Category Definitions

U.S. Equity

Large Blend

Large-blend ETFs are fairly representative of the overall U.S. stock market in size, growth rates, and price. Stocks in the top 70% of the capitalization of the U.S. equity market are defined as large cap. The blend style is assigned to ETFs where neither growth nor value characteristics predominate. These ETFs tend to invest across the spectrum of U.S. industries, and owing to their broad exposure, the ETFs' returns are often similar to those of the S&P 500 Index.

Large Growth

Large-growth ETFs invest primarily in big U.S. companies that are projected to grow faster than other large-cap stocks. Stocks in the top 70% of the capitalization of the U.S. equity market are defined as large cap. Growth is defined based on fast growth (high growth rates for earnings, sales, book value, and cash flow) and high valuations (high price ratios and low dividend yields). Most of these ETFs focus on companies in rapidly expanding industries.

Large Value

Large-value ETFs invest primarily in big U.S. companies that are less expensive or growing more slowly than other large-cap stocks. Stocks in the top 70% of the capitalization of the U.S. equity market are defined as large cap. Value is defined based on low valuations (low price ratios and high dividend yields) and slow growth (low growth rates for earnings, sales, book value, and cash flow).

Mid-Cap Blend

The typical mid-cap blend ETF invests in U.S. stocks of various sizes and styles, giving it a middle-of the-road profile. Most shy away from high-priced growth stocks but aren't so price-conscious that they land in value territory. The U.S. mid-cap range for market capitalization typically falls between $1 billion and $8 billion and represents 20% of the total capitalization of the U.S. equity market. The blend style is assigned to ETFs where neither growth nor value characteristics predominate.

Mid-Cap Growth

Some mid-cap growth ETFs invest in stocks of all sizes, thus leading to a mid-cap profile, but others focus on midsize companies. Mid-cap growth ETFs target U.S. firms that are projected to grow faster than other mid-cap stocks, therefore commanding relatively higher prices. The U.S. mid-cap range for market capitalization typically falls between $1 billion and $8 billion and represents 20% of the total capitalization of the U.S. equity market. Growth is defined based on fast growth (high growth rates for earnings, sales, book value, and cash flow) and high valuations (high price ratios and low dividend yields).

Mid-Cap Value

Some mid-cap value ETFs focus on medium-size companies while others land here because they own a mix of small-, mid-, and large-cap stocks. All look for U.S. stocks that are less expensive or growing more slowly than the market. The U.S. mid-cap range for market capitalization typically falls between $1 billion and $8 billion and represents 20% of the total capitalization of the U.S. equity market. Value is defined based on low valuations (low price ratios and high dividend yields) and slow growth (low growth rates for earnings, sales, book value, and cash flow).

Small Blend

Small-blend ETFs favor U.S. firms at the smaller end of the market-capitalization range. Some aim to own an array of value and growth stocks while others employ a discipline that leads to holdings with valuations and growth rates close to the small-cap averages. Stocks in the bottom 10% of the capitalization of the U.S. equity market are defined as small cap. The blend style is assigned to ETFs where neither growth nor value characteristics predominate.

Small Growth

Small-growth ETFs focus on faster-growing companies whose shares are at the lower end of the market-capitalization range. These ETFs tend to favor companies in up-and-coming industries or young firms in their early growth stages. Because these businesses are fast-growing and often richly valued, their stocks tend to be volatile. Stocks in the bottom 10% of the capitalization of the U.S. equity market are defined as small cap. Growth is defined based on fast growth (high growth rates for earnings, sales, book value, and cash flow) and high valuations (high price ratios and low dividend yields).

Small Value

Small-value ETFs invest in small U.S. companies with valuations and growth rates below other small-cap peers. Stocks in the bottom 10% of the capitalization of the U.S. equity market are defined as small cap. Value is defined based on low valuations (low price ratios and high dividend yields) and slow growth (low growth rates for earnings, sales, book value, and cash flow).

Sector Equity

Communications

Communications ETFs concentrate on telecommunications and media companies of various kinds. Most buy some combination of cable television, wireless-communications, and communications equipment firms as well as traditional phone companies. A few favor entertainment firms, mainly broadcasters, film studios, publishers, and online service providers.

Consumer Cyclical

Consumer cyclical ETFs seek capital appreciation by investing in equity securities of U.S. or non-U.S. companies in the consumer cyclical sector.

Consumer Defensive

Consumer defensive ETFs seek capital appreciation by investing in equity securities of U.S. or non-U.S. companies that are engaged in the manufacturing, sales, or distribution of consumer staples.

Energy Limited Partnership

Energy limited partnership ETFs invest a significant amount of their ETF in energy master limited partnerships. These include but are not limited to limited partnerships specializing in midstream operations in the energy industry.

Equity Energy

Equity energy ETFs invest primarily in equity securities of U.S. or non-U.S. companies who conduct business primarily in energy-related industries. This includes and is not limited to companies in alternative energy, coal, exploration, oil and gas services, pipelines, natural gas services, and refineries.

Equity Precious Metals

Precious-metals ETFs focus on mining stocks, though some do own small amounts of gold bullion. Most ETFs concentrate on gold-mining stocks, but some have significant exposure to silver-, platinum-, and base-metal-mining stocks as well. Precious-metals companies are typically based in North America, Australia, or South Africa.

Financial

Financial ETFs seek capital appreciation by investing primarily in equity securities of U.S. or non-U.S. financial-services companies, including banks, brokerage firms, insurance companies, and consumer credit providers.

