Market Overview

Department Of Youth: CFRA Research Reviews New ETFs

Department Of Youth: CFRA Research Reviews New ETFs

Investors were once leery of new exchange traded funds, often waiting months or even years to give them a spin. Some newer ETFs are proving that the hands-off treatment is waning.

Channeling his inner Dick Vitale, CFRA Research Director of ETF & Mutual Fund Research Todd Rosenbluth reviewed some young ETFs, including one that has recently packed on assets in a jaw-dropping fashion.

What Happened

Until recently, the JPMorgan BetaBuilders Japan ETF (NYSE: BBJP) was leading an anonymous existence, an understandable phenomenon when considering the field of Japan ETFs is crowded and that BBJP is barely a month old.

BBJP “has $1.04 billion in assets and offers a cheaper way to gain exposure to a developed market,” said Rosenbluth. “Our research highlights BBJP's modest 0.19-percent net expense ratio, which is less than half the price of the $17-billion iShares MSCI Japan ETF (NYSE: EWJ).”

For the week ended July 23, investors added nearly $701 million to BBJP, ranking the ETF first for inflows over that period. Since the start of the third quarter, only one ETF has added assets at faster pace than BBJP. The fund holds 380 stocks and tracks the Morningstar Japan Target Market Exposure Index.

Why It's Important

BBJP is not the only new ETF to recently see a substantial influx of assets. The JPMorgan BetaBuilders Europe ETF (NYSE: BBEU), which debuted on the same day as BBJP, had $9.71 million in assets under management as of June 30, but that has recently surged. Since the start of the current quarter, investors have added nearly $325 million to BBEU.

Some newer fixed income funds are adding assets at impressive paces, too.

“The Xtrackers High Yield Corporate Bond ETF (NYSE: HYLB) swelled to $1.7 billion in assets despite coming to market in December 2016,” said Rosenbluth.

As Rosenbluth said, HYLB's expense ratio of 0.2 percent per year, or $20 on a $10,000 investment, is significantly lower than the fees charged by the two largest junk bond ETFs.

What's Next

The aforementioned products and other “diaper dandies” indicate new ETFs can and do attract asssets, perhaps setting the stage for more investors to embrace rookie ETFs in the future.

CFRA has a Marketweight rating on HYLB. The research firm does not yet have a rating on BBJP.

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