That impressive growth has been driven by a solid performance by the markets and the economy. That performance has not only attracted more dollars into this asset class, it’s encouraged ETF issuers to slice and dice the investment markets ever more thinly, resulting in some rather esoteric offerings.

More choice is never a bad thing. And the ability to fine tune a portfolio’s exposures is part of what makes ETFs so useful for the individual investor. But not all of the newly launched funds will attract enough attention from investors to make them viable.

Tides ebb and flow. We’ve reached the high tide of new ETF issuance and competition within the industry. Expect a low tide marked by a raft of ETF closures later this year. Many of the funds that were launched in the wake of the financial crisis have been on the market for one year, a natural point for issuers to reevaluate these offerings’ profitability. A quick screen of the ETF universe reveals about 150 funds that most likely won’t make the cut; these funds lack the assets under management to make them profitable for their issuers.

These closures likely won’t inflict much harm on investors (see the March, 9, 2011, issue of ETF Weekly, “What Happens When an ETF Folds?”). But if you invest in ETFs with staying power, (see the May 25, 2011, issue of ETF Weekly “How to Choose the Best ETF”) you won’t fall victim to a closure in the first place.

What’s New

Exchange-traded fund issuers were busy last week as 20 funds hit the market. In this issue, I’ll cover a baker’s dozen of the most notable offerings.  

Russell Investments continued to add to its ETF stable by launching 10 ETFs focused on beta, momentum and volatility. The new funds are also divided between those that specialize in large-caps and ETFs that invest in small-cap companies.

The large-cap funds are:

• Russell 1000 Low Beta ETF (NYSE: LBTA)
• Russell 1000 High Beta ETF (NYSE: HBTA)
• Russell 1000 Low Volatility ETF (NYSE: LVOL)
• Russell 1000 High Volatility ETF (NYSE: HVOL)
• Russell 1000 High Momentum ETF (NYSE: HMTM)

The new small-cap funds are a mirror image of the large-cap offerings:

• Russell 2000 Low Beta ETF (NYSE: SLBT)
• Russell 2000 High Beta ETF (NYSE: SHBT)
• Russell 2000 Low Volatility ETF (NYSE: SLVY)
• Russell 2000 High Volatility ETF (NYSE: SHVY)
• Russell 2000 High Momentum ETF (NYSE: SHMO)

The beta-focused funds will hold stocks that sport high or low betas relative to their indexes, a strategy also adopted by the volatility-focused funds. The momentum-focused funds will hold stocks that have exhibited high intermediate-term momentum for the previous 250 trading days.

These funds will be useful for factor-driven investors. They won’t break the bank either. The large-cap funds charge an annual expense ratio of 0.49 percent while the small-cap offerings will charge 0.69 percent annually. Most of the volume in these funds will likely be driven by financial advisors and institutional investors.

Three PowerShares-branded funds launched last week, expanding the issuer’s ETF lineup to 154 offerings.

Holding about 60 individual issues, PowerShares Convertible Securities Portfolio (NYSE: CVRT) will charge an annual expense ratio of 0.35 percent and track a broad measure of the US convertible securities market, including investment grade and non-investment grade convertibles.

Convertible bonds combine the characteristics of stocks and bonds; they generally pay out fixed coupon rates but will convert into shares of common stock at target prices. By blending growth and income, convertibles have historically outperformed a wide range of bond and equity indexes.

PowerShares DB 3X Long US Dollar Index Futures ETN (NYSE: UUPT) and PowerShares DB 3X Short US Dollar Index Futures ETN (NYSE: UDNT) require little explanation. The funds will track the dollar’s performance against a basket of six global currencies: the euro, the British pound, the Japanese yen, the Canadian dollar, the Swiss franc and the Swedish krona. Both funds will charge an annual expense ratio of 0.95 percent.