Tag Archives: georgia

ETF Update: February May Have Started Slow, But It Finished With A Flood

Welcome back to the SA ETF Update. My goal is to keep Seeking Alpha readers up to date on the ETF universe and to gain some visibility, both for the ETF community and for me as its editor (so users know who to approach with issues, article ideas, to become a contributor, etc.). Every weekend, or every other weekend (depending on the reader response and submission volumes), we will highlight fund launches and closures for the week, as well as any news items that could impact ETF investors. Before we jump into what happened in the ETF industry in the last three weeks, I wanted to bring up an opportunity for authors, and potential authors, who are looking to learn more about the writing process and improve their craft. My colleague, Rocco Pendola , is currently running The Seeking Alpha Author Experience , an information series to further the partnership between Seeking Alpha and our contributors. In his own words: Our goal is to provide an unprecedented resource for author success and, more specifically, one that helps writers reach and keep expanding the boundaries of their individual potential. As a writer, you have personal style, your own voice and analytical and rhetorical ways you go about helping other investors. We’re not here to change that. We simply want to A) help you optimize your approach, B) share what we have seen work from a broad and diverse sample of techniques and C) be here to answer questions and concerns you have related to the best ways to get your message across to investors. I’ve had a number of contributors and new authors reach out to me because of the ETF Update series, and I imagine there are more of you who would be interested in contributing but have questions about the process. If interested in learning more, use the form at the following link to sign up for The Seeking Alpha Author Experience . Rocco sends all Author Experience materials out in installations via email, so while part of a community of contributors, you can receive one-on-one attention simply by clicking “reply.” You will receive no more than one email per day. I have been reading along and really enjoy his insights, so if you are looking to learn more about writing and contributing to Seeking Alpha I would highly recommend signing up. Now back to the regularly scheduled ETF content. While the first two weeks of the month only saw four launches , the month ended with 11 more. Markets also started to show signs of life again in mid-February, which is good news for ETFs looking to attach investors. As we have a lot to catch up on and there any many others on this platform covering the broader picture, lets jump right in! Fund launches for the week of February 15th, 2016 UBS (NYSE: UBS ) launches the first of many ETFs (2/16): The UBS AG FI Enhanced Europe 50 ETN (NYSEARCA: FIEE ) was the first of 3 launches from ETRACs, the ETF division of UBS, over a week. FIEE is an exchange traded note linked to the performance of STOXX Europe 50 USD (Gross Return) Index, the largest blue-chip stocks in the STOXX Europe 600. The 3 largest holdings are Nestle ( OTCPK:NSRGF ), Novartis (NYSE: NVS ) and Roche ( OTCQX:RHHBY ), all Swiss companies like UBS. UBS’s second launch of the week (2/18): The ETRACS S&P GSCI Crude Oil Total Return Index ETN (NYSEARCA: OILX ) “reflects the excess returns that are potentially available through an unleveraged investment in the contracts comprising the index, plus the Treasury Bill rate of interest that could be earned on funds committed to the trading of the underlying contracts,” according to a press release at its launch. This is not a new product idea, but with an expense ratio of 0.50% OILX is able to undercut the existing competition. ProShares gives its futures strategy ETF another chance (2/18): Later in March ProShares will be shutting down a couple funds that never found traction in the market, including the ProShares Managed Futures Strategy (NYSEARCA: FUTS ). However, in preparation of this closing, ProShares launched the ProShares Managed Futures Strategy ETF (BATS: FUT ), which is a new and improved version of FUTS. The fund structure has been updated in a number of ways, but the largest change in my opinion is that investors no longer need to fill out a K-1 form, which could have been a sticking point for the lack of interest before. For further analysis on FUT please read ” ProShares Re-Configures Its Managed Futures ETF Effort ” by Brian Haskin. Fund launches for the