Guggenheim to close a dim sum bond ETF, and updated filings on proposed emerging-markets ETFs from Emerging Global Advisors and Krane Funds. Plus, the week's best- and worst-performing funds.
On May 14, Cambria Investment Management, which subadvises the AdvisorShares-issued, actively managed exchange-traded fund Cambria Global Tactical ETF GTAA, rolled out an actively managed ETF of its own.
Cambria Shareholder Yield ETF SYLD is the first of what appears to be a planned suite of "shareholder-yield" ETFs from the firm. Research by Cambria's chief investment officer Mebane Faber shows that dividend yields alone may not be the best predictor of companies' performance. Instead, Faber's research suggests that companies ranking highly on a combination of three factors--dividends, share repurchases, and debt paydowns--tend to provide better overall shareholder yields than those solely with high dividend yields.
With that in mind, the new fund taps a quantitative algorithm to help select 100 U.S. small-, mid-, and large-cap companies that rank highly on all three shareholder-yield components. SYLD's managers also employ active management to ensure that the fund never overconcentrates in any one sector. They also rate potential holdings on value, quality, and momentum factors.
The ETF charges 0.59%.
Cambria also plans to roll out two other actively managed "shareholder-yield" ETFs focused on foreign stocks and emerging-markets stocks.
Guggenheim to Shutter Yuan Bond ETF
On May 15, Guggenheim announced plans to close a small, thinly traded ETF that holds yuan-denominated bonds traded outside of mainland China, or "dim sum bonds."
Guggenheim Yuan Bond ETF RMB rolled out in September 2011 during a period of significant issuer interest in dim sum bonds. Because China restricts foreign investors from investing in domestic Chinese debt, foreigners can gain that exposure through dim sum bonds, which are issued in Hong Kong. The Chinese government introduced dim sum bonds, which are issued by Chinese and non-Chinese corporations and governments, as part of the Chinese government's efforts to internationalize its currency.
Despite some investor demand for dim sum bonds as a currency play, the dim sum bond space never attracted significant ETF assets. A competing fund that rolled out at almost the same time as RMB is PowerShares Chinese Yuan Dim Sum Bond Portfolio DSUM, which has $73 million in assets. But RMB and Market Vectors Renminbi Bond ETF CHLC have struggled far more. CHLC has just $5.30 million in assets, and RMB has even less--just $2.61 million as of Friday.
Now, Guggenheim has decided to pull the plug on RMB. The fund will delist on June 14. Any investors who have not sold their shares by then will receive their final net asset value as of that date in the form of a final liquidating distribution that will be paid on June 21. We recommend that investors sell their shares before the fund delists, since Guggenheim indicated that RMB's final NAV will reflect the costs of closing the fund.
Emerging Global Draws Up Plans for 12 Emerging-Markets ETFs
Emerging Global Advisors has filed with the SEC for permission to create a dozen ETFs, all of which would be devoted to various corners of emerging markets.
In two separate filings, the firm revealed plans for both passively managed and actively managed ETFs, covering both bonds and equities. Details were scarce--no ticker symbols or expense ratios were offered, and many indexes were not even revealed--but it's noteworthy that Emerging Global is proposing its first-ever bond ETFs.
EGShares EM Bond Investment Grade Short Term ETF would track an index of 60 U.S. dollar-denominated, investment-grade bonds with effective maturities of one, two, and three years, drawing 20 equally weighted bonds from each of the effective maturity years.
EGShares EM Bond Investment Grade Intermediate Term ETF would track an index of 60 dollar-denominated, investment-grade bonds with effective maturities of five, six, and seven years, with 20 equally weighted bonds from each of the effective maturity years.
EGShares EM Bond Investment Grade Long Term ETF would track an index of 60 dollar-denominated, investment-grade bonds with effective maturities of 10, 11, and 12 years, with 20 equally weighted bonds from each of the effective maturity years.
EGShares EM Dividend High Income ETF would track an index of 50 emerging-markets companies with dividend yields that are higher than the emerging-markets universe.
EGShares EM Strategic Sector Allocation ETF and EGShares EM Tactical Sector Allocation ETF would be passively managed fund of funds ETFs holding other Emerging Global ETFs.
EGShares EM Asia Consumer ETF would track an index of Chinese, Indian, Indonesian, Malaysian, Thai, and Philippine consumer companies.
EGShares EM Equal Weight Sector ETF would be a passively managed fund of funds ETF tracking an equal-weight index containing Emerging Global's EGShares GEMS sector ETFs.
