Only two new exchange-traded funds launched last week, keeping up April’s lackluster rate of ETF releases — though one of the new products is a unique addition to the already crowded world of income funds.
The Market Vectors Fallen Angel Bond ETF (NYSE:ANGL) is the first ETF focused wholly on so-called “Fallen Angel” bonds, which Van Eck refers to as “corporate bonds that were once investment grade, but have since been downgraded to non-investment grade (i.e. ‘high yield’) bond status.”
Van Eck says most of these Fallen Angel companies “tend to be larger and more well-established companies,” and are likelier than originally issued high-yield bonds to jump back into investment-grade status. Well-known Fallen Angels include Ford (NYSE:F), J.C. Penney (NYSE:JCP), Sprint (NYSE:S) and Toys R Us. According to Van Eck, from March 2003 to March 2012, BofA Merrill Lynch Fallen Angels have returned 167% vs. 117% for the Lipper High Current Yield Funds Average.
ANGL currently holds 33 pieces of these Fallen Angel bonds. Bonds must be U.S. dollar-denominated and be issued by a company within the U.S., Western Europe or the G-10. ANGL’s expense fee is 0.4%.
The other fund launching last week was the United States Agriculture Index Fund (AMEX:USAG), which follows an index comprising 14 agricultural commodity futures contracts. The commodities, in alphabetical order, are canola, cocoa, coffee, corn, cotton, feeder cattle, hard red winter wheat, lean hogs, live cattle, soft red winter wheat, soybean oil, soybean meal, soybeans and sugar.
The USAG charges 1.4% in expenses and already has an existing competitor in the form of the PowerShares DB Agriculture Fund (NYSE:DBA), which follows 11 commodities. Last month, agriculture-minded investors also were treated to the launch of the Teucrium Agricultural Fund (NYSE:TAGS), a fund-of-funds that holds four commodity ETFs at equal weight.
Also last week, MSCI Inc. (NYSE:MSCI) launched a new index in anticipation of a future BlackRock (NYSE:BLK) iShares ETF. The MSCI Frontier Markets 100 Index is a smaller, “more stable” version of a larger index that tracks companies in “frontier market” nations including Qatar, Bangladesh, Croatia and Vietnam. You can read more about the Frontier Markets 100 Index here.
All in all, 92 new funds have been launched this year, according to XTF.com, though just seven so far in April. This followed a banner first quarter for exchange-traded products, which saw 229 new launches globally. The previous week’s offerings included four bond funds and a multi-asset income fund.