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ETF health check: testing the pulse of June 2016's hottest launches

ETF health check: testing the pulse of June 2016's hottest launches

Seven ETFs were launched from four ETF providers on the London Stock Exchange in June 2016, we speak to analysts to assess how they have fared over the past twelve months.

Quality pays

3rd June launches

WisdomTree Europe launched two ETFs on the LSE that targeted dividend-paying companies.

The WisdomTree US Quality Dividend Growth Ucits ETF (DGRA) has returned 21.41% in the last year.

Similarly, the WisdomTree Global Quality Dividend Growth Ucits ETF (GGRA) has also performed strongly in the last year, returning 22.7%.

Viktor Nossek, director of research at WisdomTree Europe, said: 'DGRA and GGRA have done well because it was a risk on market last year. This year it’s more risk off, because of the equity pare back against Trump not delivering on pro-growth promises. It means that those buying equities are looking for good quality stocks, from strong and liquid balance sheets.'

Not such a coup

6th June launches

Zyfin launched the first Ucits ETF with exposure to the Turkish sovereign bond market last year. The LAM Alternatif ZyFin Turkey Sovereign Bond Ucits ETF (TRKY) is down 0.55% over the last year. However, it hasn’t put investors off and has attracted $9.767m in AUM.

It is down over the last year because of weakness in the Turkish Lira as a result of the Turkish military coup last year and political developments. Inflation rising to nearly 12% has also been a drag on its bonds and currency.

Volatility vortex

8th June launches

Boost ETP listed three new products on the LSE last year.

The Boost S&P 500 VIX Short-Term Futures 2.25x Leverage Daily ETP (VIXL) costs 0.99% with assets under management of $7.066m.

It is also listed on Xetra and Borsa Italiana. It did not get off to a good start and is down 98.55% in the last year.

Devised to be used in volatile markets it has fared poorly amid calming volatility and the risk shifting from equities to currency and fixed income markets. 

Buying volatility as a long term strategy is also a difficult play and levering it 2.25x will magnify any losses.

Peter Sleep, senior portfolio manager at 7IM said: 'You would only buy this product if your crystal ball told you that equity markets were going to fall today and that volatility is going to spike.  My learned advice is that you should go to Ascot if you want to lose your money quickly – it is a sunny time of year and you might have more fun.'

Boost Emerging Markets 3x Short Daily ETP (3SEM) was also savaged by strong performing emerging market equities. It is down 56.46% in the last year and costs a hefty 0.99%. It has $406,760 in AUM.

However, the Boost Emerging Markets 3x Leverage Daily ETP (3EML) has been the beneficiary of strong emerging markets performance. It’s up 86.12% in the last year, but still carries a large price tag of 0.99%.

Viktor Nossek, head of research at WisdomTree said: 'If markets go up then the long position makes money and the short positions lose. Emerging markets have done particularly well on the back of Brazil performing strongly.'

'It stabilized as the new government look to be more credible, but that is not so true anymore since the president was investigated for corruption. Since February gains in Brazil have tailed off, but only softly and investors have taken profits. India has also performed strongly in the last year. They make up 15% of the MSCI Emerging Markets index.'

High yield gives you wings

22nd June launches

iShares Fallen Angels High Yield Corporate Bond Ucits ETF (WING) is seemingly a good product returning 6.21%. The high yield bond ETF has done well because in the last year high yield followed the sell-off in 2015/early 2016.

Sleep said: 'A component of the [2015/2016] sell-off was the concern about the falling oil price.  A large component of WING are high yield bonds issued by oil companies.  As the price of oil stabilised last year, there was a notable rally in high yield bonds and especially from oil companies.'

See below for listing details of all seven funds discussed.

ETF AUM LSE Ticker ($ trading) TER 1yr RTN Exchanges listed on
Boost Emerging Markets 3x Leverage Daily ETP $4.5m 3EML 0.99% 86.12% LSE, Borsa Italiana, Xetra
Boost S&P 500 VIX Short-Term Futures 2.25x Leverage Daily ETP $7.06m VIXL 0.99% -98.55% LSE, Borsa Italiana, Xetra
Boost Emerging Markets 3x Short Daily ETP $406,760 3SEM 0.99% -56.46% LSE, Borsa Italiana, Xetra
iShares Fallen Angels High Yield Corporate Bond UCITS ETF $268m WING 0.50% 6.21% LSE
LAM Alternatif ZyFin Turkey Sovereign Bond UCITS ETF $9.7m TRKY 0.89% -0.55% LSE, XETRA
WisdomTree US Quality Dividend Growth UCITS ETF $4.02m DGRA 0.33% 21.41% LSE, Borsa Italiana, ISE, Xetra
WisdomTree Global Quality Dividend Growth UCITS ETF $5.06m GGRA 0.38% 22.70% LSE, Borsa Italiana, ISE, Xetra

*Data from Bloomberg [as of 19th June] & provider prospectus’

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