week of February 22nd, 2016 UBS wraps up a busy week with a high yield ETN (2/22): And for UBS’s final launch in February, the UBS AG FI Enhanced Global High Yield ETN (NYSEARCA: FIHD ). This fund, designed for Fisher Investments, tracks the MSCI World High Dividend Yield USD Gross Total Return Index. This makes FIHD very similar to the Barclays ETN+ FI Enhanced Global High Yield ETN (NYSEARCA: FIGY ), which tracks the same index and was also created for Fisher Investments. Pacer Financial expands its ETF lineup (2/23): For Pacer’s 6th ETF it introduced the Pacer Global High Dividend ETF (BATS: PGHD ), self described as “a strategy driven exchange traded fund that attempts to provide a continuous stream of income and capital appreciation over time by screening for companies with a high free cash flow yield and a high dividend yield.” By tracking the companies with the highest levels of free cash flow and dividend yields in the FTSE All World Developed Large Cap Index, PGHD hopes to return strong dividends for investors looking for global exposure. For further analysis on PGHD please read ” New High Dividend ETF With Free Cash Flow Focus By Pacer ” by Zacks Funds. Cambria launches a high yield bond ETF (2/23): The Cambria Sovereign High Yield Bond ETF (Pending: SOVB ) seeks return for investors through investing in high risk, high reward bonds either directly or through other exchange-traded products. “Foreign bonds are the largest asset class in the world, yet dramatically underrepresented in investor portfolios,” said Meb Faber , Cambria Chief Investment Officer, in a press release for the fund. “Moving away from a market-cap strategy and employing a value lens to foreign government bonds could help investors gain smarter access to income in a yield-starved environment.” WisdomTree expands in the Put/Write Space (2/24): The WisdomTree CBOE S&P 500 PutWrite Strategy Fund (NYSEARCA: PUTW ) is the company’s first options strategy ETF, offering a collateralized put write strategy on the S&P 500. As described on the fund’s homepage, “the strategy is designed to receive a premium from the option buyer by selling a sequence of one-month, at-the-money, S&P 500 Index puts (SPX puts). If, however, the value of the S&P 500 Index falls below the SPX Put’s strike price, the option finishes in-the-money and the Fund pays the buyer the difference between the strike price and the value of the S&P 500 Index.” For further analysis on PUTW please read ” Finally, Is PUTW The One We’ve Been Waiting For? ” by Reel Ken. Janus adds to ETF offerings (2/25): Open for business today are the Janus Small Cap Growth Alpha ETF (NASDAQ: JSML ) and the Janus Small/Mid Cap Growth Alpha ETF (NASDAQ: JSMD ). They are the first ETFs to launch since Janus’ (NYSE: JNS ) November 2014 purchase of VelocityShares. Both are what Janus calls Smart Growth ETFs utilizing a systemic process to identify resilient small and mid-cap companies poised for long-run sustainable growth. Janus’ ETP business had about $3.2B in AUM across 17 products as of year-end. Fund launches for the week of February 29th, 2016 Vanguard targets international dividend stocks with new funds (3/2): The company yesterday launched the Vanguard International High Dividend Yield ETF (NASDAQ: VYMI ) and the Vanguard International Dividend Appreciation ETF (NASDAQ: VIGI ). Both ETFs come alongside “investor” and “admiral” classes of mutual funds. VYMI, with a 0.3% expense ratio, tracks the FTSE All-World ex-U.S. High Dividend Yield Index which has more than 800 of the highest-yielding large- and small-cap stocks in both developed and emerging markets. VIGI, with a 0.25% expense ratio, tracks the Nasdaq International Dividend Achievers Select Index, which holds about 200 stocks with long track records of dividend boosts. The funds are international cousins to the $12B Vanguard High Dividend Yield Index Fund (NYSEARCA: VYM ) and the $19B Vanguard Dividend Appreciation Index Fund (NYSEARCA: VIG ). The new products also have cheaper fees than the SPDR International Dividend ETF (NYSEARCA: DWX ), which charges 0.45%, and the iShares International Select Dividend ETF (NYSEARCA: IDV ), which charges 0.5%. Goldman boosts ETF lineup (3/4): Goldman Sachs’ (NYSE: GS ) burgeoning ETF operation now offers five funds after the launch of the Goldman Sachs ActiveBeta Europe Equity ETF (NYSEMKT: GSEU ) and the Goldman Sachs ActiveBeta Japan Equity ETF (NYSEMKT: GSJY ). As with the previous three ETFs which dame to market late last year, the two new funds were opened with institutional assets