Monday, March 11, 2013

For most of 2013 we have seen the SPDR S&P Oil & Gas Exploration & Production Fund (XOP) in one of Quant’s top 3 positions and the SPDR Industrial Select Sector Fund (XLI) in the top 10, today they hold 1st and 4th place.  The rest of the top 10 have been populated by broad market US funds tracking the S&P 500 or Russell indices and a number of Powershares smart beta funds.  A glance at our Quant page shows that is still the case.  Maybe we will get some movement today to tell you about tomorrow but in the meantime we want to remind you about the ETFGsm Liquidation Watch List.

The monthly report was published on the publicly available part of our website last week and shows 45 products meeting the three criteria for inclusion.  Our screens found 233 products with less than $5 million in AUM, often seen as the threshold of profitability, and 1,080 that have been around for at least 2 years, the amount of time a sponsor will usually give a new product to earn its place in the market.  The market tends to shun losers so the third criterion is negative performance for the trailing twelve months which turned up 311 products for the March list.  The 45 that made the list are typical in being among the more esoteric types.  23 are inverse, 6 more are leveraged and some of those 29 are among the 17 ETNs.  Only 2 are traditional equity ETFs and neither gets above 7 Green Reward Diamonds.  All products get Red Diamond Risk Ratings and the average for the group is 6.86 which gets skewed down by a few currency and fixed income products which tend to have lower Risk Ratings.

We like to say inclusion on the list does not guarantee closure and exclusion does not guarantee longevity, we are simply alerting you to things that may not appear in your other research.  Many funds close without appearing on the list due to strategic decisions made by sponsors like Russell last summer and Guggenheim last month.  Those nine Guggenheim funds will be closing this week so you only have a short term trade remaining.  If you are looking to invest for the intermediate term and beyond, the Quant list is where you want to look.  Since inception last summer it has consistently identified the top performers in the marketplace.  The model called Europe last summer, China and other emerging markets in the fall and has been focused on broad US market funds since late last year continuing to this day.  We’ll see what this week brings and we hope you have a good one.

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