Best 6 ETFs for the end of 2023

In the recent quarter, there have been some significant trends in the ETF landscape, as highlighted by Morningstar. These developments offer an interesting insight into how investors might orient themselves in the ETF market towards the end of the year, while taking into account the uncertainties caused by new geopolitical tensions, particularly in the war between Israel and Palestine. Let’s analyze the current trends and the best 6 ETFs for the end of 2023.

The main trends of the end of 2023

In this context, Morningstar has identified six main trends:

• an increase in flows into equity ETFs despite the market decline;
• a growing interest in energy-related ETFs and a move away from those focused on financial services;
• a preference for government bond ETFs;
• the emergence of maturity funds in the ETF market;
• a decrease in flows towards sustainable ETFs, with a parallel interest in green bonds;
• the rise of new players in the active ETF industry.

These trends provide important insights into identifying the best ETFs aligned with these themes.

Energy ETFs

The iShares S&P 500 Energy Sector UCITS ETF (Acc)
The iShares S&P 500 Energy Sector UCITS ETF (Acc), launched on 20 November 2015, is a major player in the energy sector with 864 million euros (937 million USD) in assets under management. This ETF stands out by faithfully replicating the S&P 500 Capped 35/20 Energy index, which reflects the dynamics of the US energy sector according to the GICS sector classification, with maximum weighting limits of 35% for the largest company and 20% for the others. With a TER of just 0.15% per annum, it offers significant cost efficiency. Trading in US dollars without currency hedging has seen volatility of 25.40% over the past year. Its policy of accumulating dividends, reinvested in the ETF, makes it ideal for long-term investors aiming to capitalize on the growth of the energy sector.

Invesco US Energy Sector UCITS ETF
The Invesco US Energy Sector UCITS ETF launched on 16 December 2009, manages assets of approximately 75 million euros (81 million USD), specializing in the US energy sector. This ETF tracks the S&P Select Sector Capped 20% Energy Index, which reflects the U.S. energy sector, with a cap of 20% per individual stock.

With a low total expense ratio (TER) of 0.14% per annum, it offers an economical option in its field. The product adopts a synthetic replication strategy through an unfunded swap. This ETF, which trades in US dollars and without currency hedging, has shown a relatively high volatility of 25.55% over the past year. Its policy of accumulating dividends, reinvested in the ETF, makes it suitable for long-term investors interested in capitalizing on the dynamics of the energy sector.

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Government Bond ETFs

PIMCO Emerging Markets Advantage Local Bond Index UCITS ETF Acc
The PIMCO Emerging Markets Advantage Local Bond Index UCITS ETF Acc, launched on 19 September 2011, manages approximately 220 million euros (238 million USD) in assets, offering investors an opportunity to expose their portfolio to emerging bond markets. With a TER of 0.61% per annum, it is positioned as a fairly economical choice in its segment.

The sampling physical replication strategy aims to emulate the PIMCO Emerging Markets Advantage Local Currency Bond Index by concentrating investments in the most significant securities. This ETF, which trades in US dollars without currency hedging, showed an annual volatility of 7.50%, which is not particularly high. Adopt an accumulation policy, reinvesting returns to maximize long-term growth. It is an attractive choice for those seeking local currency exposure to emerging markets with a long-only approach.

UBS ETF (LU) J.P. Morgan EM Multi-Factor Enhanced Local Currency Bond
The UBS ETF (LU) J.P. Morgan EM Multi-Factor Enhanced Local Currency Bond UCITS ETF (USD) A-dis, with assets under management of approximately 50 million euros (54 million USD), represents an interesting opportunity in the panorama of ETFs dedicated to emerging markets. Launched on September 5, 2018, and based in Luxembourg, this ETF focuses on tracking the JP Morgan Emerging Markets Multi-Factor Enhanced Local Currency Bond Index. This index seeks to generate incremental returns by investing in local currency debt of emerging sovereign and quasi-sovereign entities, with a focus on low-maturity bonds (1-5 years) and employing momentum and carry strategies.

With an annual TER of 0.47%, rather convenient for the theme, it presents itself as an interesting product. the ETF uses a sampling physical replication method to track the index. The semi-annual dividend distribution policy makes it attractive for investors looking for regular income. This ETF, operating in US dollars without currency hedging and with an annual volatility of 7.79%, is ideal for those seeking targeted exposure to emerging markets with a long position-only approach and not too high volatility.

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Active ETFs

Fidelity Sustainable Research Enhanced US Equity
The Fidelity Sustainable Research Enhanced US Equity UCITS ETF Acc launched on 21 May 2020 and with assets under management of approximately €200 million euros (217 million USD), represents an innovative choice in the field of actively managed ETFs. Specializing in US equities, this ETF stands out for its emphasis on sustainability criteria and fundamental analysis in stock selection. C

With a total expense ratio (TER) of 0.30% per annum, it offers reasonable cost efficiency. Its full physical replication strategy ensures faithful tracking of the Fidelity Sustainable Research Enhanced US Equity Index. The policy of accumulating dividends, reinvested in the ETF, makes it suitable for long-term investors looking for sustainable impact combined with exposure to the US stock market. Operating in US dollars without currency hedging and with an annual volatility of 15.66%, the ETF will appeal to risk-conscious investors seeking an active and sustainable approach to equity investing.

The JPMorgan US Research Enhanced Index Equity (ESG) ETF

The JPMorgan US Research Enhanced Index Equity (ESG) UCITS ETF USD (acc), launched on 10 October 2018, stands out in the panorama of actively managed ETFs with impressive assets under management of approximately 3,840 million euros (4,159 million USD). This ETF invests in US companies or companies with significant economic activity in the United States, aiming to outperform the S&P 500. A distinctive aspect is its focus on ESG (Environment, Social, and Governance) integration, avoiding companies with negative ESG impacts or practices not aligned with the fund’s principles.

With a TER of just 0.20% per annum, the ETF offers significant cost efficiency. It adopts a full physical replication of the JP Morgan US Research Enhanced Index Equity (ESG) index, ensuring a faithful reproduction of the benchmark. The policy of accumulating dividends, reinvested in the ETF, makes it suitable for long-term investors interested in an active and responsible strategy. The ETF, operating in US dollars without currency hedging and with an annual volatility of 15.56%, is aimed at risk-conscious investors seeking an active and sustainable approach to equity investing.

Original article published on Money.it Italy 2023-11-17 12:32:00. Original title: 6 ETF su cui puntare entro la fine del 2023