1. iShares
iShares is a family of ETFs issued and managed by BlackRock. The first iShares ETFs were known as World Equity Benchmark Shares (WEBS) but have since been rebranded. Each iShares fund tracks a bond or stock market index. Stock exchanges listing iShares funds include the London Stock Exchange, American Stock Exchange, New York Stock Exchange, BATS Exchange, Hong Kong Stock Exchange, Toronto Stock Exchange, Australian Securities Exchange, and a number of European and Asian stock exchanges. iShares is the largest issuer of ETFs in the US (over 350 ETFs) as well as globally.
In later 1990s American Stock Exchange launched Standard & Poor’s Depositary Receipts (NYSE Arca: SPY) (now the ‘SPDR S&P 500’) which was traded in real time and tracked the S&P 500 index. This was the first ETF to trade in the United States. In response, Morgan Stanley launched a series of ETFs called WEBS which tracked its MSCI foreign stock market indices. WEBS, an acronym for World Equity Benchmark Shares, were developed in cooperation with Barclays Global Investors, the fund manager. Unlike the SPDR fund that was a unit investment trust, the underlying vehicle of the WEBS were mutual funds.
In 2000, Barclays put a significant strategic effort behind growing the ETF market, launching over 40 new funds, branded as iShares, supported by an extensive education and marketing effort. The effort was led by Lee Kranefuss, who worked closely with the inventor of the ETF, Nate Most, at that time Chairman of the WEBs Board and an adviser to Barclays on the iShares effort. Most had retired from the American Stock Exchange some years earlier and settled in California. WEBS were soon renamed the iShares MSCI Series as part of that program.
On 7 November 2006, iShares announced the purchase of the INDEXCHANGE ETF unit of HypoVereinsbank for €240 million. This solidified the iShares position in Europe as the leading ETF provider.
Barclays added currency hedging features to the Canadian iShares, to distinguish them from US products in response to the elimination of limits on foreign holdings by Canadians in an RRSP. Barclays hedges currency changes in the Canadian – US exchange rate for the S&P 500 and the MSCI EAFE.
On 16 March 2009, Barclays confirmed that it was planning to sell iShares to CVC Capital Partners, a private equity firm that had agreed to pay more than $4 billion. However, under a 45-day “go shop” clause, a later bid by BlackRock was announced on 11 June 2009 for the whole of the parent division Barclays Global Investors including iShares, in a mixed cash-stock deal worth around US$13.5 billion (37.8 million shares of common stock and US$6.6 billion in cash). Now iShares is managed by BlackRock and has grown as the largest and most famous brand in ETF world. Ishares has over 350 ETFs in US and over 500(?) globally.
Popular iShares ETF in US:
EEM – iShares MSCI Emerging Markets ETF (EEM)
IWM – iShares Russell 2000 ETF (IWM)
EFA – iShares MSCI EAFE ETF (EFA)
EWZ – iShares MSCI Brazil Capped ETF (EWZ)
FXI – iShares China Large-Cap ETF (FXI)
2. PowerShares
Invesco PowerShares (formerly PowerShares Capital Management) is a boutique investment management firm based near Chicago which manages a family of exchange-traded funds or ETFs. The company has been part of Invesco, which markets the PowerShares product, since 2006.
Created in 2002, PowerShares funds use quantitative indices as a benchmark.There are currently over 150 PowerShares ETFs.
PowerShares cover and emulate a variety of market indices; for example, the PowerShares QQQ (NASDAQ: QQQ) is designed to replicate the NASDAQ-100 Index. The PowerShares QQQ is one of the most widely traded shares on the stock market.
PowerShares ETFs also cover the commodities market, diversified and tiny or microcap stocks. For instance, the PowerShares DB Commodity Index Tracking Fund, or DBC, which it developed with Deutsche Bank, allows for individual investors to invest in commodities by means of its ETF. The PowerShares DB Oil Fund (DBO) deals with the crude oil index.
Popular PowerShares ETF in US:
QQQ – PowerShares NASDAQ 100 ETF (QQQ)
DBC – PowerShares DB Commodity Tracking ETF (DBC)
KBWB – PowerShares KBW Bank ETF (KBWB)
SPLV – PowerShares S&P 500 Low Volatility ETF (SPLV)
PGX – PowerShares Preferred ETF (PGX)
3. ProShares
ProShares is a division of ProFunds Group that manages various investment funds with combined assets under management of $30 billion. This makes it a small provider compared to the giant asset managers running over $1 trillion. Nonetheless, ProShares offers unique funds that track different strategies and asset classes.
