S&P Likes Some "Young" ETFs

The pace of new ETF issuance has slowed in 2012, but several new funds might be worth considering according to S&P Capital IQ, which published a note that examined ETFs less than three-years-old. Six funds were highlighted in the note, with four earning Overweight ratings and two garnering Market-weight ratings. "While down slightly from the 111 equity ETF new issues in the 12-month period ended July 2011, the most recent one-year figure is up from two periods ago," S&P said. "We also see greater geographic diversification among the ETFs being issued: while the prior 12-month period saw a 60/40 split between U.S. and non-U.S. equities, the most recent 12 months saw those numbers practically reverse. Although lower in absolute numbers overall, this most recent period has seen absolute gains in the Global, Asia developed, and Europe developed regions, though only some of these funds receive a top rank of Overweight for combined performance, risk and cost factors." One of the "new" ETFs that S&P rates Overweight is the Market Vectors Oil Services ETF OIH, which is only new in its current form. Van Eck Global, the parent company of Market Vectors, acquired several of the old Merrill Lynch HOLDRs products in late 2011 and OIH was among that group. OIH re-emerged as a Market Vectors fund in December 2011 and is still the largest and most heavily traded ETF tracking oil services stocks such as Schlumberger SLB, Halliburton HAL and National Oilwell Varco NOV. The Schwab U.S. Dividend Equity ETF SCHD also earned an Overweight rating from S&P Capital IQ. With over $401 million in assets under management, SCHD is one of the more successful ETFs to come to market in the past year. The fund debuted in October 2011. SCHD charges 0.17 percent per year and its top-10 holdings include Wal-Mart WMT, Johnson & Johnson JNJ and Chevron CVX. The Schwab U.S. Broad Market ETF SCHB also landed an Overweight rating from S&P. SCHB, which will turn three-years-old in November, is home to $1 billion in assets under management. The fund competes with the Vanguard Total Stock Market ETF VTI and the SPDR Dow Jones Total Market ETF TMW, among others. S&P has a Market-weight rating on the wildly popular PowerShares S&P 500 Low Volatility Portfolio SPLV. The PowerShares S&P 500 Low Volatility Portfolio was an early entrant to the low volatility ETF game and has since become the largest, drawing in over $2.2 billion in AUM since its May 2011 debut. As a low volatility fund, more than 60 percent of SPLV's weight is devoted to utilities and staples stocks. The fund charges 0.25 percent per year. Another low volatility play, the iShares MSCI All Country World Minimum Volatility Index Fund ACWV, also received a Market-weight rating from S&P. The iShares MSCI All Country World Minimum Volatility Index Fund, which debuted in October 2011, has $442 million under management. ACWV is home to 265 stocks with a 53 percent weight to the U.S. The fund charges 0.35 percent per year. The Global X Norway ETF NORW, the dominant ETF tracking one of Europe's steadier economies, was also rated Overweight by S&P. NORW, which will enjoy its second birthday in November, has $43.7 million under management. Norway's state-run oil firm Statoil STO and oil services provider SeaDrill SDRL combine for over 29 percent of NORW's weight.