Following is a quick synopsis of goings-on in the exchange-traded fund industry, including our big-picture view of the ETF landscape, a rundown of recent ETF analyses, feature articles, and blog postings, as well as links to ETFs that recently launched.
First Actively Managed ETF Begins Trading
Although Bear Stearns BSC has taken a huge beating in the past few weeks, it has emerged a victor in one respect: Bear won the race to launch the first actively managed ETF. Bear Stearns Current Yield YYY began trading on the American Stock Exchange Tuesday. The fund, which is an actively managed ultrashort bond portfolio, will levy a 0.35% expense ratio.
For further details, check out our updated blog posting on the topic, "Bear Stearns Launches First Actively Managed ETF."
New ETF Analyst Reports
As you might have heard, we recently launched our new-and-improved ETF Analyst Reports on Morningstar.com. Those reports are available to Premium Members. If you're not a Premium Member yet, check out our recent piece, "Our Take on One of 2007's Hottest Emerging-Markets ETFs," in which you'll find a sample ETF Analyst Report. To see more ETF analyses, take a free, 14-day Premium Membership trial.
We continued to publish new Analyst Reports last week. On Tuesday, my colleague Harry Milling added iShares S&P Global Healthcare (IXJ) to coverage. The fund is one-of-a-kind in that the portfolio spans blue-chip health-care names the world over. But does that necessarily make it a better mousetrap than some of the other prominent health-care ETFs already available? Harry sets out to answer that question in his analysis.
On Wednesday, my colleague Emiko Kurotsu brought SPDR S&P World ex-US (GWL) under coverage. The SPDR portfolio joins a field of stock ETFs that span foreign markets, though this one introduces a few twists. Oftentimes, the choice comes down to cost and portfolio construction. Emiko explores how the SPDR funds stacks up on those counts, among others, in her write-up.
Emiko also added KBW Regional Banking (KRE) to coverage last Wednesday. As the name would suggest, the fund invests in a basket of regional banking stocks. There are several other regional bank ETFs on the market already, including Regional Bank HOLDRs RKH and iShares Dow Jones US Regional Banks (IAT). However, the KBW portfolio differs in several very noteworthy respects from those other offerings. Emiko takes a closer look in her report.
New ETF Analyst Notes
In addition to new reports, we also put out several ETF Analyst Notes last week. On Monday, for instance, we put out a note describing how the suspension of our fair value estimates on various prominent banks would impact the way we're valuing a number of financials ETFs that we cover. Our stock analysts placed those stocks "under review" so that they can kick the tires again on their underlying assumptions. So, our note explains how we handle cases like those when estimating an ETF's fair value.
On Wednesday, we took a closer look at whether the Visa IPO would be a boon to ETFs. To review, the credit card company made its much-ballyhooed debut as a public company last week and investors promptly sent the stock's price soaring. The question is whether any ETFs are likely to participate in that runup. Our note explores that issue and offers up some thoughts on the likely timetable for adding Visa to some of the prominent indexes that ETFs track.
Here are some of the topics we've covered recently in our ETF-related blog, "Basis Pointing."
- Bear Stearns Launches First Actively Managed ETF: As mentioned above, Bear Stearns won the race to launch the first actively managed ETF. This updated blog posting--which we originally published a few weeks back--offers chapter-and-verse on the strategy, how much it costs, and our first-blush take on the value that the manager is likely to add.
- PowerShares Discloses Cost of Its Forthcoming Actively Managed ETFs: Another posting on actively managed ETFs. PowerShares amended its registration statement covering four actively managed ETFs that are slated to launch in the coming weeks. The filing is noteworthy in that it offers the first glimpse into the cost of an actively managed stock ETF, a topic that has been the subject of much speculation.
- The 'Little ETF That Beats the Market': A short, and perhaps pie-in-the-sky, riff on noted author Joel Greenblatt's "Magic Formula." (In addition to being a highly accomplished investor, Greenblatt wrote the best-selling "Little Book That Beats the Market.") Our question: Why hasn't the magic formula, which is very popular in investing circles, become the basis for an ETF?
- Further Proof That ETFs Haven't Cornered the Market on Odd Ideas: We give ETF providers guff from time to time for launching gimmicky or just plain bizarre ETFs. But it's not like they've cornered the market. In this posting, we profile a couple of traditional mutual funds that left us scratching our heads.
Following is a tally of ETFs and ETNs that began trading in the last week or so (we've linked to the relevant prospectus whenever possible).
- Bear Stearns Current Yield YYY: We wrote about this fund, which is the first actively managed ETF to begin trading, on our blog.
- SPDR DB International Government Inflation-Protected Bond (WIP): We also profiled this fund, which will invest in a basket of inflation-linked bonds of foreign governments, a few weeks back on our blog.
- Market Vectors-Chinese Renminbi/USD ETN (CNY): This exchange-traded note tracks the performance of the Chinese currency relative to the U.S. dollar. This marks Market Vectors first foray into the ETN space. (Morgan Stanley is the issuer of the notes.)
- Market Vectors-Indian Rupee/USD ETN (INR): Like its sibling, this ETN will track the returns of the Indian Rupee against the greenback.
By our count, 33 ETFs have launched thus far in 2008, with commodity (nine), currency (seven), and fixed-income (two muni, four taxable) ETFs being most common.
Interestingly, new launches have been split almost evenly between ETNs and traditional ETFs. Of the 15 ETNs that have made their debut this year, seven track currency indexes, another seven commodity indexes, and one tracks an index of publicly traded "private equity" firms.
Another quiet week in the ETF pipeline, as we didn't see any filings for new ETFs cross the transom. That's the second week in a row that we've seen nary a new filing.
Want to know how some of the most popular ETFs have fared? This performance summary should whet your appetite.
If it's the leaders and laggards that interest you, then give our "best/worst performers" list a look.
Finally, looking beyond ETFs to the benchmarks and industries themselves, you can find a wealth of performance data on Morningstar.com, including performance stats by indexes, sectors, and industries. Also, be sure to check out our Quicktake reports for the Dow, S&P, Russell 2000, and Nasdaq Composite indexes.
Jeffrey Ptak, CFA does not own shares in any of the securities mentioned above. Find out about Morningstar's editorial policies.