Rarely is it a dull year in the exchange traded funds industry and 2020 was no exception. Among the many records set last year in ETF Land were closures and launches.
First, the bad news. As Bloomberg analyst Eric Balchunas points out in some recent posts, as of Dec. 28, 253 ETFs closed in 2020. That’s a record and more than double the closure level seen in 2019, but that is the sign of a hyper-competitive, maturing industry. Just because an issuer builds it (an ETF) doesn’t they (investors) will come.
The better news is that more than 300 new ETFs, just in the U.S., debuted last year, up from 219 the previous year. Balchunas recently posted some interesting footnotes about the top 20 by assets. First, Vanguard isn’t on that list because it didn’t introduce any new products last year. Second, some nuanced products from smaller issuers rapidly accumulated assets. Third, as Balchunas notes, just 36 rookie ETFs amassed more than $100 million in assets last year and just one topped $1 billion.
Here, we’ll examine three of 2020’s new ETFs that could be in for big things this year for reasons that go beyond their assets under management.
JPMorgan BetaBuilders U.S. Mid Cap Equity ETF (BBMC)
Yes, some of the smaller though still successful rookie ETFs will be highlighted here, but the JPMorgan BetaBuilders U.S. Mid Cap Equity ETF (NYSE: BBMC) deserves attention, too, because this is the only new one of 2020’s new ETFs that has over $1 billion in assets. To be precise, BBMC is a $1.34 billion fund following its April 14 debut.
JPMorgan was a late entrant to the ETF business, but thanks to a robust distribution network and the ability to bring its own assets, it’s a rapidly growing issuer. Those benefits are trickling down to BBMC — the mid-cap fund is now the issuer’s seventh-largest ETF.
Besides those superficial superlatives, BBMC is up 61% since inception. Buoyed by mid-cap earnings momentum, the new JPMorgan ETF could shine again next year.
“We expect the Russell Midcap Index to post a sizable earnings-per-share increase, which should support our 2021 year-end median price target for the index of 2,700,” according to Wells Fargo.
Cabana Target Drawdown 10 ETF (TDSC)
The Cabana Target Drawdown 10 ETF (NYSE: TDSC) is part of a broader suite of five ETFs launched by Cabana Group in May — another is on the top 20 list in terms of assets added by new ETFs.
As of Dec. 29, TDSC had $552.28 million in assets under management, a total surpassed by just five other new ETFs. TDSC is an ETF of ETFs that’s designed to protect investors against equity market swoons while still providing ample opportunity for upside capture. There’s a hefty dose of income as four of the new fund’s holdings include Treasury, corporate debt — investment-grade and junk — and preferred stock ETFs.
Other holdings include the Invesco QQQ (NASDAQ: QQQ) and the Consumer Discretionary Select Sector SPDR (NYSE: XLY).
Global X Telemedicine & Digital Health ETF (EDOC)
Just seven new ETFs, including the aforementioned BBMC and TDSC, have accumulated more assets this year than the Global X Telemedicine & Digital Health ETF (NASDAQ: EDOC). EDOC debuted on July 29 and now has a tidy $564.17 million in assets, speaking to investors enthusiasm for thematic ETFs.
EDOC is benefiting from the duel tailwinds of that thirst for thematic investments and the coronavirus pandemic hastening adoption of digital health practices. On the other hand, both of those catalysts could expire next year.
Fortunately, that won’t weigh on EDOC because telemedicine was growing prior to the pandemic and is forecast to do so after COVID-19 is a thing of the past. EDOC is up 24.15% in just five months on the market.
Photo courtesy: Joe Mabel via Wikimedia
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