The U.S Exchange Traded Funds market has been a buzz of activities as investors eye broader market exposure to counter the exacerbated volatility levels. The uncertainty triggered by the COVID-19 pandemic has seen most investors turn to ETFs to diversify investment portfolios.
ETFs For IPOs
Likewise, the Initial Public market has also been heating up with new offerings coming online, from several high profile names. Buoyed by the impressive stock market amid the pandemic, investors have continued to invest in ETFs in a bid to gain exposure to some of the companies transitioning from private to public entities.
With high profile IPO’s scheduled before the end of the year, a number of ETFs are poised to edge even higher. Food delivery service DoorDash is one of the companies poised to make its much-awaited debut in the New York Stock Exchange. The company is seeking to raise $3.1 billion on the issuance of $33 million shares.
Airbnb, which has seen its core business come under pressure on the travel industry coming to a standstill, is also going public. The company seeks to raise $2.6 billion on the issuance of 51.9 million shares. Affirm holdings are another company that has filed an IPO as it seeks to raise $100 million with Enterprise artificial intelligence company C3.AI also going public.
While investing in multiple IPO’s can always prove a challenge, investors are increasingly tapping ETFs’ power to gain exposure. Renaissance IPO ETF IPO is one of the ETFs known to offer exposure to new IPOs. The fund offers exposure to the largest and most liquid newly listed companies. First Trust U.S Equity Opportunities ETF FPX also offers exposure to the largest and best performing U.S IPOs.
The ETF market is also poised to continue edging higher as the mergers and acquisition market heats up. For the better part of the year, corporate America has hoarded cash waiting to see how the pandemic fare’s on. In non-financial companies, cash holdings hit record highs of $2.1 trillion in June, up 30% year-over-year.
While M&A activity remains at historically depressed levels, the same looks to change as companies put to use the huge cash holdings at their disposal to use. Close to $313 billion in acquisitions has already been confirmed in the fourth quarter.
With M&A activity gathering steam, investors focus should be on SPDR Portfolio S&P 600 Small-Cap ETF (NYSEArca: SPSM), Vanguard Small-Cap Value Index Fund ETF Shares (NYSEArca: VBR), and iShares Core S&P Small-Cap ETF (IJR). The ETFs are best suited to offer exposure to small companies that could be potential acquisition targets.
Emerging Markets ETF
In addition to pursuing ETFs focused on small companies, investors can also pay close watch to ETFs that provide exposure to emerging markets as well as the burgeoning e-commerce sector. Growth in emerging markets has picked pace, with China leading the fray. Similarly, e-commerce is taking over the traditional retail sector, all but presenting unique investment opportunities.
Likewise, the Emerging Markets Internet & Ecommerce ETF (NYSEArca: EMQQ) continues to provide tremendous exposure to emerging markets and companies related to online retailers.