Under The Hood: Active Global Appeal (ACCU, THD, EWZ)
As has been previously noted, actively managed ETFs hold a small slice of the total exchanged-traded products pie. At the end of March, U.S.-listed ETFs and ETNs had a combined $1.2 trillion in assets under management, according to ETF Industry Association data, but actively managed ETFs had just $5.8 billion in AUM as of mid-April.
Today, there are only about 50 actively managed funds on the market. That's 50 of over 1,450 total U.S. ETFs and ETNs, but up from just 29 actively managed ETFs two years ago.
One of the newer additions to the actively managed ETF fray is the AdvisorShares Accuvest Global Opportunities ETF (NYSE: ACCU), which debuted in late January. ACCU seeks long-term capital appreciation in excess of global equity benchmarks such as the MSCI All Country World Index and aims to accomplish that objective in fund of funds fashion.
Said another way, ACCU's holdings are other global ETFs, six emerging markets ETFs to be exact. ACCU's active management style utilizes a proprietary country ranking model which ranks countries from most attractive to least attractive, on a monthly basis, based on a broad range of nearly 40 different factors, according to AdvisorShares.
The highest-rated five or six country funds make the cut for inclusion in the fund and that has led to some interesting choices as of late. The iShares MSCI Thailand Investable Market Index Fund (NYSE: THD) is ACCU's top holding at the moment with a weight of 23.2%. While THD has pulled back a tad recently, it has acted like a momentum play this year, jumping more than 21%. Plus, the long-term outlook for Thailand is stellar.
So THD isn't the problem with ACCU. What some investors might be critical or leery of is the fund's combined 36% exposure to the iShares FTSE China 25 Index Fund (NYSE: FXI) and the iShares MSCI Brazil Index Fund (NYSE: EWZ). In the past week alone, both of those giants among emerging markets ETFs have lost about 6%.
ACCU's other holdings include the iShares MSCI South Korea Index Fund (NYSE: EWY), the iShares S&P 500 Index Fund (NYSE: IVV) and the iShares MSCI South Africa Index Fund (NYSE: EZA). Since its January debut, ACCU has increased its exposure to THD while reducing its exposure to U.S. stocks. The iShares MSCI Russia Capped Index Fund (NYSE: ERUS) has also been eliminated from the portfolio.
ACCU uses a top-down approach that focuses on macro conditions rather than how a country's equity markets are acting at the moment. That approach could certainly serve ACCU and its investors well over time, but it can argued that the macro conditions in Brazil, China and South Africa are not appealing at the moment and haven't been so for multiple months.
We're not going to tell anyone how to do their job and it's a good thing ACCU features a large exposure to Thailand, but we'll be bold enough to say that a fund that is currently interesting could be very good or great by including countries such as Colombia and the Philippines over Brazil and China.
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