For the month of December, the ETF Deathwatch decreased in size.
Nine exchange-traded products (“ETPs”) were added to the list and 17 funds were removed, making December a busier month in terms of removals. Of the removals, 13 were removed due to increased health and only four were due to asset managers closing their funds. It’s possible that many fund companies were more concerned with recent market action than looking at their product lineups.
For December, eight of the new additions to the list were emerging-market funds. After peaking in early January 2017, emerging markets lost their luster and have been battered in the markets since then. Part of this stems from the tariffs between China and the U.S., which have affected emerging markets across the globe. Because of this, we will be closely watching the negotiations between China and the U.S. this year. The ninth addition to the Deathwatch list was in the Utilities sector. Each addition to the list was a product serving a niche portion in the financial markets.
All but one of the additions this month were due to low average daily volume rather than low assets. It is possible that these additions may have enough AUM to keep them from closure; however, our system takes into account both AUM and volume. Should volume and interest remain low, these funds may be considered for closure. The triple-leveraged utility fund was the sole fund added due to low assets. This is not a shock as the Utilities (NYSEARCA:XLU) sector saw a sharp decline (~9%) following the Federal Reserve’s rate increase in December. Investors exited stocks for safer assets, such as Treasurys and bonds.
There are 55 ETFs and ETNs on Deathwatch this month that have been in the market for more than 10 years. This is a long time for ETPs to exist while remaining on our Deathwatch list. Triple-leveraged inverse shares of both Direxion Daily Developed Markets (DPK) and Direxion Daily Mid Cap (MIDZ) hit their 10-year mark in December. Leveraged and short ETF instruments dominate our list of funds older than 10 years. It’s possible that the fund companies managing these products will allow them to remain active, as they play a larger role for their clients that are interested in active management.
The average asset level of the threatened ETFs on ETF Deathwatch decreased from $7.85 million to $7.26 million, and 51 products had less than $2 million in assets. The average age of products on the list decreased from 50.69 months to 50.00 months, and the number of products more than 5 years of age decreased from 131 to 127. The largest ETF on the list had an AUM of $24.93 million, while the smallest had assets of just $413,000.
Here is the Complete List of 430 ETFs and ETNs on ETF Deathwatch for December 2018 compiled using the objective ETF Deathwatch Criteria.
The 9 ETF/ETNs added to ETF Deathwatch for December:
- iShares MSCI Argentina and Global Exposure ETF (AGT)
- Reality Shares Nasdaq Nexgen Economy China ETF (BCNA)
- Rogers AI Global Macro ETF (BIKR)
- Virtus Glovista Emerging Markets ETF (EMEM)
- Cambria Emerging Shareholder Yield ETF (EYLD)
- KraneShares CCBS China Corporate High Yield Bond USD Index ETF (KCCB)
- FlexShares Currency Hedged Morningstar EM Factor Tilt Index Fund (TLEH)
- Direxion Daily Utilities Bull 3x Shares (UTSL)
- WisdomTree ICBCCS S&P China 500 Fund (WCHN)
The 13 ETF/ETNs removed from ETF Deathwatch due to improved health:
- VictoryShares International Volatility Wtd ETF (CIL)
- VanEck Vectors Emerging Markets Aggregate Bond ETF (EMAG)
- First Trust Mega Cap AlphaDEX Fund (FMK)
- JPMorgan Long/Short ETF (JPLS)
- ProShares Short MidCap 400 (MYY)
- WisdomTree Dynamic Currency Hedged International SmallCap Equity Fund (DDLS)
- WisdomTree Dynamic Currency Hedged International Quality Dividend Growth Fund (DHDG)
- First Trust California Municipal High Income ETF (FCAL)
- Principal Millennials Index ETF (GENY)
- Principal Shareholder Yield Index ETF (PY)
- ProShares UltraShort Basic Materials (SMN)
- WisdomTree Fundamental US High Yield Corporate Bond Fund (WFHY)
- Global X YieldCo Index ETF (YLCO)
The 4 ETFs/ ETN that were closed:
- Tactile Analytics AR/VR Virtual Technologies ETF (ARVR)
- Fieldstone Merlin Dynamic Large Cap Growth Fund (FMDG)
- O’Shares FTSE Asia Quality Dividend ETF (OASI)
- O’Shares FTSE Russell International Quality Dividend ETF (ONTL)