These New ETFs Have Bright Futures Ahead of Them
We’re just over a quarter of the way into 2010, and already 60 new exchange-traded funds (ETFs) have hit the marketplace. That’s about half the number that launched in all of 2009.
Don’t expect this wave to die down anytime soon. There are currently more than 550 additional funds registered with the Securities and Exchange Commission (SEC) waiting their turn for approval.
If these funds make it to the market, it would increase the size of the overall ETF universe by about +70%. Of course, we’ll also lose a few along the way. But for every ETF that dies, three or four more are being born — which points to a wider selection during the next few years.
I’ve included a table of some of the more interesting new funds below:
As I’ve said before, it’s always nice to have more tools in the chest, even if you never have cause to use many of them. Personally, I don’t see myself investing in a corn futures ETF, for example. But it might make sense for somebody else.
In the meantime, small-caps appear to be the flavor of the month. It’s not hard to see why. These up-and-comers typically lead the market coming out of a recession and can deliver impressive, market-beating results. PowerShares, Market Vectors and IndexIQ all seem to have recognized this by welcoming small-caps to their lineups recently.
#-ad_banner-#Investors have apparently been doing their homework. Asset flows into small-cap funds have outpaced those in large-caps by a two-to-one during the past quarter. The newest entrant, Market Vectors Latin America Small-Cap (Nasdaq: LATM), has only gathered a scant $2.5 million, but I suspect it will attract plenty more in the months to come.
It’s no secret that Brazil and other Latin American markets have been investment hotspots for much of the past decade. The iShares Brazil (NYSE: EWZ) ETF, for example, delivered a sizzling gain of +283% during the past five years, and that’s after a -54% shellacking in 2008.
But that doesn’t necessarily mean EWZ is the best way to tie your portfolio to this booming country. More than half the fund’s portfolio is sunk in the materials and energy sectors — which means returns are driven more by global commodities prices and demand in China than what’s actually going on within Brazil. Instead, why not look to Market Vectors Brazil Small-Cap ETF (NYSE: BRF)? Its pure-play portfolio is geared towards consumer oriented businesses like Lojas Renner, which owns a chain of 120 upscale department stores.
Action to Take –> I like LATM for the same reasons I like BRF. Small-cap companies in the Latin American region are highly leveraged to positive changes taking place on the ground in promising markets like Brazil and Chile. Low penetration rates for cars, Internet and other products and services leave huge upside as natural resource revenues filter into the hands of middle class Latin American consumers.