Sunday, December 10, 2023
Hometrader talkIn with the new: Unusual ETFs in 2014

In with the new: Unusual ETFs in 2014

After a stellar run in 2013, you may be wondering how it can get even sweeter than a nearly 30 percent annual return, which is what you would have gained holding the SPDR S&P 500 ETF (SPY) last year.

One advantage of ETFs is that, because most are pegged to indexes and not actively managed, their low costs can be passed on to you, the investor. The expense ratio for the SPY, for example, is 0.09 percent; that's 90 cents for every $1,000 invested.

However, not all ETFs track indexes track plain vanilla indexes. Here are three somewhat offbeat ETFs that follow different paths.

Tracking the titans

Want to invest like hedge-fund titan Ray Dalio? What about Carl Icahn? There's an ETF for that.

The Global X Guru fund (GURU) tracks large hedge funds' portfolios, concentrating on U.S.-listed securities.

The good: GURU has rocketed 67 percent since its inception in 2012.

The bad: Its positions aren't entirely timely, since they are rebalanced quarterly.

Hedge funds aren't required to reveal their positions until 45 days after each calendar quarter ends. As a result, GURU's securities may be outdated by as many as 135 days.

The ugly: It doesn't necessarily reflect all of a hedge fund's strategy because the funds are only required to disclose their publicly-traded stock positions. Many funds hedge using derivatives, like options and futures, which they are not required to disclose.

Tracking the untapped

Looking to tap a virtually untapped market?

Getty Images

Try db X-trackers Harvest CSI 300 China A-Shares ETF (ASHR). This is a new fund, debuting in November of last year, that gives investors direct access to China's A-shares market, which consists of mainland Chinese companies that have been closed off to most foreign investors.

ASHR isn't the first of its kind. The Market Vectors China ETF (PEK) has provided access, but it's often traded at significant premiums.

Before buying ASHR, you should ask yourself whether you want to be exposed to the China A-shares market for reasons other than its exclusivity.

Consider these points:

  • Most prominent Chinese companies don't list in mainland China: they list in Hong Kong. If all you want is exposure to large-cap Chinese companies, you might want to try the more liquid iShares China Large Cap (FXI).
  • If you're looking for access to the currently-hot internet sector, almost all Chinese internet companies list in the U.S. ConsiderPowerShares Golden Dragon China ETF (PGJ).
  • State-owned enterprises (SOEs) make up a majority of the A-shares market. Since they are largely controlled by the Chinese government, these companies have traditionally been light on transparency.
  • ASHR isn't cheap. It has a relatively high expense ratio of 1.08 percent.

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