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Will Gold Miner ETFs Turn Around In Q4?

The September U.S. jobs data released on Friday signaled a sudden halt in the pace of job growth and has dented the chance of an interest rate hike later this month, which could have been the first in nearly a decade. While this ushered gains on several asset classes, gold mining was among the huge beneficiaries. The metal lost its allure long back, thanks to an increased prospect of an interest rates hike this year, a strengthening dollar, muted inflation across the most developed nations and slowdown in key consuming countries like China. Occasional geopolitical flare-ups and even a risk-off trade sentiment could not save this safe-haven yellow metal. As a result, the biggest gold ETF – the SPDR Gold Trust ETF (NYSEARCA: GLD ) – is off 4% this year. The decline was more pronounced in the gold mining ETF space, which trades as a leveraged play of the underlying metal. The largest gold mining ETF – the Market Vectors Gold Miners ETF (NYSEARCA: GDX ) – is down over 21% this year. However, things appear to be stabilizing at the start of Q4 (read: ETF Winners & Losers Post Dovish Fed Meet ). What Gives Gold Miners a Bounce to Start Q4? The below-par jobs report has raised questions over the health of the U.S. economy and the fate of the looming Fed policy tightening. Headline job gains for September came in at 142K versus estimates of 200K and the prior month’s tally of 136K. The originally reported tally for July was also revised lower to 223K from 245K originally. The year-to-date monthly pace of job gains now averages at 198K, though the pace for the last three months is much lower at 167K. This compares to the monthly average of 260K for 2014. In any case, subdued inflation and a faltering global backdrop were always the deterrents to the looming Fed action. Only solid job numbers kept the likelihood of a sooner-than-expected Fed rate hike alive. So, the latest bit of employment information did magic for the gold and the related ETFs, and the demand for the metal seems to have returned with the start of the fourth quarter on a weakening dollar. On Friday, dollar ETF – the PowerShares DB USD Bull ETF (NYSEARCA: UUP ) – lost about 0.24% while GLD and GDX were up over 2.1% and 8.1%, respectively. Gold miners delivered two successive years of losses in 2013 (down 50%) and 2014 (down 16%) and are on their way to imitate the prior performances this year too. It goes without saying that such huge sell-offs have made the metal’s valuation so cheap that any single driver would easily take it to new heights. Moreover, an unsteady global macroeconomic backdrop will likely keep the market rocky throughout Q4 and brighten the appeal for safe investments. Since gold serves this purpose efficiently, Q4 can essay a turnaround story for gold this year (read: Short-Term Respite for Gold ETFs? ). Time to Buy Gold Miners ETFs? Despite the great start to the quarter, the fundamentals are still not strong. Investors should note that this job data induced leap is likely to be short-lived. Sooner or later, the Fed will start tightening policies. Basically, gold miner ETFs are presently sitting on the fence with possibilities and perils on each side. The bullish trend for gold mining ETFs could continue in the weeks ahead if more choppy economic data comes in, the rate hike possibility keeps getting delayed, or some political issue creeps in. Thus, investors who go by the belief that “the trend is your friend” might take a look at these gold mining ETFs to make some quick bucks. GDX in Focus This is the most popular and actively traded gold miner ETF with an AUM of $4.7 billion and average daily volume of around 65 million shares. The fund follows the NYSE Arca Gold Miners Index, holding 36 stocks in its basket. Canadian firms account for 55.1% of the assets, followed by the U.S. (13.2%) and South Africa (10.4%). The fund charges 53 bps in annual fees and returned over 8% on October 2 (see: all the Material ETFs here ). Sprott Gold Miners ETF (NYSEARCA: SGDM ) This fund follows the Sprott Zacks Gold Miners Index, holding over 25 stocks in its basket. The product is skewed toward mid caps at 56% while the rest goes to small caps. The fund has amassed $108.3 million in its asset base and trades in a good volume of over 90,000 shares a day. It charges 57 bps in annual fees from investors. SGDM added about 8.2% on October 2. iShares MSCI Global Gold Miners ETF (NYSEARCA: RING ) This fund is the cheapest choice in the gold mining space, charging just 0.39% in fees and expenses. The fund has been able to manage assets worth $44 million while it trades in moderate volume of 105,000 shares. The ETF follows the MSCI ACWI Select Gold Miners Investable Market Index and holds 29 securities in its portfolio. Country holdings are also similar, with Canada as the top country, followed by South Africa and the U.S. The fund was up over 7.4% On October 2. Original post