of $25M each. Each has an expense ratio of 0.25%. Those original three now have more than $1B in combined AUM. In addition, the Goldman Sachs ActiveBeta International Equity ETF (NYSEARCA: GSIE ) – which came to market in November – has its fee cut to 0.25% from 0.35% Fund closures for the weeks of February 15st, 22nd and 29th, 2016 Have any other questions on ETFs or ETNs? Please comment below and I will try to clear things up. As an author and editor I have found that constructive feedback is the best way to grow. What you would like to see discussed in the future? How can I improve this series to meet reader needs? Please share your thoughts on this first edition of the ETF Update series in the comments section below. Have a view on something that’s coming up or a new fund? Submit an article. Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.

Invest In The Next Boom

By Carl Delfeld “My interest is in the future because I am going to spend the rest of my life there.” – Charles Kettering One of the best economic thinkers out there right now is Robert Gordon, who gave a great speech about the American economy at a recent TED conference. Gordon spoke about America’s amazing run of economic growth from 1870 to 1970 with innovation being a big part of the story. Breakthroughs such as electricity, indoor plumbing, transportation (trains, cars, and aircraft), infrastructure, communications, and medical care – in addition to rising educational achievements and population growth – drove steady increases in American productivity, income, profits, and a rising middle class – the backbone of any healthy economy. Looking ahead, Gordon thinks that America’s economy will have a tougher time keeping the momentum. Why? Because instead of enjoying tailwinds, it now faces challenging headwinds such as poor demographics, weak education, crushing debt, and rising inequality. This is pretty consistent with the mood in the country right now, and forms the talking points of many of the candidates running for president – with the significant exception of Marco Rubio. But a new book by Alec Ross paints an altogether different picture of America’s future: The Industries of the Future. Ross paints an upbeat, lively picture highlighting many emerging industries, from cyber security and big data to financial technology, along with a huge, emerging trillion-dollar industry at the heart of life sciences – genomics. He sees huge opportunities for young people in this industry, as there’s a sizable skills gap with many good-paying jobs for those with only a technical degree. Broaden Your Horizon From an investment point of view, I think the current challenges China is facing – as well as the weak relative performance of emerging markets over the last several years – are blinding many to the real opportunity. In short, you need to move emerging markets from the fringes of your portfolio, to the very center of your investment strategy. And corporate America needs to put selling to emerging market consumers at the top of its growth agenda. Why not capture the growth of markets that offer significant tailwinds that supercharge growth and profits? Just think of it. About 70% of the world’s population is just beginning to enjoy the many innovations that propelled Americans’ growth from 1870 to 1970. And per capita incomes and production rates of emerging nations are at about 10% to 15% of Americans’. Many living in emerging markets still don’t have access to electricity, clean water, or indoor plumbing. The need for better infrastructure is enormous. Demand for better transportation, consumer goods, technology, education, medical care, and luxury goods, is booming along with the means to pay for them. This “catch up” of past innovations plus the ready adoption of new technologies is fuel for much higher growth and investment returns. You need to capture this growth – or risk falling behind. The Right Strategy Is Crucial To capture most of these big gains, and avoid these downturns, you need the right strategy. This means a disciplined, opportunistic, active, and value-based approach. What is the common denominator of all great value investors? At all costs, they avoid buying into emerging market companies after they have made a nice run, have become too expensive, and are vulnerable for a pullback. With emerging and frontier markets cheap and out of favor, this is the time to take action. Finally, if you want to really supercharge your wealth, you must look far beyond the usual suspects of Brazil, Russia, India, and China (BRIC). With the possible exception of India, they have significant flaws. There are much better opportunities in many other countries – some offer us better opportunities than the China of 20 or 30 years ago. These markets are also completely off the radar screen of Wall Street analysts and the financial pundits. Investments and capital are headed to these markets, and it’s starting to show up in the performance numbers. By shifting your emerging market strategy away from “buy and hold,” and the BRIC countries , to an active value approach targeting other emerging markets, you’ll put the probabilities of success in your favor. Original Post

