committee members began hinting at a second tidal wave of bond buying (QE2). From summertime rumor through QE2 completion in the second quarter of 2011, the S&P 500 pole vaulted approximately 29%. Might the monetary policy authorities have decided, at that juncture, to let financial markets operate without additional interference? At the conclusion of the second quarter of 2011? They might have. Perhaps unfortunately, the S&P 500 responded unfavorably to the end of another Federal Reserve program and the absence of a European bank bailout. A 19% price collapse over a brief span of time compelled the Fed to invoke “Operation Twist” – a program to push borrowing costs even lower through using the proceeds of short-dated Treasury bond maturities to acquire intermediate- and long-dated maturities. The Federal Reserve also orchestrated dollar liquidity swap arrangements that aided European financial institutions with raising capital. Not surprisingly, the Fed-inspired activities helped push U.S. stocks 27% off of the 2011 bottom. “Operation Twist” was scheduled to end in the second quarter of 2012. What could possibly go wrong? This time, investors did not even wait for another Fed program to end, sending stocks down nearly 10% over 8 weeks in April-May. The Fed did not wait either. They extended “Operation Twist” through year-end 2012. And there was more. In an effort to break the cycle of start-stop stimulus dates, and to stimulate a U.S. economy that showed definitive signs of deceleration, the Fed served up hints of its largest quantitative easing experiment yet. The third round of asset purchases (QE3) was not only larger than its predecessors at $85 billion per month, it was open-ended in nature; that is, it came without a formal termination date. Over the next three years, the S&P 500 catapulted roughly 57% with little resistance. Since the last asset purchase by the Fed in mid-December of 2014, however, investors have not been able to rely on the Fed to “ride to the rescue.” On the contrary. Investors have lived with the persistent headwind of overnight lending rate tightening. Granted, the Fed did everything it could to prepare financial markets for an exceptionally slow path to rate normalization. Monetary policy leaders even pushed its first move – a 0.25% increase in the Fed Funds rate – out from the first quarter of 2015 to the 4th quarter of 2015. Nevertheless, once market participants began to fear that the Fed would cease serving as a backstop for falling equity prices, return OF capital supplanted return ON capital. Unless the Fed reverses course back toward zero percent rate policy, and perhaps another round of QE, overexposed investors are likely to sell the bounces. Consider the overexposed participants who leveraged their portfolios on margin. Those who bought stock on margin have leveraged themselves 2:1, having borrowed money to acquire twice as many shares of stock than they would have been able to do otherwise. And while that increased demand for stock shares pushed prices higher on the way up, the need to deleverage accelerates price declines on the way down. How out of whack did margin debt become over the last few years? Margin debt peaks went hand in hand with the stock market tops in 2000 and 2007. Similarly, the margin debt pinnacle in April of 2015 is not far from the nominal high for the S&P 500 in May of 2015. Keep in mind, prominent members of the Federal Reserve like Richard Fisher, have acknowledged front-loading an enormous stock rally to create a wealth effect. What Mr. Fisher did not acknowledge, however, are the back-end issues associated with wealth effect intentions. For instance, stocks that move to exorbitant valuation levels offer less hope for future returns. In the same vein, one should be able to anticipate a wealth effect reversal when a front-loading Federal Reserve subsequently removes its support for ever-increasing equity prices. Don’t be fooled by CNBC’s focus on China or the ticker tape on crude oil. China’s slowing economy may be relevant to U.S. corporate revenue and profitability, but it’s the Fed’s perceived unwillingness to “save stocks” from the volatile sell-off that exacerbates the panic. Oil depreciation may be signaling global recessionary pressures and domestic manufacturer retrenchment. Again, however, it is the direction of the Fed’s rate normalization path, albeit gradual, that has poked the grisly bear in its eyes. Perhaps ironically, the Fed ignored its own projections on economic deceleration in the final quarter of 2015. It raised its benchmark overnight interest rate by 25 basis points to between 0.25 percent and 0.50 percent, even as the Atlanta Fed’s “GDP Now” currently projects 0.6% 4th quarter economic growth. That’s well below the 2.0% annualized growth in the six-and-a-half year economic recovery, where 2.0% had been deemed too anemic for the Fed to fully remove itself from the QE/zero percent rate game. In sum, the U.S. stock market is likely to see little more than bounces and rallies in a bearish downtrend, until and unless the Fed reverses course. In the past, “bad news was good news” because poor economic data solidified ongoing central bank involvement. “Good news was good news” because, well, that meant things were getting better. Today, on the other hand, “good news is bad news” because it might encourage the Fed to tighten rates more quickly. And bad news? That’s the worst of both worlds for risk assets because the Fed is not currently expressing a willingness to head back toward quantitative easing or zero percent rate policy. There have been some safer havens over the last six months, ever since the August-September meltdown for stocks. The PowerShares DB USD Bull ETF (NYSEARCA: UUP ), the iShares 7-10 Year Treasury Bond ETF (NYSEARCA: IEF ), the iShares 20+ Year Treasury Bond ETF (NYSEARCA: TLT ), the SPDR Gold Trust ETF (NYSEARCA: GLD ), the CurrencyShares Japanese Yen Trust ETF (NYSEARCA: FXY ) and the iShares National AMT-Free Muni Bond ETF (NYSEARCA: MUB ) have all gained ground over the last six months. In fact, most of the asset classes in the FTSE Multi-Asset Stock Hedge Index (MASH) – zero-coupon bonds, munis, longer-term treasuries, the yen, the greenback, gold – have appreciated in value. The SPDR S&P 500 (NYSEARCA: SPY ) has not been quite as fortunate. Click to enlarge Disclosure: Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. Gary Gordon, Pacific Park Financial, Inc, and/or its clients may hold positions in the ETFs, mutual funds, and/or any investment asset mentioned above. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial, Inc. or its subsidiaries for advertising at the ETF Expert web site. ETF Expert content is created independently of any advertising relationships.