EGShares EM Bond Investment Grade ETF would be an actively managed ETF, holding investment-grade debt issued in emerging-markets countries and denominated in emerging-markets currencies.
EGShares EM Strategic Sector Allocation ETF and EGShares EM Tactical Sector Allocation ETF have the same names as their proposed passively managed counterparts above, although if the two pairs of ETFs eventually launch, they undoubtedly would use different names. The two proposed actively managed allocation ETFs also would be fund of funds ETFs, investing in other Emerging Global ETFs.
EGShares EM Bond ETF would invest in emerging-markets bonds that are both investment-grade, below investment-grade, and non-rated.
Krane Funds Drops Exchange Traded Concepts to Go It Alone
New York investment firm Krane Funds, which had ETFs in registration since August 2011 through private-label "ETF-in-a-box" provider Exchange Traded Concepts, has cut its ties with that firm and reregistered many of the funds that it had been planning.
Krane also has drafted plans for two newly proposed ETFs. In every case, the proposed ETFs in registration relate to China.
In August 2011, Krane had tapped Exchange Traded Concepts to help roll out its proposed "KraneShares" ETFs. The seven proposed passively managed ETFs at that time were KraneShares China Consumer Luxury ETF, KraneShares China Internet ETF, KraneShares China Alternative Energy ETF, KraneShares China Consumer Staples ETF, KraneShares China Consumer Discretionary ETF, KraneShares China Five Year Plan ETF, and KraneShares China Urbanization ETF.
Then in December 2011, Krane filed for the proposed passively managed KraneShares Dow Jones Select Dividend ETF, which the firm had planned to issue independently without the help of Exchange Traded Concepts.
None of those eight proposed ETFs ever came to market. Now, Krane has redrawn its product portfolio by cutting ties altogether with Exchange Traded Concepts, reregistering some of its proposed funds, and serving up plans for other new funds.
Last month, Krane reregistered four of the ETFs it first had proposed in 2011, using its own exemptive relief. The four proposed funds, which each would cost 0.63%, now would be named KraneShares CSI China Consumer Discretionary ETF, KraneShares CSI China Consumer Staples ETF, KraneShares CSI China Urbanization ETF, and KraneShares CSI China Five Year Plan ETF.
On May 7, KraneShares submitted a new filing that detailed plans for three other ETFs. One of the proposed funds is one that Krane had registered using Exchange Traded Concepts' exemptive relief in 2011: KraneShares CSI China Internet ETF, which would cost 0.63%. The May 7 filing also detailed two other proposed funds with no price tags yet: KraneShares CSI China Consumer ETF, which would track an index of China-based companies operating in the consumer discretionary or consumer staples sectors, and KraneShares CSI China Government Bond ETF, which would track an index of renminbi-denominated bonds issued outside of mainland China by the Chinese government and other entities.
Krane has not detailed ticker symbols yet for any of the proposed ETFs, so it's not clear how close they are to launch.
ETF Performance Last Week
Clean-energy ETFs were the week's best performers. All of the top performers were lifted by large stakes in either electric car maker Tesla Motors TSLA or SolarCity SCTY, both of which are headed by tech guru Elon Musk. Tesla continued its march upward and now has doubled in price in the past month. Tesla's gains last week came in part on the announcement of a new investment from Musk and of a stock offering, which would allow the company to repay its loan from the U.S. Department of Energy, thereby freeing Tesla from certain government constraints. SolarCity actually reported fairly weak first-quarter results early in the week but posted strong price performance partly because of its association with Musk and also because of a new financing deal with Goldman Sachs GS that was announced on Thursday.
Also doing well were Japan ETFs, which continued their rally. Japanese hedged equity funds did the best, which was to be expected as the yen has continued its depreciation. A depreciating yen relative to the dollar would hinder returns for investors in ordinary Japanese ETFs, since the currency's depreciation would limit gains as the performance is converted into U.S. dollars. Japanese hedged equity ETFs have attracted considerable investor interest of late, since these funds represent a way to benefit from Japan's booming stock market while not being impaired by a weaker yen.
Gold- and silver-mining ETFs dominated last week's list of worst-performing ETFs as more investors abandoned precious metals. Further hurting those funds was the fact that the dollar strengthened, stocks hit new highs, and investors reacted to subpar first-quarter results from Anglogold Ashanti AU and especially negative comments about the company and the price of gold from the firm's CEO.