Stock markets around the world have been on a roller coaster ride over the past few weeks, thanks mainly to global growth worries and monetary policy uncertainty. However, the ETF industry continues to grow. Net inflows into US Exchange Traded Products (ETPs) reached US$127.5 billion in the first eight months of the year, 19% higher compared to the same period last year per ETFGI.
More than 200 ETFs have been launched in the US this year so far, taking the total number of products to 1,788 and assets under management to a little over $2 trillion (as of October 5).
The industry remains ultra competitive with top 3 providers managing almost 80% of total assets and top 10 products holding more than 25% of total assets. Sponsors are now trying to come up with more “unique” or “innovative” strategies since it's almost impossible to compete with ultra-popular, ultra-cheap market leaders.
Investors should take a look at these two brand new ETFs that have the potential to emerge as winners in future.
Goldman Sachs ActiveBeta US Large Cap Equity ETF (GSLC – ETF report)
GSLC was the first in a series of smart beta ETFs that will track Goldman Sachs's proprietary indexes. Smart beta strategies seek to combine the best of active and passive investing i.e. outperforming the market while keeping costs low.
For this ETF, stocks are weighted on four fundamental factors—good value, strong momentum, high quality and low volatility. The fund charges only 9 bps in annual expenses, same as that being charged by the most popular ETF in the world—SPDR S&P 500 ETF (SPY – ETF report), and much lower compared to most Smart Beta ETFs.
Market Vectors Oil Refiners ETF (CRAK – ETF report)
Refiners seem to be the only bright spot in the energy space as they are a differentiated segment of the energy sector. Crack spread—the difference between the price of crude oil and its refined products—is an indicator of the profitability of the refining industry and lower oil prices could result in higher margins for refiners.
This is the first and the only US listed ETF to provide pure-play exposure to global oil refiners. However, with more than half of its assets invested in non-US companies, the product has foreign exchange risk and also a higher fee of 59 basis points.
