It is a fact of life that the exchange-traded products business grows more competitive by the day. With the battle for investor assets escalating, fund issuers have unleashed an array of efforts to attract fresh capital. Some issuers have tried rock-bottom expenses and commission-free trading as a means of luring investors to a particular suite of ETFs.
Other ETF sponsors have taken a different tact, issuing funds that can best be described as laser-focused or niche products. A kind assessment is that such ETFs are thematic and dependent upon investors embracing a specific theme to drive the fund's performance.
The risk is only so many niche ETF can capture investors' attention at a given time. When a theme-driven ETF fails, investors and the fund itself may be left traveling a boulevard of broken dreams. That appears to be the case with these ETFs where the funds' best days have come and gone.
Guggenheim Solar ETF (TAN) In theory, the Guggenheim Solar ETF's April 2008 debut should have been a case of good timing. That was just a few months before then-Senator Obama became president. During the 2008 campaign and since being elected, President Obama has been an ardent supporter of alternative energy. That has not translated into positive returns for TAN.
The ETF is more than four-years-old and has just $46 million in assets under management, not a good number for an ETF that is this old. To be fair, TAN has surged in the past month, rallying almost 12 percent. However, that is off little compensation to long-term holders of this fund.
Not only did undergo an ominous reverse split earlier this year, but the fund is an absolute value destroyer. A 93.3 percent plunge since inception says as much. The best case scenario is TAN is a short-term trading vehicle, not a long-term investment.
iPath S&P 500 VIX Short-Term Futures ETN (VXX) The iPath S&P 500 VIX Short-Term Futures ETN is a play on one theme: Volatility. With almost $2 billion in assets under management, VXX is not going anywhere. That might not be a good thing. Why investors have continued to pour money into this product is anyone's guess as it seems the best thing that can be said of VXX is that it is headed for a reverse split just like one of its rivals. VXX is 43-months old and has lost more than 97 percent since inception.
iShares MSCI Hong Kong Small Cap Index Fund (EWHS) The iShares MSCI Hong Kong Small Cap Index Fund is not a bad ETF in terms of performance. EWHS has gained 3.6 percent since its January debut, but the real question is how much investors are willing to embrace Hong Kong small-caps. Apparently, not much. EWHS has just $5.2 million in AUM and has not traded in over a week as of this writing.
The signs were there before EWHS came to market. Another version of a small-cap Hong Kong play from another ETF issuer debuted in mid-2011 only to be closed by the end of the year.
iPath Global Carbon ETN (GRN) For those that believe exchange-traded products have only recently become more esoteric, check out the iPath Global Carbon ETN. GRN has been around for more than four years and it is fair to say the concept of investing in carbon credits has not resonated with investors.
GRN's index "is designed to measure the performance of the most liquid carbon-related credit plans and is designed to be an industry benchmark for carbon investors," according to the iPath web site. Investors have not been compelled to get in with this ETN. GRN has just $1.33 million in AUM and a 20-day average volume of 420 shares. That might be overstating things because GRN has not traded in a week.
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