Category Archives: FactorShares

Dividend and Volatility Top ETF Trends in 2011

Morningstar’s Samuel Lee gives a nice review of the year in ETFs, saying it’s been a “banner year” with more than 300 new ETFs for a total of just under 1,400. Also, the $100 billion in assets flowing into ETFs over the 12 months far surpassed the mutual fund industry’s inflows, finally giving some credence to the claim by ETF providers that ETFs will soon begin to eat mutual funds’ lunch.

The big trends this year were ETFs focused on providing yield through dividends or good returns with minimal volatility. Lee’s top two ETFs for the year are the iShares High Dividend Equity Fund (HDV) and the PowerShares S&P 500 Low Volatility (SPLV), which each pulled in more than $800 million in assets under management. He also praised iShares for its suite of low-volatility ETFs, especially for their low fees.

iShares MSCI USA Minimum Volatility Index Fund (USMV), exp. ratio 0.15%
iShares MSCI EAFE Minimum Volatility Index Fund (EFAV), 0.20%.
iShares MSCI Emerging Markets Minimum Volatility Index Fund (EEMV), 0.25%.
iShares MSCI All Country World Minimum Volatility Index Fund (ACWV), 0.35%.

Lee calls the UBS E-TRACS 2x Wells Fargo Business Development Company ETN (BDCL) the worst new fund with an expense ratio of 0.85% and the possibility of 0.4% more in accrued financing charges. Yet, the big problem is that the note doesn’t take advantage of the ETN structure’s ability to avoid incurring taxes on the huge yield it offers.

Another big trend this year was ETFs that tracked factors such as momentum or volatility. New companies that produced these include Russell, QuantShares and FactorShares. I’ll look at these more closely later.