Finally, Mid-Cap Sector ETFs

For a while, a common criticism of the exchange-traded funds industry was that “all the good ideas” were taken. That was not necessarily true as there were no mid-cap sector ETFs, but that changed last week when Illinois-based Elkhorn Investments, LLC introduced nine mid-cap sector ETFs.

The nine ETFs from Elkhorn are the first mid-cap sector ETFs in the United States. Each tracks a sector offshoot of the widely followed S&P MidCap 400 Index. Mid-cap stocks were impressive performers in 2016, as highlighted by an annual gain of 20.5 percent for the S&P MidCap 400.

9 New Sector ETFs

Elkhorn's mid-cap sector ETF suite does not include real estate or telecom ETFs. The other nine GICS sectors are addressed by the new Elkhorn ETFs. All nine of the new Elkhorn ETFs are listed on the Bats Exchange.

The Elkhorn S&P MidCap Consumer Discretionary Portfolio XD tracks the S&P MidCap 400 Capped Consumer Discretionary Index, while the Elkhorn S&P MidCap Energy Portfolio XE follows the S&P MidCap 400 Energy Index.

The Elkhorn S&P MidCap Financials Portfolio XF and the Elkhorn S&P MidCap Health Care Portfolio XH track the financial services and healthcare benchmarks from the S&P MidCap 400.

The Elkhorn S&P MidCap Industrials Portfolio XI, and the Elkhorn S&P MidCap Information Technology Portfolio XK track the S&P MidCap 400 Capped Industrials Index and the S&P MidCap 400 Capped Technology Index.

The Elkhorn S&P MidCap Materials Portfolio XM and the Elkhorn S&P MidCap Consumer Staples Portfolio XS follow the S&P MidCap 400's materials and staples equivalent benchmarks. The Elkhorn S&P MidCap Utilities Portfolio XU is linked to the S&P MidCap 400 Utilities Index.

Investing Strategy

Elkhorn's new mid-cap sector ETFs could make for solid ideas for investors looking for tactical mid-cap exposure when considering the poor performances turned in by many active mid-cap managers.

“Unfortunately, active managers have been a disappointment for investors in midcaps as evidenced by more than 91% failing to outperform the S&P MidCap 400 Index over the last ten years3. The beta exposure in the Elkhorn midcap sector ETFs seeks to provide investors better passive tools for portfolio construction when compared to active management,” said Elkhorn in a statement.

The new Elkhorn ETFs charge 0.29 percent per year, or $29 on a $10,000 investment. Elkhorn now lists 13 ETFs on BATS.