ETF Update: John Hancock, Goldman Sachs, JPMorgan And More Launched Funds This Week

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. Last week we saw the first Goldman Sachs (NYSE: GS ) ETF enter the arena, the ActiveBeta U.S. Large Cap Equity ETF (NYSEARCA: GSLC ). While there was a followup launch from GS this week, John Hancock made the biggest splash with its first 6 ETF offerings. The newcomer has a strong history in mutual funds and I am excited to see how these new ETFs perform in the coming months. Fund launches for the week of September 28, 2015 Another Goldman ETF opens for business (9/29): One week after the launch of GSLC, Goldman Sachs rolls out one for emerging markets , the Goldman Sachs ActiveBeta Emerging Markets ETF (NYSEARCA: GEM ). John Hancock adds 6 new funds (9/29): As stated by Andrew G. Arnott, president and CEO of John Hancock Investments, “it was important to us to develop an ETF product that seeks to address investor needs for performance potential, backed by an investment approach rooted in decades of academic research.” They are the John Hancock Multifactor Mid Cap ETF (NYSEARCA: JHMM ), the John Hancock Multifactor Large Cap ETF (NYSEARCA: JHML ), the John Hancock Multifactor Technology ETF (NYSEARCA: JHMT ), the John Hancock Multifactor Healthcare ETF (NYSEARCA: JHMH ) and John Hancock Multifactor Financials ETF (NYSEARCA: JHMF ). John Hancock doesn’t seem to have pages for the 6 funds yet, but the SEC filing linked above should be a good starting point for interested investors. JPMorgan (NYSE: JPM ) launches a new U.S. Equity ETF (9/30): The JPMorgan Diversified Return U.S. Equity ETF (NYSEARCA: JPUS ) tracks the Russell 1000 Diversified Factor Index , which “seeks to provide U.S. exposure with the potential for better risk-adjusted returns.” Credit Suisse rolls out an income ETF (9/30): The Credit Suisse X-Links Multi-Asset High Income ETN (NYSEARCA: MLTI ) tracks an index “comprised of a broad, diversified basket of up to 120 publicly-traded securities that historically have paid high dividends or distributions.” IndexIQ launches a new fund-of-funds ETF (9/30): The IQ Leaders GTAA Tracker ETF (NYSEARCA: QGTA ) follows the IQ Leaders GTAA Index, which “seeks to track the performance and risk characteristics of the 10 leading global allocation mutual funds. Identifying 10 leading mutual funds is based on fund performance and asset size and is reconstituted annually.” iShares launches a hedged alternative to Japanese equities (10/1): The iShares Currency Hedged JPX-Nikkei 400 ETF (NYSEMKT: HJPX ) “seeks to track the investment results of a broad-based benchmark composed of Japanese equities.” It is a hedged alternative for the iShares JPX-Nikkei 400 ETF (JPXN). There were no fund closures for the week of September 28, 2015 One of the first comments on my article last week raised an important question : The ETF world is ever changing. Smart beta was a new thing recently. Similarly I saw few articles that talked about ETMF (Exchange Traded Mutual Funds) being the next big thing. Would love to see some research on it.. Our own Jonathon Liss came up with an answer that I feel many readers will find incredibly helpful as ETMFs start to gain traction in the market: ETMFs are not really ETFs. In fact, I think the term is intentionally confusing in an attempt to ride the popularity of ETFs. In most key ways, these products are no different than mutual funds. The fact they are ‘exchange-listed’ is meaningless for all intents and purposes. They only price once a day and are non-transparent meaning they only have to list their holdings once per quarter akin to MFs – and on a 1-2 month delay at that as is standard with 13F filings. Additionally, they have a strange auction bidding system required to buy them. They do likely share some of the theoretical tax advantages of ETFs but that’s about it. Thus, I think they should essentially be lumped with mutual funds and not ETFs. If I’m missing key details I’d be happy for others to fill me in but this is what I’ve been able to gather from the literature I’ve seen. 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. Share this article with a colleague

Does FlexShares’ New Corporate Bond ETF Stand Apart?

