February 4, 2021
As more investors crowd into socially responsible investments, some are warning of a potential bubble forming in the environmental, social, and governance exchange traded fund category.
ESG-related ETFs attracted a record $85 billion across the U.S. and Europe over 2020, and the funds are still raking it in, Bloomberg reports. As more money flowed into these strategies, stocks in many of these funds are now trading at elevated price-to-earnings multiples that are increasingly hard to justify.
“There is a risk that holdings that populate ESG funds have become overvalued,” Chris Dyer, director of global equity at Eaton Vance, told Bloomberg. “Investors – both active and passive – are increasingly chasing these themes and driving valuation to uncomfortable levels in some cases. This type of naïve investing tends to end badly.”
Bank Stock ETFs Surge as Yields Rise, Economic Outlook Improves February 4, 2021
Financial stocks and sector-related exchange traded funds jumped Thursday as rising bond yields helped strengthen the appeal of bank stocks.
Among the better performing non-leveraged ETFs of Thursday, the
Yields on benchmark 10-year Treasury notes was up to 1.139% on Thursday, as talks of another round of fiscal stimulus progressed through Congress.
The financial sector has fallen behind the broader U.S. markets, but the segment is slowing gaining momentum. Since August, XLF has advanced 27% while KBE surged 47%. The S&P 500 was up 17% over the same period, CNBC reports.
While the XLF has seen “a very good short-term move,” its chart hasn’t yet confirmed a longer-term trend higher, according to Mark Newton, president and founder of Newton Advisors.
ETF of the Week: ERShares NextGen Entrepreneurs ETF (ERSX)
ETF Trends CEO Tom Lydon discussed the
ERShares Non-US Small Cap ETF (ERSX) on this week’s “ETF of the Week” podcast with Chuck Jaffe on the MoneyLife Show. [Note: ERShares announced a name changed for ERSX, as the fund is now the ERShares NextGen Entrepreneurs ETF effective February 5, however, this episode was recorded before said announcement.]
ERSX selects the most entrepreneurial, primarily Non-US Small Cap companies, that meet the thresholds embedded in their proprietary Entrepreneur Factor (EF). ERShares’ EF delivers strong performance across various investment strategies without disrupting investors’ underlying risk profile metrics. Their geographic diversity enables them to harness global advantages through additional returns associated with currency fluctuations, strategic geographic allocations, comparative trade imbalances, and relative supply/demand strengths.