ETF Wrap: ‘Green’ ETFs are minting some green as the energy crisis sparks a boomlet in alternatives

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The good and…

…the bad

Clean in the green

Clean energy ETFs and other alternative fuel funds are on a mini tear, with at least five of the top 10 funds that ETF Wrap tracks via its screen underpinned by renewable assets.

Invesco Solar ETF, which comprises 46 solar-related companies, including the biggest holdings SolarEdge Technologies Inc.
SEDG,
+0.60%
and Enphase Energy Inc.
ENPH,
+0.33%,
has gained over 10%, so far this week, which is handily outperforming the Energy Select Sector SPDR ETF
XLE,
+1.22%,
up 0.3% so far this week. TAN, referencing the Invesco funds ticker symbol, has an expense ratio of 0.69%, which means that the fund will cost $6.90 annually for every $1,000 invested. (The much larger XLE has a expense ratio of 0.12% and has $25 billion in assets, versus TAN’s nearly $3 billion.)

Other green funds are also getting some shine.

Also in the Invesco suite, WilderHill Clean Energy
PBW,
-0.37%,
which tracks some 70 “clean energy” companies, including Tesla Inc.
TSLA,
+0.89%,
was up 6.3% thus far this week.

The iShares Global Clean Energy ETF
ICLN,
-0.39%
is up 6.8% on the week and ALPS Clean Energy ETF
ACES,
-0.73%
was up sizably too (table attached). We’ve already noted that uranium funds are exploding higher here and here, so we’ll leave it at that.

It is worth nothing that these funds are holding year-to-date losses, of at least 11%, though they are up over the 12-month period.

Hope that the Biden administration can finally push through an infrastructure spending bill is, perhaps, underpinning some of the newfound enthusiasm for clean energy ETFs. However, much of Biden’s economic initiatives, including infrastructure, are stalled in Congress because of divisions within the Democratic Party about spending, according to reports.

The crunch for energy that has caused a surge in fossil fuels is prompting a hunt for alternatives. Natural gas futures were trading around a seven-year high last week and U.S. oil futures for oil are near their highest level since 2014.

ProShares Ultra Bloomberg Natural Gas
BOIL,
+0.09%,
which offers exposure to the hot commodity is up over 270% year-to-date and nearly 100% over the past 12 months.

BlackRock’s new ETF

As all eyes are on 10-year Treasury yields
TMUBMUSD10Y,
1.516%
and the potential for the Federal Reserve to announce the start of tapering of its monthly asset purchases, BlackRock is rolling a new bond fund.

The iShares USD Bond Factor ETF tracks the BlackRock USD Bond Factor Index, and picks bonds that are underpriced relative to peers and exhibit lower probabilities of default, “using the quality and value stylefactors alongside macro factors.” For clarity, “factor” investing is built according to specific, predetermined characteristics of an asset such as value, growth, large-capitalization, or small-capitalization, to name a few.

Read:What is factor investing?

The fund, adding to the suite of such fixed-income offerings from BlackRock, carries a 0.18% expense ratio and the fund provider boasts that that is lower than 86% of mutual funds and ETFs in the Morningstar Core Bond category.

The underlying index has outperformed the Bloomberg US Aggregate bond and the Morningstar US Intermediate Core Bond indexes over the past six years or so.

But as they say in investing, past performance is no guarantee of future success, especially amid fears of an inflationary world in which bonds are expected to go pear shaped, with yields rising and prices skidding.

That said even with a sizable move higher in the 10-year toward 2%, analysts would deem bonds to be at historically low yields.

“Historically low yields heighten the importance of broadening potential sources of fixed income returns,” wrote Karen Schenone, head of iShares U.S. fixed-income strategy within BlackRock’s Global Fixed Income Group, in a statement.

Is there an ETF for that

Humankind U.S. Stock ETF
HKND,
+1.51%
is touting its road to $100 million after being launched back in February on the Intercontinental Exchange
ICE,
+0.31%
-owned NYSE’s Arca platform. The passively managed fund carries a razor-thin expense ratio of 0.11%.

Humankind Investment’s says it uses a proprietary Humankind US Equity Index that tracks the top 1,000 US companies that “promote healthier, safer, more equitable and longer lives.”

Notionally, the concepts may sound very hokey, but the inflows into the ETF do speak to the stunning growth and adoption of investments by folks aiming to match their returns with their values and beliefs.

The growth in environmental, social, and governance, however, isn’t without some skepticism. Earlier this week, the Securities and Exchange Commission recently said that it was looking closely at advisory firms that advertise investment strategies focused on environmental, social, and corporate-governance commitments.

“In a nutshell, I think across all advisor types and as well as looking at registered investment company investments, we’ll be looking at compliance programs, portfolio management, and marketing and advertising,” said Kristin Snyder, deputy director of the SEC’s Division of Examinations at an annual SEC Speaks conference.

For its part, Humankind founder James Katz wrote that “our fresh, quantitative approach to measuring human impact seems to be resonating with investors looking for a differentiated model within a sustainable fund landscape that’s often inauthentic and a mild repackaging of mainstream products.” 

Visual of the day

What happens when the QQQs, also known as the Invesco QQQ Trust Series I
QQQ,
+1.84%,
ends in its lowest quartile for four straight sessions?

The folks at Bespoke Investment Group said that the QQQs did just that on Tuesday, tying the second-longest streak in the history of the ETF. A dubious feat that the SPY, or SPDR S&P 500 ETF Trust
SPY,
+1.68%
had been on the precipice of notching until paring its losses on Tuesday.

In any case, despite the bearish-sound record, the QQQs have tended to perform very well after such downbeat streaks, according to Bespoke.

“One week later, QQQ’s median gain was 2.09% with positive returns two-thirds of the time. That compares to a gain of just 0.24% for all periods since 1999. For the one, three, six, and twelve-month periods, returns were similarly strong.”

On Tuesday, the Dow Jones Industrial Average
DJIA,
+1.56%,
the S&P 500
SPX,
+1.71%
and the Nasdaq Composite
COMP,
+1.73%
indexes booked a third straight decline but were seemingly on the mend, at last check, Thursday.

Check out the attached table:

Good ETF reads

—That’s a wrap