Being the largest ETF industry in the world, the US is always the first to bring out the most niche and most interesting products to the market. While some of them can be questionable, there are several ETFs which I think are genius. Here are four US-domiciled ETFs which I have been following that should come over to Europe or deserve more attention than they are currently getting.
ETFMG Alternative Harvest ETF (MJ)
Like many other people in the ETF industry, I have been very much interested in the cannabis ETF products which have come to market in recent months. Most famously MJ, which broke the barrier of $1bn in assets under management, is comprised of companies which engage in the legal production, marketing and distribution of cannabis and hemp.
As more US states and countries legalise the medicinal and recreational use of cannabis such as Canada back in October 2018, the potential for growth is substantial and the returns are showing it already.
MJ was rocked by the volatile market in Q4 2018, with its net asset value falling 38.7%. But since then, MJ has bounced back and has produced year-to-date returns of 40.6%, rectifying its losses in the previous three months. The one-year returns remain at an attractive 25.3%.
Vesper US Large Cap Short-Term Reversal Strategy ETF (UTRN)
UTRN’s objective screams high risk as the ETF hopes to catch out the S&P 500 stocks which have seen their share prices fall and are predicted to spring back, performing a U-turn (it is in the ticker). But the ETF appears to be proving my first impressions wrong.
Vesper Capital believes negative news is contagious and spark sell-offs. These sell-offs are usually oversold and therefore expect an opportunity for investors to ride the potential rebounds. Dr. Victor Chow tested this theory for over 25 years and designed the Chow Ratio which identifies the stock which have the greatest rebound potential.
This unique product has only been made possible because of the accessibility to short-term pricing data, low trading costs and availability of the ETF wrapper, according to Vesper.
Not even a year old, its hard to tell how consistent UTRN is at calculating which stocks are due a rebound, but it had produced YTD returns of 22.2%, aiding its Q4 losses meaning it’s had a positive return since its inception in September of 3.7%.
Renaissance IPO ETF (IPO)
You never know how well a company will do when it finally goes public given its initial valuation could be over or under-priced. One example of an underwhelming initial public offering was Lyft, Uber’s nearest competitor, back at the end of March.
The ride-hailing platform was valued at $24bn with an initial share price of $72. Lyft’s price jumped to $78.3 on its first day but has been on a downward trend ever since, falling 26.1% to $57.8.
This example, albeit a negative one, is what the IPO ETF is built on and makes it a very interesting product. It is comprised of newly public US companies and adjusted every quarter. A company will be removed once it reaches its two-year anniversary of being public.
Renaissance Capital seem to be doing a good job stock picking for its index to avoid scenarios such as Lyft. Its top 10 holdings include Elanco Animal Health, VICI Properties and music streaming platform Spotify. All having a successful and positive IPO, the ETF, IPO, has produced YTD returns of 32.6%.
ProShares Pet Care ETF (PAWZ)
Finally, being a massive animal lover and getting swooned by an amusing ticker, PAWZ is a good ETF for other animal lovers that want to invest in pet care.
ProShares describes PAWZ as the first ETF that allows investors to capitalise on people’s passion for their pets. 7 out of 10 US households owning a pet which require feeding, healthcare, insurance and more, making them services in demand. PAWZ is comprised of companies which offer these services.
It is estimated the global pet care industry could reach $203bn in sales by 2025. The industry has grown year-to-year, even during the Great Recession, according to ProShares.
The 10-month old ETF has produced YTD returns of 10.7%, not as large as the previous three ETFs but nonetheless a pretty return revolved around animal care and in an industry which I can’t see going anywhere.