Several years ago, Dos Equis beer ran its “most interesting man in the world” ad campaign with a gray-bearded, debonair gentleman who could do no wrong. In that spirit, we present to you the “most interesting new ETFs in the world.” Or, at least. one man's take on the most interesting new ETFs that launched in 2019.

Some of the ETFs mentioned are upstarts and haven’t yet accumulated significant assets. They also lack the brand power of an iShares or SPDR fund. Nevertheless, they offer practical solutions for obtaining coverage to needed but overlooked and underserved markets. 

Just The Net Lease Please!

While many real estate investment trust funds contain net lease REITs as part of their holdings, NETL is a pure-play in this category.

The NETLease Corporate Real Estate ETF (NETL) screens for equity REITs that focus on leasing properties to single tenants under net leases that make tenants responsible for the payment of most, if not all, operating expenses. The “triple net lease"—whereby the tenant pays the property taxes, insurance and maintenance—is the most common type of net lease.

NETL contains 24 holdings with W.P. Carey, Realty Income Corp. and National Retail Properties the top three positions. The fund charges 0.60% annually, and has accumulated $38.2 million in assets since its debut in March.

Home Alone, Version 2.0

The problem with housing ETFs is their tendency to be dominated by heavyweights like home improvement retail giants Home Depot or Lowe’s, which distorts their exposure to the housing market. The Hoya Capital Housing ETF (HOMZ) aims to avoid this by making sure key stocks within key segments of the housing market are being tracked and that no single company has too much say.

HOMZ's underlying yardstick, the Hoya Capital Housing 100 Index, segregates its 100 stock holdings into four areas: home ownership and rental operations; home building and construction; home improvement and furnishings; and home financing, technology and services. The home ownership and home building subsectors receive a 30% fixed weighting while the remaining two subsectors are limited to a 20% weighting. The overall effect is a more balanced approach to U.S. housing exposure.

The U.S. real estate sector represents less than 3% of the S&P 500's exposure, and HOMZ offers a novel solution for getting direct exposure to the housing market portion of it. HOMZ began trading in March and has $9.3 million in assets. Its net expense ratio is 0.45%.

Being A “Nerd” With A Cause

It's no secret that gaming is one of the biggest trends within the technology sector. And the global gaming craze is expected to grow 9% annually through 2022. The problem is finding a way to get concentrated exposure to the trend.

The Roundhill BITKRAFT Esports & Digital Entertainment ETF (NERD) divides its sector exposure into media, hardware, games and broad-based companies with direct relevance to eSports and digital entertainment. And it invests across all market cap sizes.

Emerging industry groups like eSports can be problematic because the universe of companies to choose from is tiny and usually geographically concentrated in just one or two continents. As such, NERD deliberately takes a global approach and the fund’s largest country exposures are to China (21.3%), United States (19.2%) and Japan (10.2%).

NERD was introduced in June and has $10.7 million in assets. The fund charges annual expenses of 0.25%.

Growth And Value: United At Last

The next most interesting new ETFs are a pair of funds: the Direxion Russell 1000 Growth Over Value ETF (RWGV) and Direxion Russell 1000 Value Over Growth ETF (RWVG).

The interplay of growth and value is like the yin and yang of the investing world, and depending on the market's mood they’ve both had their moments in the sun. For ETF investors, being bullish on one style while simultaneously underweighting the other hasn’t been easy.  

For example, let's suppose you prefer value over growth. Instead of owning two different ETF positions with a long exposure to value stocks and a short exposure to growth stocks, the RWVG fund offers you one ETF solution for this same trade.

Specifically, RWVG's underlying portfolio has a 150% long exposure to the Russell 1000 Value Index and a 50% short exposure to the Russell 1000 Growth Index. The RWGV fund takes the opposite approach with a 150% long exposure to the Russell 1000 Growth Index and a 50% short exposure to the Russell 1000 Value Index.

Both ETFs launched in January and carry expense ratios of 0.46%. 


Summary


The “most interesting ETFs in the world” aren’t necessarily the biggest or most familiar names. But they might turn out to be ones that offer a much needed missing piece to your clients’ portfolios. 

Ron DeLegge is founder and chief portfolio strategist at ETFguide, and is the author of “Habits Of The Investing Greats.”