New exchange-traded funds must endure a brutal Darwinian struggle for attention and assets. To attract enough capital to survive amid the competition, new ETFs need a good investment idea and a catchy marketing approach. Those were but some of the takeaways I gathered from speaking with folks attending various sessions at the giant Inside ETFs conference in Hollywood, Florida, earlier this week.
Eric Balchunas, an ETF analyst at Bloomberg Intelligence, notes that during the past five years, 1,050 ETFs have launched. During the same period, more than 900 ETFs have folded. Their average lifespan is just 3.4 years.
My pet theory is that for a new ETF to succeed, it needs more than luck, deep-pocketed backers and a rational, defendable methodology for assembling assets into a bundle.
It also helps -- believe it or not -- to have a memorable, descriptive stock ticker. Research has shown that stocks with these types of ticker symbols and pronounceable names have a higher valuation than those that don’t.
Consider for example, the VanEck Vectors Agribusiness ETF, with the symbol MOO; it has attracted $764.2 million since it was introduced in 2007.
Here are some of the more memorable tickers I learned about or overheard other people discussing at the conference:
JUST: Billionaire Paul Tudor Jones is behind the nonprofit Just Capital, which uses a novel method of stock selection. It polls the American public about issues that are their greatest concerns, then uses that data to help pick companies. Most recently, some of the top concerns included fair pay for workers, customer privacy, reasonable cost and quality of products and so on. Since the ETF started in 2016, it has outperformed the benchmark Russell 1000.
KRMA: Global X Conscious Companies ETF was “designed to provide investors an opportunity to invest in well-managed companies that achieve financial performance in a sustainable and responsible manner.” Since 2016 it has attracted about $57 million.
BOON: The Pickens Oil Response ETF takes it ticker from oilman T. Boone Pickens, whose name, according to the fund, “is synonymous with energy investing and ETF stock industry thought leadership.”
PUTW: The WisdomTree CBOE S&P 500 PutWrite Strategy Fund is based on the well-established option strategy in a low-cost, tax-efficient ETF wrapper. Theoretically, the option premiums yield higher returns in a market where prices change little. It has accumulated $242 million in assets since launching in 2016.