Covered Call ETFs Sidestep Market Volatility

Many investors have now transitioned to a lower stock allocation during the midst of this early 2016 decline. In fact, it has likely created a new sense of reality that it may be time to transition to a structure of low volatility to wait out the storm. A conventional and highly touted method has been to own stocks with lower historical price fluctuations than their peers like the iShares MSCI USA Minimum Volatility ETF (NYSEARCA: USMV ). However, there is also another way for ETF investors to own a basket of stocks with built-in options to collect income and potentially reduce price volatility. Covered call ETFs are also often referred to as a “buy-write” options strategy. This process involves owning a group of publicly traded stocks and selling call options on the underlying securities to collect the premium. This can be done by sophisticated investors on individual positions or you can effectively own an ETF or two that will do it for you on a diversified basket of stocks. The end goal is to collect income from the options contracts, which will ultimately reduce the effectiveness of these ETFs during a sustained uptrend in the market. Nevertheless, they have shown far less relative drawdown than their fully loaded index peers during the last two recent corrections. The oldest and most established fund in this group is the PowerShares S&P 500 BuyWrite Portfolio (NYSEARCA: PBP ). This ETF debuted in 2007 and has accumulated $312 million in assets. As you can see on the chart below, PBP has been able to sidestep a great deal of the decline versus the broad-market SPDR S&P 500 ETF (NYSEARCA: SPY ). It was also able to accomplish that same feat in the summer 2015 swoon as well. It’s worth noting that over longer periods of time, the PBP performance story falls short of the stock-only SPY. This is primarily due to the drag of the options buy-write strategy on 3, 5, and 10-year time horizons. In addition, PDP charges a premium expense ratio of 0.75% for the implementation of its unique approach. The income from PBP is interesting because it often experiences big changes over time. Distributions are paid on a quarterly basis to shareholders and over the last 12-months the trailing yield is 5.40%. Some of those distributions have included short and long-term capital gains as well. Another worthy contender in this space is the Recon Capital NASDAQ 100 Covered Call ETF (NASDAQ: QYLD ). This ETF implements a similar strategy based on the NASDAQ-100 Index. The end result is a more concentrated mix of stocks with concentrations in technology and consumer discretionary sectors. This ETF has been able to achieve a similar pattern of reduced draw down relative to the PowerShares QQQ (NASDAQ: QQQ ) during periods of market stress. QYLD charges an expense ratio of 0.60% and income is distributed on a monthly basis to shareholders. This may be a more attractive feature for income investors who are searching for a more regular dividend stream . The trailing 12-month distributions indicate a yield of 10.49% based on the current share price of QYLD. These buy-write strategies have traditionally been a more obscure way to generate income while reducing draw down during sideways or falling markets. This likely means that they are going to be more of a tactical opportunity in the context of a diversified portfolio rather than a dedicated core position. Investors considering these funds should closely research the underlying mechanics of how the income is generated and compare against other potential low volatility alternatives as well. Disclosure: I am/we are long USMV. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. Additional disclosure: David Fabian, FMD Capital Management, and/or clients may hold positions in the ETFs and mutual funds mentioned above. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell, or hold securities.