Exchange-traded fund (ETF) issuance has been rapid this year, as the universe has expanded by more than 13 percent. A total of 148 new ETFs have come to market in 2010 and 25 have folded, a net gain of 123 funds. Although investor sentiment has shifted from actively managed funds to passively managed index funds, assets under management by ETFs has swelled by more than $56 billion year-to-date to top $845 billion.

As I noted two weeks ago, that asset growth has been extremely profitable for asset managers such as Invesco (NYSE: IVZ) and State Street Corp (NYSE: STT). This trend continues to encourage the issuance of new products.

Barclay’s has launched an intriguing new exchange-traded note (ETN), Barclays ETN S&P VEQTOR (NYSE: VQT). The ETN will track an index made up of three components–equity, volatility and cash. The equity component will be represented by the S&P 500 Total Return Index; the S&P 500 VIX Short-Term Futures Index will comprise the volatility aspect of the portfolio.

The product is based on the premise that high volatility in the equity market tends to have a negative correlation with performance–when volatility goes up, returns usually go down. When volatility is low, a greater portion of the index will be allocated to the S&P 500; when volatility is high, a greater portion will be devoted to the VIX. When the volatility measure passes a particular threshold–such as if the index loses 2 percent or more of its value over any five consecutive trading days–the index will go to cash.

The general idea is that the ETN will allow investors to maintain broad equity market exposure while at the same time hedging against the downside. I expect the fund to lag the S&P 500 during strong, up-trending markets, but it could post positive returns in down markets.

Barclays ETN S&P VEQTOR has the potential to be an extremely useful innovation and could make a solid addition to the alternative/hedges sleeve of a portfolio. An expense ratio of 0.95 percent strikes me as reasonable for a product of this type. What remains to be seen is how the strategy performs in the real world.

Resource-based economies such as Canada, Australia and Brazil have performed much better than most as of late. But with a few exceptions, most resource-based economies are also emerging markets.

New Zealand is very much a developed nation that’s heavily dependent on soft commodities; the country’s principal exports are forestry products, dairy and other livestock products, fish and fruit. There’s also an abundance of aluminum and some crude oil in the country. In addition to abundant natural resources, New Zealand also boasts an extremely attractive stock market with an average dividend yield of 6 percent, a price-to-book ratio of less than 1.0 and price-to-earnings ratios that tend to fall into deep value territory.

Using a free-float adjusted market cap weighted index, the fund will hold around 23 names in total and charge an annual expense of 0.55 percent. It will also be the only pure-play New Zealand product. After three trading days, the fund is averaging more than 100,000 shares a day in volume, a sign that it’s catching on early with investors.