The company also offer dozens of different ETF products, all designed to perform specific speculative investment strategies. They are divided into three categories: short, ultra and alpha. Short ProShares behave inversely to the market, while Ultra ProShares amplify market performance by a factor of greater than one. The Alpha fund tracks the performance of the Credit-Suisse Index.
Leveraged ETFs applies a multiple of two or three to gain more robust daily or monthly returns than the underlying index. Conversely, inverse ETFs are designed to track an underlying index with a negative multiplier. The fund succeeds when the underlying asset performs poorly and during a bull market, the ETF will struggle. Geared funds (inverse and leveraged) are constructed for investors to take hedging and speculative positions without having to purchase derivatives. ProShares trade like any other ETF and can be purchased and sold like stocks.
ProShares offer over 140 different products across different asset classes, sectors, and market segments. Products grounded in asset classes seek to track the investment progress of equities, fixed income, commodities, and real estate, whereas sectors observe different industries and market segments follow emerging and developing markets as well as individual countries in Europe and Asia. ProShares ETFs also employ popular smart beta strategies like dividend growth to capture greater risk-adjusted returns than traditional market cap indexes. Below are some popular products under the ProShares umbrella:
- Ultra VIX Short-Term Futures ETF (UVXY): This fund seeks to double the daily performance of the S&P 500 VIX Short-Term Futures Index. It provides leverage exposure to the most followed volatility index.
- Ultra S&P 500 (SSO): One of the first products offered by ProShares, this fund attempts to double the returns of the S&P 500 Index for a single day, as measured from sequential NAV calculations.
ProShares ETFs are high risk with leverage or inverse feature and very speculative. It is very different from other ETFs. It does not fit regular investors’ strategy. We suggest the investors to do more researches before they invest in the leverage or inverse or volatility ETFs.
4. SPDR
SPDR funds (pronounced “spider”) are a family of exchange-traded funds (ETFs) traded in the United States, Europe, and Asia-Pacific and managed by State Street Global Advisors (SSGA). Informally, they are also known as Spyders or Spiders. SPDR is a trademark of Standard and Poor’s Financial Services LLC, a subsidiary of S&P Global.
The name is an acronym for the first member of the family, the Standard & Poor’s Depositary Receipts, now the SPDR S&P 500 (NYSE Arca: SPY), which is designed to track the S&P 500 stock market index. For a long time, this fund was the largest ETF in the world.
The funds are formulated as unit investment trusts. In 2007, SSGA rebranded its other United States ETFs as SPDRs, including the StreetTRACKS family and its other flagship ETF shares, the DOW DIAMONDS (NYSE Arca: DIA), that tracks the Dow Jones Industrial Average. This move united all U.S. ETFs managed by SSGA, a total of 23 at that time, under a single brand.
In 1995, Mid-Cap SPDRs (NYSE Arca: MDY) were launched by the Bank of New York to track Standard & Poor’s S&P 400 index of middle-market equity shares.
The DIAMONDS (NYSE Arca: DIA) were developed, like the original SPDR, by SSGA in cooperation with the American Stock Exchange. DOW DIAMOND shares are designed to track the Dow Jones Industrial Average.
In 1998, SSGA and Merrill Lynch introduced the Sector Spiders, which now consist of ten funds which follow the eleven GICS sectors of the S&P 500.Because the S&P 500 contains only four telecommunications companies, those companies are a part of the information technology SPDR (NYSE Arca: XLK), and that one fund represents those two sectors.
SSGA also launched a number of index-based ETFs under the brand StreetTRACKS. These were renamed SPDRs in 2007.
SSGA also manages ETFs that are sold on exchanges outside the United States.
Popular SPDR Sector ETFs:
SPY – SPDR® S&P 500 ETF (SPY)
XLF – Financial Select Sector SPDR® ETF (XLF)
XLE – Energy Select Sector SPDR® ETF (XLE)
XLU – Utilities Select Sector SPDR® ETF (XLU)
XLI – Industrial Select Sector SPDR® ETF (XLI)
XLB – Materials Select Sector SPDR® ETF (XLB)
XLK – Technology Select Sector SPDR® ETF (XLK)
XLRE – Real Estate Select Sector SPDR® (XLRE)
XLY – Consumer Discret Sel Sect SPDR® ETF (XLY)
XLP – Consumer Staples Select Sector SPDR® ETF (XLP)
XLV – Health Care Select Sector SPDR® ETF (XLV)
XTN – SPDR® S&P Transportation ETF (XTN)