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ETF Deathwatch For November 2015: Investors Shun Smart Beta

ETF Deathwatch membership rolls increased by eight for November, with 21 additions and 13 removals. Eight of the funds were removed from the list because they went out of business in October. Five others were discharged due to improved health, a more honorable way to get off the list. The net increase leaves the count at 343: 246 ETFs and 97 ETNs. Thirteen of the 21 (62%) additions this month are smart-beta funds. “Smart beta” is the industry terminology applied to ETFs that weight each stock using factors other than market capitalization. Thirteen of the 21 (62%) additions this month are smart-beta funds. These alternative factors might include volatility, yield, momentum, value, earnings, revenue, or a combination of these and other factors. The ETF industry is currently enamored with smart-beta funds, and many new products coming to market carry the smart beta label. The reason for this is easy to see because nearly all of the traditional market-capitalization-weighted indexes are already well-represented in the ETF space. Smart-beta approaches can use a virtually unlimited combination of factors to produce a unique ETF. It is much easier to claim an investment vehicle is “new” when it is not based on a traditional capitalization index. However, despite the industry push and hype surrounding smart beta, ETF investors have been slow to embrace many of these vehicles. We categorize ETFs into seven broad categories. Unleveraged equity ETFs and ETNs are classified as either a sector, international, or a style & strategy ETF. There are currently 65 ETFs from our style & strategy classification on ETF Deathwatch. All 65 of these funds carry the smart beta label. Within the international classification, 52 of the 72 funds on Deathwatch are smart-beta funds. With 100% of the style & strategy funds and 72% of the international funds on ETF Deathwatch categorized as smart-beta funds, it is easy to see that investors have not fully embraced this corner of the ETF universe. Liquidity is a major concern when trying to buy or sell any ETF or ETN on ETF Deathwatch. Only 16 traded every day in October. The other 327 (95%) had at least one day with zero volume. In a true display of illiquidity, 15 of these ETFs and ETNs went the entire month of October without a single trade. The average asset level of products on ETF Deathwatch increased from $6.3 million to $6.8 million, and the quantity of products with less than $2 million decreased from 76 to 73. The average age decreased from 48.8 to 48.0 months, and the number of products more than five years old held steady at 114. Here is the Complete List of 343 Products on ETF Deathwatch for November 2015 compiled using the objective ETF Deathwatch Criteria . The 21 ETPs added to ETF Deathwatch for November: AlphaMark Actively Managed Small Cap (NASDAQ: SMCP ) ALPS STOXX Europe 600 ETF (NYSEARCA: STXX ) Barclays Inverse U.S. Treasury Aggregate ETN (NASDAQ: TAPR ) DB 3x Japanese Govt Bond Futures ETN (NYSEARCA: JGBT ) Deutsche X-trackers DJ Hedged Intl Real Estate (NYSEARCA: DBRE ) Deutsche X-trackers S&P Hedged Global Infrastructure (NYSEARCA: DBIF ) EGShares EM Quality Dividend ETF (NYSEARCA: HILO ) First Trust Eurozone AlphaDEX ETF (NASDAQ: FEUZ ) Global X Guru Activist ETF (NASDAQ: ACTX ) iShares Commodity Optimized Trust (NYSEARCA: CMDT ) iShares FactorSelect MSCI Global (NYSEARCA: ACWF ) iShares FactorSelect MSCI International (NYSEARCA: INTF ) iShares FactorSelect MSCI International Small-Cap (NYSEARCA: ISCF ) iShares FactorSelect MSCI USA Small-Cap ( OTC:SMLF ) PowerShares Multi-Strategy Alternative (NASDAQ: LALT ) PowerShares S&P International Developed High Beta (NYSEARCA: IDHB ) PowerShares Wilderhill Progressive Energy (NYSEARCA: PUW ) ProShares Ultra MSCI Brazil Capped (NYSEARCA: UBR ) Recon Capital FTSE 100 ETF (NASDAQ: UK ) RevenueShares ADR (NYSEARCA: RTR ) SPDR MSCI USA Quality Mix (NYSEARCA: QUS ) The 5 ETPs removed from ETF Deathwatch due to improved health: BLDRS Asia 50 ADR (NASDAQ: ADRA ) IQ Hedge Market Neutral Tracker (NYSEARCA: QMN ) ProShares Short Oil & Gas (NYSEARCA: DDG ) ProShares UltraShort Industrials (NYSEARCA: SIJ ) ProShares UltraShort MSCI EAFE (NYSEARCA: EFU ) The 8 ETPs removed from ETF Deathwatch due to delisting: AdvisorShares Pring Turner Business Cycle ( DBIZ ) Global X Brazil Financials (NYSEARCA: BRAF ) Global X Central Asia & Mongolia Index ETF (NYSEARCA: AZIA ) Global X Guru Small Cap Index ETF (NYSEARCA: GURX ) Global X Junior Miners (NYSEARCA: JUNR ) Direxion Daily 7-10 Year Treasury Bull 2x (NYSEARCA: SYTL ) Direxion Daily Basic Materials Bull 3x (NYSEARCA: MATL ) Direxion Daily Mid Cap Bull 2x (NYSEARCA: MDLL ) ETF Deathwatch Archives Disclosure covering writer: No positions in any of the securities mentioned . No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.

