Market Overview

Some ETFs From 2017's Bumper Crop Find Success

Some ETFs From 2017's Bumper Crop Find Success

More than 200 new ETFs came to market in 2017. The pace of ETF launches is blistering to start 2018, as more than 30 new ETFs, or more than one per day, have come to market since the turn of the year. 

Some new ETFs are immediately successful while others struggle to gain investor traction. Still, a case can be made that there are not too many ETFs.

While some products will ultimately fail to gather assets and close, other recently launched products are in response to client demand and are well-constructed,” Todd Rosenbluth, CFRA Research's director of ETF and mutual fund research, said in a Monday note. “It's hard to imagine there are too many ETFs, in our view, when the number of mutual funds still dwarfs the number of ETFs.” 

A Successful Small-Cap ETF

Among 2017's successful rookie ETFs highlighted by CFRA is the IQ Chaikin U.S. Small Cap ETF (NASDAQ: CSML). CSML debuted in mid-May and already has $413.5 million in assets under management.

CSML, which tracks the NASDAQ Chaikin Power US Small Cap Index and holds nearly 230 stocks, “provides exposure to domestic small-cap equities through a multifactor model, The Chaikin Power Gauge,” according to the issuer.

CSML allocates over 53 percent of its combined weight to financial services and industrial stocks, while the consumer discretionary and staples sectors combine for a quarter of the fund's weight.

The success of CSML spurred the creation of a large-cap equivalent, the IQ Chaikin U.S. Large Cap ETF (NASDAQ: CLRG). The IQ Chaikin U.S. Large Cap ETF debuted in December. That ETF uses a similar methodology as CSML and tracks the NASDAQ Chaikin Power US Large Cap Index.

CFRA has an Underweight rating on CSML. 

Another Successful New ETF

The Vanguard Total Corporate Bond ETF (NASDAQ: VTC), the only ETF launched by Vanguard last year, debuted in November and had almost $30 million in assets by the end of 2017.

Vanguard is the second-largest ETF provider and has been more cautious with its product launches than many other ETF providers, with just four of the firm's 74 offerings rolled out in the last three years,” said Rosenbluth.

VTC is an ETF of ETFs using Vanguard's three other corporate bond ETFs as its holdings. That gives investors exposure to short-, intermediate- and long-term corporate bonds to the tune of over 3,500 issues.

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