Anonymous ETFs With $100M+ in AUM (FDL, GUNR, PBP)
There is still some debate as to what assets under management watermarks an ETF needs to reach to ensure profitability for the fund's sponsor. As has been noted, impressive size is nothing more than impressive size when it comes to ETFs.
Size is not a guarantee of a fund's ability to generate alpha. Still, the investment community loves numbers. When it comes to exchange-traded products, conventional (though not necessarily correct) wisdom seems to stipulate an ETF with $50 million in AUM will be profitable for the fund's sponsor while an ETF with $100 million or more in AUM is assured survival.
There are some cold realities regarding the ETF landscape. One of those realities includes the fact that new funds are finding it harder to standout, as Barron's recently noted. Another is that all U.S.-listed ETFs and ETNs combined had $1.17 trillion in AUM at the end of June, but $220.1 billion of that total belonged to just three funds – the SPDR S&P 500 (NYSE: SPY), the SPDR Gold Shares (NYSE: GLD) and the Vanguard Emerging Markets ETF (NYSE: VWO).
It is hard for plenty of ETFs with over $100 million in AUM to standout, but there are some anonymous $100 million (or more) ETFs that are worth considering even if the so-called exports have not discovered these funds yet.
PowerShares Dynamic Energy Sector Portfolio (NYSE: PXI) The PowerShares Dynamic Energy Sector Portfolio is not quite the competitor to the Energy Select SPDR (NYSE: XLE) it would appear to be. Nor is PXI a direct rival to ETFs such as the SPDR S&P Oil & Gas Exploration & Production ETF (NYSE: XOP) or the iShares Dow Jones US Oil & Gas Exploration Index Fund (NYSE: IEO).
PXI features a little a bit of everything from the energy sector, meaning integrated oil producer as well as independent names are found in this ETF along with MLPs, coal producers and refiners. More importantly, PXI has outperformed IEO, XLE and XOP year-to-date. As of July 3, PXI had almost $113 million in AUM.
First Trust Morningstar Dividend Leaders Index Fund (NYSE: FDL) With almost $587 million in AUM, the First Trust Morningstar Dividend Leaders Index Fund is by no means small. Despite FDL's heft, it is somewhat ignored in the conversation about dividend ETFs. That should not be the case. FDL has a 30-day SEC yield north of four percent and in the past 90 days, the fund has outperformed larger, more popular dividend ETFs such as the Vanguard Dividend Appreciation ETF (NYSE: VIG), the SPDR S&P Dividend ETF (NYSE: SDV) and the iShares High Dividend Equity Fund (NYSE: HDV).
FlexShares Morningstar Global Upstream Natural Resources ETF (NYSE: GUNR) It can be argued that the universe of materials and energy ETFs is saturated. There simply does not need to be more new ETFs tracking these sectors. It can also be said that the FlexShares Morningstar Global Upstream Natural Resources ETF could have fallen victim to bad timing. The ETF debuted in September 2011 and with energy names struggling over the past several months, it would have been fair to assume GUNR would struggle to accumulate assets.
That has not been the case. In just 10 months on the market, GUNR has raked in over $379.1 million in AUM. GUNR does offer one-stop shopping for investors looking for resources exposure as the fund's 121 holdings include fertilizer producers, integrated oil names and gold miners among others. The fund is a rival to the older Market Vectors RVE Hard Assets Producers ETF (NYSE: HAP).
PowerShares S&P 500 BuyWrite Portfolio (NYSE: PBP) The PowerShares S&P 500 BuyWrite Portfolio is worth a look for investors searching for income in form of covered call writing. PBP's benchmark is the CBOE S&P 500 BuyWrite Index, which measures the rate of return on an S&P 500 covered call strategy, according to PowerShares. Not surprisingly, the consistent use of options contracts does leave PBP with an expense ratio that is much higher than a typical S&P 500 index fund (PBP charges 0.75 percent).
PBP, which has almost $208 million in AUM, reinvests dividends and the options premiums generated from the covered calls. The red flag: PBP has trailed the SPDR S&P 500 (NYSE: SPY) by a wide margin this year.
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