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Ethical ETFs
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About Ethical ETFs |
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Ethical ETFs Overview and forecast
The Ethical ETFs are based on the same basic principles of ethical corporations
and other funds. These investments are tuned to investor values and principles,
like environmentalism, ethical treatment of animals, and alternative energies,
among others.
Ethical investments haven't been much in the headlines lately, except on the
subject of the lack of them in some corporations. Despite this the Ethical ETFs
have maintained a surprisingly credible presence in the markets. They, like
most other ETFs, followed the September to November 2008 nosedive,
following very much the market pattern, although one or two were slightly
shallower in their declines.
The Ethical ETFs are a bit of an enigma, in some ways. By ETF standards, they
trade well, and some of them seem slightly less shock- prone than other more
directly conventional investment classes. Their behavior is also not class-
based. They vary considerably among each other.
One of the difficulties in getting an instant handle on the Ethical ETFs is the
diversity of their investments. They're certainly ethical investments, but they
also cover a gamut of stocks. That hasn't stopped traders getting enthusiastic
enough to trade very large volumes of some Ethical ETFs, but it does make
analysis an acquired taste.
Ethical ETFs range from the iShares KLD 400 Social Index (DSI) ETF, with
holding which include monster corporations like Intel, Coca Cola, and JP
Morgan Chase Co, to Claymore/MAC Global Solar Energy (TAN), a solar
specialist with holdings in some very big Chinese and other national companies.
Short term (6 months)
Six months isn't quite long enough to believe that big capital will swing into
the Ethical ETFs. As you can see from the high quality holdings referred to
above, there's such a thing as being too close to the big guys when they fall
over, and that hurt some of the Ethical ETFs. Adjustments and investment
policies haven't yet returned to normal, and the markets won't put away the
Zimmer frame that soon.
The first quarter of 2009 was OK for most of the Ethical ETFs. However, in the
second quarter of 2009, their performance has been quite respectable, even
good. Those who bought in at the bottom have definitely had no reason for
complaint. As index performers, Claymore/MAC, for example, has been well
served by Suntech Power Holdings' (STP) strong showing.
Medium term (2 years)
It must be acknowledged that in two years, the Ethical ETFs stand to benefit
from a lot of the projected policies of the US government regarding alternative
energies, and other initiatives. That could be a factor which dovetails well with
a resurgent, and less paranoid, investment market. It's also reasonable to
assume the Ethical ETFs will benefit from a return to significant economic
growth, which even the more skeptical expect to resume in 2011-12.
Another factor affecting the Ethical ETFs will be their management strategies.
It's not unlikely that capital and size will become an issue, as the funds move
to do some growing of their own. Some funds may become predators, others
may decide to put on weight and increase size by aggressive marketing. That
will happen, it's really a matter of when. In the medium term the Ethical ETFs
are obvious candidates for some rapid evolution.
Long term (5 years)
The resilience of the Ethical ETFs is now apparent. They were a relatively
minor feature of the original flurry of ETF creation in 2007, but they're not in
any sense "cute" investments. The "fringe" tag doesn't apply to them. A quick
look at holdings would convince most people that they're well organized, and
quite well balanced as mixes.
Their Net Asset Values are generally strong, and several have distinct blue chip
characteristics, which will be healthy in the long term to encourage
investment. As trading funds, they don't seem to have had much difficulty in
trading in large volumes, even during the meltdown. They've been looking
quite popular, in the second quarter of 2009. Any additional market recovery
will act as reinforcement to basically well- built positions.
Qualifiers to projections
The Ethical ETFs haven't shown any particular weaknesses, as basic investment
vehicles. Their weak spot, if anything, is their profile. ETFs generally are still
relatively exotic, to market concepts, and the Ethical ETFs can appear as an
exotic form of an exotic species, not well understood by the retail market.
These ETFs are also still in their infancy, and it remains to be seen what active
management can do with them. It's possible that some faddish element could
emerge, creating bubbles in prices, based on holdings like solar, where a rumor
or so could produce hiccups and some bumpy moments. On the other hand,
active management, and good trading and investment, could do very well,
given the nature of some of these funds. Investors will need to keep an eye on
values and market neuroses, but the Ethical ETFs are looking positive.
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Last Updated on: 2010-01-14 02:03:40 |
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Quotes are updated automatically. Quotes are delayed. Etftips.com has not
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informational errors, incompleteness, or delays, or for any action taken in
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agree not to redistribute the information found herein. ETF Values can go up as
well as down.
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