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Published: June 1, 2010
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:
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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.
Investors have apparently been doing their
homework. Asset flows into small-cap funds have outpaced those
in large-caps by a two-to-one margin 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.
-- Nathan Slaughter
Editor
StreetAuthority Market Advisor
The ETF
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