Most Popular New ETF Strategies of 2016

The exchange traded fund universe has steadily expanded with many new additions and strategies this year.

There are now 1,961 U.S.-listed exchange traded products, which include both exchange traded funds and exchange traded notes, with a little over $2.5 trillion in assets under management.

The most popular new ETF options available to investors of 2016 include some that track leveraged high-yield strategies, a dynamically hedged international equity position, another that screens companies for gender equality in the evolving age and a forward momentum investment style.

The two most popular ETP strategies of 2016 include two ETNs that specifically focus on high-yield generation for income-minded investors. The UBS ETRACS FI Enhanced Global High Yield ETN (NYSEArca: FIHD), which began trading in February 22, has accumulated $525.7 million in assets under management and UBS ETRACS FI Enhanced Europe 50 ETN (NYSEArca: FIEE), which started trading in February 12, has $418.6 million in assets.

FIHD takes a two times leveraged long exposure to the performance of the MSCI World High Dividend Yield USD Gross Total Return Index, which is designed to reflect the performance of the parent MSCI World Index with higher dividend income and quality characteristics than average dividend yields that are both sustainable and persistent. Unlike other leveraged ETPs that takes a daily leveraged performance of the underlying index, FIHD takes a quarterly compounded performance.

Additionally, FIEE follows the two times leveraged long exposure of the STOXX Europe 50 USD Index, Europe's leading blue-chip index that covers 50 stocks across 17 European countries. The ETN also takes the quarterly compounded performance of the index.

ETNs try to reflect the performance of some sort of index as part of their investment strategy. However, an exchange traded note, like the name implies, is a type of debt note that trades on an exchange. ETNs are debt securities issued by financial institutions that promise to pay the return of an index, minus fees and taxes. Consequently, investors are exposed to the credit risk or the possibility the underwriting bank goes bankrupt. The note can be vulnerable if the issuer gets into financial trouble, otherwise known as a default. With an ETN, an investor can lose some or all of their investment if the ETN issuer goes under.

The WisdomTree Dynamic Currency Hedged International Equity Fund (BATS: DDWM), which began trading in January 7, has $300.6 million in assets under management. Unlike other popular currency-hedged ETF offerings with a static foreign exchange hedge, the Dynamic Currency Hedged Equity Fund will hedge currency fluctuations in the relative value of the foreign currencies against the USD, ranging from a 0% to 100% hedge based on interest rate differentials, valuations and relative price momentum of the foreign currencies compared to the USD. This may help the so-called dynamic currency-hedged ETF adjust to changes in the dollar ahead.

The SPDR Gender Diversity Index ETF (NYSEArca: SHE), which began trading in March 7, has $273.8 in assets. SHE seeks to track the performance of the SSGA Gender Diversity Index, which is comprise of listed U.S. large capitalization companies with the highest levels within their sectors of gender diversity on their boards of directors and in their senior leadership. The ETF strategy may be a play on potential outperformance as a 2015 MSCI study that explored global trends in gender diversity on corporate boards between December 2009 and August 2015 showed companies with at least three female board members outperformed others in overall return on equity by more than 36%.

Lastly, the First Trust Dorsey Wright Dynamic Focus 5 ETF (NasdaqGM: FVC), which began trading in March 17, accumulated $256.7 in assets. FVC's underlying index is designed to provide targeted exposure to five First Trust sector and industry based ETFs as identified by DWA’s proprietary relative strength methodology. This methodology is a ranking system used to measure a security’s price momentum relative to its peers and helps DWA identify meaningful patterns in daily share price movements. The investment strategy is seen as a form of buying high and selling even higher.

FVC is a fund-of-funds strategy that currently holds about a 20% stake in five First Trust sector-specific ETFs with the highest relative strength or market momentum, including First Trust Energy AlphaDEX Fund (NYSEArca: FXN), First Trust Utilities AlphaDEX Fund (NYSEArca: FXU), First Trust Industrials/Producer Durables AlphaDEX Fund (NYSEArca: FXR), First Trust Nasdaq-100 Tech Index (NasdaqGM: QTEC) and First Trust Dow Jones Internet Index Fund (NYSEArca: FDN).

This article was provided by our partners at etftrends.com

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