When accounting for a spate of launches after Oct. 24, a dizzying amount of new exchange-traded funds have come to market in the U.S. this year. Even when accounting for a significant amount of closures, a sign that the ETF industry is maturing, perhaps prompting issuers to consider the viability of fund ideas, 2019 has been brisk when it comes to ETF debuts.
This year’s crop of new ETFs includes an array of funds ranging from the inexpensive and prosaic to five new cannabis ETFs. The group of new ETFs also includes a slew of fixed-income funds, leveraged fare, several new video game funds, defined outcome strategies and much, much more.
Indeed, the pace of new ETFs remains steady. Issuers appear willing to push boundaries when it comes to investment concepts and objectives. However, new ETFs face hurdles, namely from being new. There are examples of new funds, such as the Xtrackers MSCI USA ESG Leaders (NYSEARCA:USSG), that come to market with massive seed capital, and others that find immediate success among advisors and investors.
However, those funds are in the minority because many investors wait for new ETFs to draw a crowd. That also means plenty of good new ETFs go overlooked.
Here we’ll look at some of this year’s best new ETFs, some of which have proven adept at adding assets and others that are really fresh on the scene.
Best ETFs New in 2019: Global X Cloud Computing (CLOU)
Expense ratio: 0.68% per year, or $68 on a $10,000 investment.
The Global X Cloud Computing ETF (NASDAQ:CLOU) is easily one of the more impressive stories among this year’s crop of new ETFs. CLOU, which debuted in April, entered an arena with a heavily entrenched competitor: the First Trust Cloud Computing ETF (NASDAQ:SKYY). SKYY is more than eight years old and has about $2.2 billion in assets under management.
Making CLOU’s ascent to more than $456 million in assets under management all the more impressive is that it actually has a higher expense ratio than SKYY. The rival fund charges 0.6% per year. Typically, the strategy for new funds is to undercut rivals on costs in an effort to attract assets.
This competition is relevant because these funds are not mirror images of each other. The overlap by weight between the two cloud computing ETFs is just 25%, meaning investors should expect diverging returns from these products over time.
CLOU may be the way to go for investors looking for the impact of smaller, though not small-cap stocks. The weighted average market capitalization of its holdings is $75.6 billion compared to SKYY’s $169.4 billion.
ProShares S&P Technology Dividend Aristocrats ETF (TDV)
Expense ratio: 0.45%
The ProShares S&P Technology Dividend Aristocrats ETF (BATS:TDV) is definitely a new ETF. It just came to market last week. Assessing performance of such a new fund is hard, so this ETF is best viewed through the lens of potential.
There are several reasons why TDV could prove to be a winner among new ETFs, not the least of which is the technology sector’s status as a major driver of domestic dividend growth over the past several years.
First, TDV’s underlying index, the S&P Technology Dividend Aristocrats Index, mandates that member firms have minimum dividend increase streaks of seven years. The competing technology dividend ETF doesn’t have a related requirement. Second, the new ProShares fund is five basis points less expensive on an annual basis than its established rival.
TDV holdings, which are equally weighted, include Dow Jones Industrial Average components like Microsoft (NASDAQ:MSFT), International Business Machines (NYSE:IBM) and Cisco (NASDAQ:CSCO).
The Acquirers Fund ETF (ZIG)
Expense ratio: 0.94%
The Acquirers Fund ETF (NYSEARCA:ZIG) debuted in May and breathes new life into the value fund group. ZIG’s fee is on the high side because this new ETF is a long/short fund, a strategy that usually carries higher expenses than traditional value funds.
According to the issuer, ZIG tracks an index of long and short stock portfolios from the U.S. Translation: ZIG’s long holdings have sturdy balance sheets and strong free cash flow generating capabilities. The new ETF’s short positions are richly valued, show weak fundamentals and flimsy balance sheets.
ZIG’s long positions include Biogen (NASDAQ:BIIB), Cummins (NYSE:CMI) and Bank of America (NYSE:BAC). From its September low, ZIG is up more than 17%. Plus, it has sharply outperformed the S&P 500 Value Index over that time.
As of this writing, Todd Shriber did not hold a position in any of the aforementioned securities.
