It’s only September, and the number of new exchange-traded funds is already at an annual record—200 so far.
That means more than one ETF is being created every day, on average. New ETFs are raining down from the likes of Shark Tank star Kevin O’Leary to megabank Goldman Sachs to bond king Jeffrey Gundlach. There have now been upward of 1,000 ETFs launched this decade. That’s more than the previous two decades combined, with more than four years to go.
What’s an investor to do? How can they keep up?
Judging from the assets, they aren’t keeping up. For the most part, investors ignore new ETFs and continue to pile into older ones. All 200 new ETFs combined have a little more than $5 billion in assets, or 3 percent of the $140 billion that’s flowed into ETFs this year. All but about 20 are below one standard measure of success—accumulating $50 million in assets.
Most of these products will limp along in oblivion. Many others will probably liquidate eventually and join the more than 500 products in the ETF graveyard. A small cohort will survive and gain assets and become useful products for investors.
Below is a list of the 20 most successful new ETFs, in terms of assets. There’s no common thread tying them together except that they somehow struck a chord with investors, for a variety of reasons.
The biggest newbie winner so far is the SPDR DoubleLine Total Return Tactical ETF (TOTL), an actively managed bond ETF run by bond guru Gundlach. Any ETF with a big name attached to it—like Gundlach or Bill Gross—has a huge leg up on the competition.
In second place is the iShares Exponential Technologies ETF (XT). It tracks companies that create industry-changing technologies in sectors such as health care and industrials. But this one’s part of a growing trend of “bespoke” ETFs that are created to suit the needs of a particular adviser’s client base—and if more assets come in, that’s gravy. Almost all of the assets that flowed into XT in its first week came from independent advisory firm Edelman Financial Services, which has more than $13 billion in assets under management.
Also in the top three is the Direxion Daily CSI 300 China A Share Bear 1X Shares (CHAD). It gives inverse exposure to China’s mainland stock market, which means it basically gives investors a positive return when that stock market falls. CHAD’s success is a result of perfect timing. It was started just as the China stock market bubble burst and investors rushed to bet on the slide. CHAD is up 27 percent so far this year.
The Pacer Trendpilot 750 ETF (PTLC) is also a successful newbie. The ETF invests in 750 large-cap stocks but moves to 50 percent or 100 percent in cash if certain market signals show up, such as the Wilshire U.S. Large-Cap Total Return Index dipping below its 200-day moving average for a number of days. This ETF was designed to appeal to advisers who want something that provides protection against a stock market drop, without using derivatives. It went to cash in late August. The ETF is down 5 percent, while the large-cap index it tracks is down 7 percent.
Rounding out the top five: the WisdomTree Europe Hedged SmallCap Equity Fund (EUSC). It tracks euro zone stocks but neutralizes the effect of currency on the portfolio. It’s a follow-on to the hugely popular WisdomTree Europe Hedged Equity Fund (HEDJ). Just as in the movie business, many ETF issuers try to capitalize when an initial product is successful and launch the ETF version of a sequel. This particular sequel ETF took off, but like a lot of movie sequels, these ETFs are hit or miss.
Eric Balchunas is a senior exchange-traded-fund analyst at Bloomberg.