First Trust US IPO Index (FPX)
IPOs are having a bumper crop in 2013, and experts suggest 2014 will be even better. Ernst & Young says that in the first quarter alone, we could see as many as 300 deals totaling $45 billion on a global basis.
Given that there aren’t a whole lot of ways to play this trend, the First Trust US IPO Index (FPX) becomes a natural choice. Up 42% year-to-date through Dec. 13, and up 29% on annualized basis over the past five years, this is one of the hottest ETFs out there.
FPX invests in 100 of the largest IPOs in the US that are part of the IPOX Global Composite Index, a group of approximately 2,300 companies with a total market capitalization of $1.4 trillion. Once a stock enters the IPOX-100 U.S. it’s held for 1000 trading days and then sold automatically. In comparison, the Renaissance IPO ETF (IPO), which only came into existence in October, utilizes a fast entry system, which leads to much different holdings.
Renaissance Capital, the company behind IPO, has a rich history providing IPO information. However, its Global IPO Fund (IPOSX), which has been in existence since 1997, has a dreadful record. There’s simply no comparison between the two companies’ products. While FPX might not give you the hottest IPOs as soon as they hit the markets, you will get an ETF that’s simply constructed and designed for superior performance. Although there’s a lot of hype right now about the IPO markets, I believe the hype is real. Look for FPX to perform once again in 2014.