5 New ETFs With Laser-Focus (MOAT, QLTA, EELV)
Over time, the exchange-traded products industry has continually brought new products to market that have increasingly narrow exposures. Call them niche funds, call them too narrow, but whatever one's opinion is, there's no getting around the fact niche funds are a last frontier of sorts for ETF issuers.
That's not surprising given that the market for ETFs tracking the S&P 500 or another benign investment concept such as large-cap value funds is essentially saturated at this point.
The technology sector is a case study in this trend. In 2011 alone, new ETFs focusing on smartphones, cloud computing and social media came to market, indicating that gone are the days that all tech ETFs must be dominated by the likes of Apple (Nasdaq: AAPL), IBM (NYSE: IBM) and Microsoft (Nasdaq: MSFT).
While the technology group may be particularly heavy on niche ETFs, the trend has reached to all corners of the ETF arena, providing investors with more narrowly-focused ETF options than ever. Here are some of 2012's more compelling new introductions on the niche product front.
Market Vectors Unconventional Oil & Gas ETF (NYSE: FRAK) FRAK isn't your run-of-the-mill energy ETF, so those looking for another version of an old standby like the Energy Select Sector SPDR (NYSE: XLE) should look elsewhere. FRAK and XLE do share some holdings in common, Occidental Petroleum (NYSE: OXY) being one prime example, but FRAK differentiates itself by focusing on a specific niche of the energy exploration business: Onshore activity at oil sands and shale plays.
FRAK is also a credible play on rebounding natural gas prices given that the fund is also home to major gas producers such as EOG Resources (NYSE: EOG) and Devon Energy (NYSE: DVN). Energy stocks have been beaten up lately, and that's putting it mildly, but FRAK might be worth a nibble as long as support at $20 holds.
WisdomTree Emerging Markets Corporate Bond ETF (Nasdaq: EMCB) Investors have plenty of options when it comes to bond ETFs. There also hasn't been a shortage of funds offering exposure to corporate debt or emerging markets sovereigns, however, emerging markets corporate bonds hadn't been deemed worthy of their own ETF until March when EMCB debuted.
EMCB has a 30-day SEC yield of 4.85% and more than two-thirds of its holdings are rated either BBB or A. The idea of an emerging markets corporate bond ETF may have been overdue because soon after EMCB debuted, the iShares Emerging Markets Corporate Bond Fund (BATS: CEMB) came to market.
iShares Aaa - A Rated Corporate Bond Fund (NYSE: QLTA) Speaking of corporate bond funds with a niche flavor to them, we present the iShares Aaa - A Rated Corporate Bond Fund. QLTA, which debuted in mid-February, does exactly what its name implies: Tracks corporate bonds rated AAA down to A. Conservative investors will like that and they'll also like the monthly dividend and the meager 0.15% expense ratio.
PowerShares S&P Emerging Markets Low Volatility Portfolio (NYSE: EELV) High and low beta and volatility ETFs have been a favorite outlet for fund sponsors to create new narrowly-focused funds and it's not surprising that theme has reached into the emerging markets universe. EELV has a natural rivalry going with the older, larger iShares MSCI Emerging Markets Minimum Volatility Index Fund (NYSE: EEMV), but there are important differences between these two funds regarding country exposure. The PowerShares offering has also outperformed its iShares rival since coming to market in January.
Market Vectors Morningstar Wide Moat Research ETF (NYSE: MOAT) Arguably, the Market Vectors Morningstar Wide Moat Research ETF really stretches the bounds of a niche product by focusing on stocks that deemed to be both undervalued and possessing distinct competitive advantages. MOAT isn't even a month old, so perhaps it's wise to reserve judgment and/or praise until the fund has had time to mature. Investors appear to like MOAT though as the ETF has attracted almost $20 million in AUM since its debut.
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