Farmland: A Growing Investment Option

By Tim Maverick The last 20 years have seen a new asset category grow in popularity… farmland. And it’s easy to see why, because farmland is profitable. In fact, the National Council of Real Estate Investment Fiduciaries’ ((NCREIF)) Farmland Index had an average annual return of 12% over 20 years. That beat the NCREIF’s Commercial Property Index and the S&P 500’s return of about 9%. It also topped investment-grade corporate bonds, which had returns in the 7% range. Institutional Money Going Country Not surprisingly, farmland’s outperformance has caught the attention of institutional investors. In the past two years alone, institutional investment into U.S. farmland topped $2 billion, according to iiSearches, the data arm of Institutional Investor. And the trend seems to be continuing. In August, TIAA-CREF announced that it raised $3 billion for its second global farmland investment partnership. Institutions, however, still own less than 1% of the $2.4 trillion U.S. farmland market. And their share of farmland ownership is sure to rise in the years ahead. It’s the perfect investment for institutions with long-range investment goals, such as pension funds. It’s a real asset, not correlated with stocks and bonds. And it pays steady income, as farmers pay rent on the land. The average rent for U.S. farmland over the past 16 years rose about 5% annually. It was about $141 per acre in 2014, according to the U.S. Department of Agriculture . Farmland REITs Farmland is a real asset tied to a megatrend – rising global food demand. The middle class is expected to grow from 1.8 billion in 2010 to 3.2 billion in 2020 and 4.9 billion in 2030, with 85% of that growth coming from Asia. This real asset pays a steady income, making it suitable for mom and pop investors, too. And the good news for those looking to invest in farmland is that there are now three farmland real estate investment trusts, or REITs. These are equity REITs that lease the land to farmers. The three REITs, from the oldest to the most recent, are Gladstone Land Corp. (NASDAQ: LAND ), which IPO’d in 2013, Farmland Partners Inc. (NYSE: FPI ), which IPOd in 2014, and American Farmland Co. (NYSEMKT: AFCO ), which IPO’d this year. Farmland REIT Breakdown Each REIT focuses on a different type of farmland: Gladstone Land began with fruit, vegetable, and berry operations mainly in California and Florida. It has since expanded to other states. Farmland Partners is focused on crops such as corn, wheat, soybeans, rice, and cotton in the central and southeastern United States. American Farmland’s acreage is roughly a third grapes, nuts, and specialty crops, a third in crops similar to Farmland Partners’, and a third in farmland being developed to grow grapes, nuts, and citrus. Thanks to University of Illinois professors Paul Peterson and Todd Kuethe, this graphic shows the geographic breakdown. The Outlook To date, none of these REITs have performed well – though, to be fair, American Farmland is new to the market. Perhaps the companies were overpriced when they IPO’d. They’ve also been hit by Wall Street concerns over commodities in general. But in typical Wall Street fashion, investors are only looking at the short term. One thing is certain in farming, and that’s Mother Nature’s tendency to be fickle. This year may be great for growing crops, leading to oversupply and weak prices. But next year may bring vastly different conditions, leading to soaring crop prices. Investors should take the institutional perspective on these farmland REITs and hold them for the long term. The Wall Street Journal even quoted some institutional investors as saying that it’s like “gold with a coupon.” Link to the original post on Wall Street Daily Editor’s Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.