[Editor’s note: “5 Unusual ETFs to Wrap Your Head Around” was previously published in September 2019. It has since been updated to include the most relevant information available.]
As the exchange-traded funds (ETFs) industry has grown and evolved, so have the number of offerings that can be considered unique, unusual or downright odd.
It’s safe to say that prosaic, easy to understand ETFs will always be the kings of the castle, but there are plenty of unusual ETFs that investors may want to investigate, too. And just because it’s an unusual ETF doesn’t mean it’s a bad fund.
On the other hand, unusual ETFs dedicated to obscure commodities, those that focus on isolated age demographics or those that have such complex methodologies you’d need to be a CFA to understand them probably are not applicable to most investors.
Here are some unusual ETFs that are certainly interesting and applicable for use by a wider audience than some of the really oddball stuff out there.
Direxion Russell 1000 Value Over Growth ETF (RWVG)
Expense ratio: 0.46% per year, or $46 on a $10,000 investment.
The Direxion Russell 1000 Value Over Growth ETF (NYSEARCA:RWVG), which debuted last January, is a long/short fund. That on its own doesn’t make it an unusual ETF because there are dozens of such products on the market.
What makes RWVW (and its stablemates) unique is that its long/short strategy pertains directly to specific investment factors, in this case value and growth.
RWVG targets the Russell 1000 Value/Growth 150/50 Net Spread Index. That’s a mouthful of an index name, so let’s put it is objective in simple terms: RWVG has 150% long component and a 50% short portion to arrive at net long exposure of 100%. Essentially, this unusual ETF is overweight some of the primary tenants of the Russell 1000 Value index, such as financial services, healthcare and energy stocks. Those sectors combine for nearly two-thirds of RWVG’s roster.
What makes this unusual ETF worth a gander right now, in addition to its concept being relatively straight forward, is that value stocks are finally showing signs of life after a lengthy slumber. It’s possible for value and growth stocks to rise in unison, but this time around, many market observers believe value’s redemption will come at the expense of growth and that could make RWVG’s long/short methodology all the more potent.
Global X Internet of Things ETF (SNSR)
Expense ratio: 0.68%
The Global X Internet of Things ETF (NASDAQ:SNSR) isn’t the most unusual ETF on the market, but it focuses on a still nascent investment and does the fit the bill as a thematic fund.
Internet of Things, or IoT, “includes the development and manufacturing of semiconductors and sensors, integrated products and solutions, and applications serving smart grids, smart homes, connected cars, and the industrial internet,” according to Global X.
While SNSR is unique, if not unusual, it puts investors at the forefront of some mega-growth segments and is suitable for a wide variety of market participants.
“The internet’s backbone that allows billions of devices to smoothly connect consists of an extensive infrastructure from networking and equipment makers, including wireless systems, switches, routers, controllers, servers, and other hardware and software systems,” according to Global X research.
Hoya Capital Housing ETF (HOMZ)
Expense ratio: 0.45%
Remember what I said earlier, the older the ETF industry gets, the fresher the concepts appear to be. If there was ever a sector that needed some refreshing, it was real estate, long the territory of boring funds. That has changed over the past couple of years thanks to up-and-coming funds such as the Hoya Capital Housing ETF (NYSEARCA:HOMZ).
Many real estate ETFs focus on the commercial side of the industry, levering those funds to the decaying brick-and-mortar retail space. HOMZ goes in a different, potentially more lucrative direction by emphasizing residential real estate. That alone makes it an unusual ETF relative to some of its stodgy competitors.
It’s also unusual to find a real estate ETF focusing on the following quartet of themes: 1) Home Ownership and Rental Operations; 2) Home Building and Construction; 3) Home Improvement and Furnishings; and 4) Home Financing, Technology & Services.
HOMZ also pays its dividend on a monthly basis, something else that makes it an unusual ETF in the real estate arena and a trait that could make the fund more attractive to income investors.
Invesco S&P 500 ex-Rate Sensitive Low Volatility ETF (XRLV)
Expense ratio: 0.25%
As its name implies, the Invesco S&P 500 ex-Rate Sensitive Low Volatility ETF (NYSEARCA:XRLV) has two purposes: to provide reduced volatility and exposure to stocks that are not sensitive to rising interest rates.
According to Invesco, XRLV holds the 100 S&P 500 members “that exhibit both low volatility and low interest rate risk. The Underlying Index is designed to include stocks exhibiting low volatility characteristics, after removing stocks that historically have performed poorly in rising interest rate environments.”
What makes XRLV an unusual ETF isn’t its methodology or investment objective. Those parts of the equation are easy to understand. The unusual part here is the ETF’s resilience at a time when interest rates are falling and expected to continue doing so.
Confirming the notion that XRLV is responding more to its low volatility objective than the rates dictum, the fund is up nearly 22% year-to-date and currently resides near record highs.
Procure Space ETF (UFO)
Expense ratio: 0.75%
The Procure Space ETF (NYSEARCA:UFO) is another newcomer to the world of unusual ETFs and perhaps the most unique of the bunch mentioned here. UFO, which holds 31 stocks, debuted April 2019 and now has nearly $19 million in assets under management.
It may seem an unusual for an ETF to focus on the final frontier, but UFO is at the corner of some compelling trends. Remember, Jeff Bezos and Elon Musk are racing to space, so maybe it’s not a far-flung concept for regular investors to get a taste of the action, too. Along, the space robotics market is expected to swell to $3.5 billion by 2025.
“National organizations such as NASA, CSA, JAXA, etc., are introducing humanoid robots to perform the maintenance, servicing, and transportation operations to gain high efficiency, further developing the space robotics market. The rising trends of autonomous features and AI technology in robotic products will drive rapid industry expansion,” according to ReportsGo.
Todd Shriber does not own any of the aforementioned securities.
