ETF or Exchange Traded Funds are trading of investment funds in stock exchange. Similar to stocks, it holds stocks, commodities, bonds, and other assets operating on an arbitrage mechanism designed to keep it trading close to the net asset value, despite rare occasional deviations. Throughout the last decade, the number of ETF launches in the unpredictable Indian economy has increased significantly. Some of the biggest ETF launches of the past year (2018) include:
Communication Services Select Sector SPDR Fund (XLC)
XLC was designed to represent the new Communication Services sector, formed due to 2018 GICS sector changes, causing major shifts to the telecommunication sector, absorbing stocks of the IT sectors. Despite being launched in mid-June, it drew 3.4 billion US dollars by the year-end.
JP Morgan Beta Builders ETF
The second largest ETF launched by amateur JP Morgan
- BBJP – The Japan ETF which drew 3.2 billion net inflows by the end of 2018.
- BBCA – It is the Canada ETF which drew 2.3 billion dollars by the year end
- BBEU – It is the Europe ETF, which drew 1.9 billion US Dollars in the second half of the year
- BBAX – the Asia ex-Japan ETF which was relatively new but managed to draw about 800 million dollars within the span of four months.
Barclays ETN+ FI Enhanced Global High Yield Exchange Traded Notes(ETN) Series B (FIYY)
The ETN Series B (FIYY) is an amazing developed bespoke product, for the usage of in-house strategies by the Fisher Investments Pvt, Ltd. The not-dependence on outside customer base, but instead having an already invested pool of assets turned out to be profitable. The total inflows are more than 1.4 billion US Dollars for the remainder of the year.
Barclays ETN+ FI Enhanced Europe 50 Exchange Traded Notes(ETN) Series C (FFEU)
Despite striking similarities with FIYY in terms of catering to the needs of in-house strategies, the total assets of FFEU are roughly half of the total assets of FIYY. Despite low assets, the total inflow of FFEU is more than 766 million US Dollars for the year, from August till the end.
PDR Gold MiniShares Trust (GLDM)
Based on the current economy, the GLD is one of the most popular ETFs overall with a net inflow of about 30 billion US Dollars. Launched in mid-June, it aimed to provide an alternative gold investment scheme, based on the trusted SDR system, where one GLD share represents 1/100th of an ounce of gold.It’s unique conception is well appreciated in the unstable Indian economy.
Few advantages of ETFs include diversification to a group of equities, stock-like trade, lower fees, immediately reinvested dividends, limited Capital Gains Tax and lower discount or Premium in Price. However, some of the negative aspects of ETFs include centralized diversification, intraday pricing (which is not beneficial to long term investors), not guaranteed cost margining and skewing of leveraged ETF returns. All of these combined; determine the utility of ETFs in general.