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[«] Money and Markets 2010 Archive View This Issue On Our Website [»]
Seven New ETFs Cover New Ground
by Ron Rowland

Dear Subscriber,

Ron Rowland

The exchange traded fund menu is growing fast. So far this year more than 170 new ETFs and similar exchange-traded products have hit the market in the U.S.

Quite a few of the new ETFs were just "me-too" funds. The big sponsors like iShares, SPDR, and Vanguard don't want their rivals to own any niche unchallenged.

Competition is good for consumers because it keeps fees down. On the other hand, the plethora of ETF choices in some market segments can leave investors confused and paralyzed.

That's why I'm always excited when new ETFs cover unexplored territory: Corners of the global markets that are otherwise inaccessible for most individual investors. I love this kind of innovation. Unfortunately sometimes it doesn't work out as the sponsor had hoped (see my latest ETF Deathwatch report).

Today I'm going to tell you about seven new funds that offer something unique. If they're successful in attracting assets, you can bet other firms will come out with similar offerings. For now, though, all these ETFs and ETNs have their corners to themselves.

The Philippines and New Zealand are now available as ETFs.
The Philippines and New Zealand are now available as ETFs.

iShares MSCI Philippines (EPHE)

iShares MSCI New Zealand (ENZL)

You know I'm bullish on Southeast Asia. The Philippines are on the edge of that region and share many of the same attractions. EPHE owns about 26 Philippine stocks from a variety of sectors, with a heavy concentration in financials.

New Zealand is a little farther away and is often lost in the shadow of much bigger Australia. Yet New Zealand is a booming economy and ENZL is the only pure-play for U.S. investors. ENZL also features a more-balanced sector allocation, the largest being materials and telecommunications. New Zealand stocks are also noted for their yields. And the distribution yield on ENZL is expected to be more than 4 percent.

UBS E-TRACS 1x Monthly Short Alerian MLP Infrastructure Total Return Index ETN (MLPS)

This one's name is quite a mouthful, so I will decode it for you. You are probably familiar with the MLP segment: Master limited partnerships that invest mainly in energy pipelines and storage facilities. If not, please review Add Energy Income with an MLP ETN.

Investors can choose from six MLP-related funds on the long side. MLPS is the first, and so far the only, product to provide inverse exposure for this group. I suspect the MLP boom may be a bit overbought — meaning MLPS might come in handy soon.

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Most of the MLP funds, including MLPS, are structured as exchange traded notes, or ETNs. They're essentially a form of bond. With an ETN you are exposed to loss if the issuer should go bankrupt. I explained more in my column last year, Why ETNs are Riskier Than They Look.

WisdomTree Dreyfus Commodity Currency Fund (CCX)

If you like currencies and commodities, then CCX may be just what you've been waiting for. This actively-managed ETF holds the currencies of key commodity-producing nations. Such currencies tend to be stronger during times of inflation and often bring higher yields as well.

The list of currencies held by CCX can change. For now eight currencies are represented: Australian dollar, Canadian dollar, Norwegian krone, New Zealand dollar, Brazilian real, Chilean peso, Russian ruble, and South African rand.

Emerging Global Shares Indxx India Infrastructure (INXX)

Global X Brazil Consumer (BRAQ)

India is in dire need of infrastructure improvements.
India is in dire need of infrastructure improvements.

INXX and BRAQ are another combination of two attractive niches: Emerging markets and sectors. India and Brazil are both growing nicely, and these ETFs let you zero in on some of their best sectors.

Global X Lithium ETF (LIT)

I mentioned LIT in my September 9 column on Green Energy ETFs. Lithium is a key ingredient in the lightweight batteries used in electric cars. If the move toward alternative energy sources continues to revive, lithium demand will grow, too. LIT owns the stock of lithium producers and battery manufacturers around the globe. This one is high-risk, but the potential for profits is big, too!

All these funds came out since July of this year, so they don't have much operating history. Use caution if you want to buy any of them. Limit orders are always a good idea for small funds, especially those with exposure to foreign markets.

Also, don't be surprised if some of the new ETFs and ETNs don't last long ...

Just this week The Wall Street Journal published an article headlined Uncertain Future for Tiny ETFs. I was quoted in the article and provided some of the statistics reported. You can read it for yourself at the link.

Here is the bottom line: Unproven products from unknown sponsors have a very high failure rate. Yet if they make it, I think some of these funds have tremendous potential. Check them out!

Best wishes,

Ron

P.S. Do you Tweet? I do. Twitter users can follow me at http://www.gliq.com/cgi-bin/click?weiss_mam+186601-17+MAM1866+computerdiy@yahoo.com for frequent updates, personal insights and observations about the world of ETFs.

If you don't have a Twitter account, sign up today at http://www.gliq.com/cgi-bin/click?weiss_mam+186601-18+MAM1866+computerdiy@yahoo.com and then click on the 'Follow' button from http://www.twitter.com/ron_rowland to receive updates on either your cell phone or Twitter page.


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