Corporate bond market has been hit by global growth concerns lowering the investor outlook on the credit worthiness of the corporations as well as looming interest rate hike. Further, there are concerns about corporate bond market liquidity (read: 3 Bond ETFs to Consider in a Market Slump ). In an attempt to take care of this situation and attract the investment grade corporate bond ETF investors, FlexShares – a unit of Northern Trust Corporation (NASDAQ: NTRS ) – has launched the FlexShares Credit-Scored US Long Corporate Bond Index Fund (NASDAQ: LKOR ) , which focuses on longer maturity corporate bonds. LKOR in Details LKOR follows a recently developed Northern Trust Credit-Scored US Long Corporate Bond Index. As per FlexShares, the index covers a liquid issuer universe, employs a proprietary model for credit scoring and optimizes the index’s constituents to maximize the credit score while maintaining duration, spread and other investment grade-like characteristics. More than 66% of LKOR’s holdings have maturities ranging from 20 to 30 years while more than 27% have maturities ranging from 15 to 20 years. This results in a weighted average effective duration of 13.25 years, as per the issuer. The ETF comprises 136 holdings with Apple Inc. ( OTC:APPL ) occupying the top position with 1.43% share, followed by Time Warner Inc. (NYSE: TWX ) with 1.34% share and JPMorgan Chase & Co. (NYSE: JPM ) with 1.29% share. The top 10 holdings constitute around 12.5% of the fund. As far as sector allocation is concerned, Industrials (23.7%), Consumer (20.8%) and Energy (18.9%) make up the top three positions. Considering country-wise allocation, the fund is heavily biased towards the U.S. with 87.6% share while Canada, U.K., Netherlands, Australia and Spain hold minimal shares. The fund is cheap as it charges only 22 bps in fees from investors per year (see all Investment Grade Corporate Bond ETFs here). How Does it Fit in a Portfolio? LKOR seems to have addressed the investors’ concern about the companies’ ability to repay their debt as economic slowdown in China and low commodity prices may lead corporations to face financial crisis. This is because the issuer has targeted corporate bonds with higher credit quality, lower risk of default and potential for higher yield and price appreciation. On the Standard & Poor’s ratings scale, the fund’s quality breakdown includes investment-grade ratings AAA (2%), AA (14.8%), A (36.6%) and BBB (46.6%). Moreover, the fund seeks to improve liquidity and transparency by excluding illiquid and smaller issuers. The question of liquidity is of high importance as banks, serving as brokers, have reduced their inventories of corporate bonds following post-financial crisis regulations, making bond trading difficult. It is for these reasons the issuer has stated that the ETF provides “a contemporary approach to optimizing credit risk, with improved transparency and liquidity relative to legacy corporate bond benchmarks”. ETF Competition LKOR definitely stands apart from other long term corporate bond ETFs as it addresses the present ailments in the corporate bond market. Still, there are a number of such ETFs that worth to mention due to their popularity. A couple of long term corporate bond ETFs includes the iShares iBoxx $ Investment Grade Corporate Bond ETF (NYSEARCA: LQD ) and the Vanguard Long-Term Corporate Bond Index ETF (NASDAQ: VCLT ) . LQD tracks the iBoxx $ Liquid Investment Grade Index focusing on 600 highly liquid investment grade corporate bonds in the U.S. It has an asset base of $22.1 billion and focuses on all-term bond duration. On the other hand, VCLT follows the Barclays U.S. 10+ Year Corporate Index focusing on corporate bonds issued by industrial, utility, and financial companies, with over 10 years in maturities. It manages an asset base of $991 million. Both LQD and VCLT look attractive on the cost front with expense ratios of 0.15% and 0.12%, respectively. However, in terms of yield, VCLT (4.14%) is a better option than LQD (3.13%). Link to the original post on Zacks.com