ETF Wrap: A year and change, and okay, boomer

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ETF Wrap: Virus purgatory


What just happened?

It still seems impossible, somehow: a once-in-a-century global pandemic bringing the world to its knees, killing thousands of souls, crippling economies and upending the social fabric in so many communities.

Perhaps even more unbelievable is that in spite of widespread job losses, small-business closures and big questions about economic rebounds, markets did just fine. But here we are, one year after the start of the 2020 bull market, and things look a lot rosier.

That means there’s no better time for the First Annual Totally Unofficial Completely Unserious ETF Idea Contest.

The rules for the FATUCUEIC are as simple as its name. Send ideas until March 29, 2021, to this address. An entry need not be long, but it should have as much information about the idea as we need to judge it: What is its investment thesis? Who is the intended audience? What market gap does it fill? How would it execute on those ideas? What types of assets would it hold? What ticker should it have?

Our judge is ETF veteran Amrita Nandakumar, currently president of VIA Investment Advisory, a boutique asset manager which provides portfolio management and trading services to ETFs. One lucky winner will be written up in a future issue of Wrap, and we’ve extended the deadline to make sure you have this weekend to send in your applications.

Once again: submit your ideas by 11:59 p.m. Eastern on March 29, 2021, to this email address, ideally with the email subject header ETF Wrap Contest. Good luck!

Thanks for reading — and playing along at home, we hope.

March 2020: a teachable moment?

Much of the coverage of the one-year anniversary of the bull market has focused on the outcomes since then: the outrageous fortunes for many equities, the dawning of a new reflationary regime, and so on.

But it’s also important to remember the mayhem that engulfed markets for several scary weeks last March. At the time, MarketWatch called it “whack-a-mole” because one section of the markets would flare up, get soothed, only to have another start breaking.

That was an “unprecedented, even once-in-a-generation” series of events, said Rich Lee, head of program trading with Baird.

Lee likes to look at the glass-half-full version of that dislocation.

“The extreme market activity we saw, I think highlighted and brought to light the functions of how ETFs work,” he said in an interview with ETF Wrap. In particular, Lee highlighted the disconnect between the way bond funds traded and how their component securities traded — or didn’t trade.

“Market participants didn’t really think about how creations and redemptions affect an ETF,” he said. But during those weeks of panic, when ETFs held together, “it highlighted all the different pieces that go into pricing an ETF. Overall, the market benefitted because everyone is more educated now.”

Perhaps another takeaway is that ETFs “worked,” Lee said. If that sounds mundane, don’t forget there were multiple instances when stock-market trading was halted.

Let’s just hope panic like that is truly once in a generation.

Exchange-traded sundries

Charles Schwab Investment Management will launch the Schwab International Dividend Equity ETF in late April. The fund is designed to be among the lowest-cost ETFs with exposure to international dividend equities. “Every day, about 10,000 baby boomers turn 65 and many of them –– as well as other investors –– are seeking income strategies,” Schwab said in a statement.

Add asset management heavyweight Fidelity Investments to the list of firms applying to offer a Bitcoin ETF, according to an SEC filling. Fidelity has offered a private bitcoin investment fund to qualified investors since 2020.

Happy birthday, ANTs! As Todd Rosenbluth, head of mutual fund and ETF research at CFRA, noted in a recent analysis, active non-transparent ETFs were first launched in late March 2020. There are now about two dozen funds tracking this strategy, with about $1.4 billion in assets.

With vaccinations ramping up, what’s on your travel bucket list? If you have “go to an ETF conference” on top, boy are you reading the right newsletter! Exchange is a new event from industry veterans including Tom Lydon, Matt Hougan and Matt Middleton. “Exchange has been designed to be an entirely new experience for today’s financial advisor as well as for the institutional community,” according to a release. It will be held Feb. 13-16, 2022, at the Fontainebleau Miami Beach.

Was there an ETF for that?

There’s recently been media coverage of the individual securities that did best over the past 12 months: you would have had to be very greedy indeed to make a bet on shares of Caesar’s Entertainment Corp.
CZR,
-1.72%

in March 2020, when everyone around you was losing their heads (to butcher a Warren Buffet-ism).

ETF Wrap decided to compile the best and worst performing ETFs over that period, as well. Data in the following table comes from FactSet, and excludes any leveraged products or ETNs.

Fund name

Gain or loss, 3/23/20 – 3/23/2021

Invesco WilderHill Clean Energy ETF
PBW,
-3.17%
332.8%

Amplify Transformational Data Sharing ETF
BLOK,
-4.59%
319.6%

Invesco Solar ETF
TAN,
-3.27%
311.7%

Amplify Seymour Cannabis ETF
CNBS,
-1.96%
306.7%

First Trust Nasdaq Clean Edge Green Energy Index Fund
QCLN,
-3.22%
300.8%

Vanguard Long-term Treasury ETF
VGLT,
-0.13%
-17.7%

iShares 20+ Year Treasury Bond ETF
TLT,
-0.14%
-17.9%

United States Natural Gas Fund LP
UNG,
+1.80%
-24%

Vanguard Extended Duration Treasury ETF
EDV,
-0.35%
-24.1%

PIMCO 25+ Year Zero Coupon US Treasury Index ETF
ZROZ,
-0.40%
-24.1%

Source: FactSet

It’s striking how thoroughly the presumed end of the decades-long bond bull market swept the worst performers category, even as investors made everything from clean energy to cannabis to crypto into the best performers.

Visual of the Week

Well, that’s a relief!

Weekly rap
Top 5 gainers of the past week

iShares 25+ Year Treasury STRIPS Bond ETF
GOVZ,
-0.82%
2.5%

PIMCO 25+ Year Zero Coupon US Treasury Index ETFZROZ

2.5%

PIMCO 15+ Year US TIPS Index ETF
LTPZ,
-0.16%
2.3%

Vanguard Extended Duration Treasury ETF
EDV,
-0.35%
2.2%

Global X MSCI China Utilities ETF
CHIU,
-0.46%
2.1%

Source: FactSet, through close of trading Wednesday, March 24, excluding ETNs and leveraged products

Top 5 losers of the past week

iShares MSCI Turkey ETF
TUR,
-1.01%
-17.9%

SPDR S&P Oil & Gas Equipment & Services ETF
XES,
-4.31%
-14.6%

Invesco Dynamic Oil & Gas Services ETF
PXJ,
-3.92%
-14.4%

Breakwave Dry Bulk Shipping ETF
BDRY,
+4.83%
-14.4%

Invesco S&P SmallCap Energy ETF
PSCE,
-4.88%
-12.6%

Source: FactSet, through close of trading Wednesday, March 24, excluding ETNs and leveraged products

MarketWatch has launched ETF Wrap, a weekly newsletter that brings you everything you need to know about the exchange-traded sector: new fund debuts, how to use ETFs to express an investing idea, regulations and industry changes, inflows and performance, and more. Sign up at this link to receive it right in your inbox every Thursday.



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