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Some New ETFs Could Be Stars in 2013


The lack of new ETF quantity has been made up for in terms of quality.


Observers of the exchange-traded products industry know that 2012 has been long on closures, 99 to be a precise -- a record. They also know that new fund listings have reached "just" over 160 according to Lipper data; the slowest pace in several years.

However, an argument can be made that, broadly speaking, the lack of new ETF quantity has been made up for in terms of quantity. Said another way, while a fair amount of 2012's new ETFs have niche focuses, many have investment objectives that are easy to understand and are not as opaque as some critics would like to believe.

The good news for investors is that the straightforward investment objectives combined with quick success in terms of asset-gathering and performance bodes well for some of these ETFs on two levels. First, they could be equally if not more successful next year. Second, many of 2012's new ETFs look destined to be around for a while and not head to the ETF graveyard.

With that here is a review of some of the best new ETFs of 2012. Here, "best" means a combination of understandable investment objectives, asset-gathering proficiency and performance. Please not all of the successful new product launches of 2012 are included here.

PIMCO Total Return Exchange-Traded Fund (NYSEARCA:BOND): There is not much more praise that can be heaped upon the Bill Gross ETF. Following its February 29 inception date, BOND is on track to haul in $4 billion in assets. BOND is already the largest actively managed ETF and the ETF has delivered the goods in terms of performance since its debut. In fact, it has been better than the Total Return Mutual Fund, the world's largest bond fund. By returns, AUM and ease of understanding what this ETF tries to do, BOND has impressed. There is no arguing that.

iShares MSCI Global Select Metals & Mining Producers Fund (NYSEARCA:PICK): On the basis of performance, PICK has been lousy as it has tumbled about 18% since its early February debut. That is not because this ETF is a bad idea. PICK's woes are attributable to not enough of 2012 being a risk on year. Investors have been worried about the Chinese economy, the fiscal cliff, and a myriad of other issues that have hamstrung materials stocks.

PICK does deserve some credit for entering a crowded field (there is no shortage of equity-based mining ETFs) and proving adept at attracting assets. The fund has nearly $236 million and if 2013 brings a risk on flair, PICK could soar.

WisdomTree China Dividend Ex-Financials Fund (NASDAQ:CHXF): The WisdomTree China Dividend Ex-Financials Fund is another ETF that entered an arena fraught with competition. There are hundreds of ETFs that offer some exposure to China, and in terms of China-specific funds, that universe is dominated by the iShares FTSE China 25 Index Fund (NYSEARCA:FXI).

In other words, any new China-specific ETF that comes to market these days had better offer up something unique or risk being passed over in favor of more familiar fare. CHXF is unique. Not only does the fund feature a lower expense ratio than FXI, it excludes Chinese bank stocks in favor of Chinese equities with better dividend reputations. Up almost 8% since its September debut, CHXF is straightforward in its approach and has accumulated $29.4 million in assets.

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No positions in stocks mentioned.

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