Global Real Estate

Global real estate ETFs invest primarily in non-U.S. real estate securities but may also invest in U.S. real estate securities. Securities that these ETFs purchase include: debt securities, equity securities, convertible securities, and securities issued by real estate investment trusts (REITs) and REIT-like entities. ETFs in this category also invest in real estate operating companies.

Health

Health ETFs focus on the medical and health-care industries. Most invest in a range of companies, buying everything from pharmaceutical and medical-device makers to HMOs, hospitals, and nursing homes. A few ETFs concentrate on just one industry segment, such as service providers or biotechnology firms.

Industrials

Industrial ETFs seek capital appreciation by investing in equity securities of U.S. or non-U.S. companies that are engaged in services related to cyclical industries. This includes and is not limited to companies in aerospace and defense, automotive, chemicals, construction, environmental services, machinery, paper, and transportation.

Infrastructure

Infrastructure equity ETFs invest more than 60% of their assets in stocks of companies engaged in infrastructure activities. Industries considered to be part of the infrastructure sector include: oil & gas midstream; waste management; airports; integrated shipping; railroads; shipping & ports; trucking; engineering & construction; infrastructure operations; and the utilities sector.

Miscellaneous Sector

Miscellaneous-sector ETFs invest in specific sectors that do not fit into any of Morningstar’s existing sector categories and for which not enough ETFs exist to merit the creation of a separate category.

Natural Resources

Natural-resources ETFs focus on commodity-based industries such as energy, chemicals, minerals, and forest products in the United States or outside of the United States. Some ETFs invest across this spectrum to offer broad natural-resources exposure. Others concentrate heavily or even exclusively in specific industries. ETFs that concentrate primarily in energy-related industries are part of the equity energy category.

Real Estate

Real estate ETFs invest primarily in real estate investment trusts (REITs) of various types. REITs are companies that develop and manage real estate properties. There are several different types of REITs, including apartment, factory-outlet, health care, hotel, industrial, mortgage, office, and shopping center REITs. Some ETFs in this category also invest in real estate operating companies.

Technology

Technology ETFs buy high-tech businesses in the U.S. or outside of the U.S. Most concentrate on computer, semiconductor, software, networking, and Internet stocks. A few also buy medical-device and biotechnology stocks, and some concentrate on a single technology industry.

Utilities

Utilities ETFs seek capital appreciation by investing primarily in equity securities of U.S. or non-U.S. public utilities including electric, gas, and telephone-service providers.

Allocation

Aggressive Allocation

Aggressive allocation ETFs invest between 70% and 85% of total assets in equity securities; remaining assets are allocated among bonds or cash. ETFs in this group may focus on a wide range of market capitalization and valuation characteristics, though under normal market conditions they tend to maintain a fairly static asset allocation.

Conservative Allocation

Conservative allocation ETFs pursue exposure to each major asset class, with a preference for fixed income. These ETFs typically invest 20% to 50% of assets in equities, with the remainder focused on bonds and some cash. Relative exposure to each asset type typically falls within specified ranges.

Convertibles

Convertible-bond ETFs are designed to offer some of the capital-appreciation potential of stock ETFs while also supplying some of the safety and yield of bond ETFs. To do so, they focus on convertible bonds and convertible preferred stocks. Convertible bonds allow investors to convert the bonds into shares of stock, usually at a preset price. These securities thus act a bit like stocks and a bit like bonds.

Moderate Allocation

Moderate allocation ETFs distribute assets among all three major asset classes: equity, bonds and cash. These ETFs take a balanced approach, investing 50% to 70% of assets in equity securities and 30% to 50% in fixed income. Typically, exposure to each asset class remains within specified ranges.

Moderately Aggressive Allocation

Moderate allocation ETFs distribute assets among all three major asset classes: equity, bonds and cash. These ETFs take a balanced approach with a more aggressive tint, investing 50% to 70% of assets in equity securities and 30% to 50% in fixed income. Typically, exposure to each asset class remains within specified ranges.

Moderately Conservative Allocation

Moderate allocation ETFs distribute assets among all three major asset classes: equity, bonds and cash. These ETFs take a balanced approach with a more conservative tint, investing 50% to 70% of assets in equity securities and 30% to 50% in fixed income. Typically, exposure to each asset class remains within specified ranges.

Tactical Allocation

Tactical Allocation ETFs seek to provide capital appreciation and income by actively shifting allocations across investments. These ETFs have material shifts across equity regions, and bond sectors on a frequent basis. To qualify for the tactical allocation category, the ETF must have minimum exposures of 10% in bonds and 20% in equity. Next, the ETF must historically demonstrate material shifts in sector or regional allocations either through a gradual shift during three years or through a series of material shifts on a quarterly basis. Within a three-year period, typically the average quarterly changes between equity regions and bond sectors exceeds 15% or the difference between the maximum and minimum exposure to a single equity region or bond sector exceeds 50%.

International Equity

Diversified Emerging Mkts

Diversified emerging-markets ETFs tend to divide their assets among 20 or more nations, although they tend to focus on the emerging markets of Asia and Latin America rather than on those of the Middle East, Africa, or Europe. These ETFs invest predominantly in emerging market equities, but some ETFs also invest in both equities and fixed income investments from emerging markets.

Europe Stock

Europe-stock ETFs invest at least 70% of total assets in equities and invest at least 75% of stock assets in Europe. Most of these ETFs emphasize the region's larger and more developed markets, including Britain, the Netherlands, Germany, France, and Switzerland. Many also invest in the region's smaller markets, including the emerging markets of eastern Europe

Focused Region

Miscellaneous Region stock ETFs invest in countries or smaller regions that do not have their own category. They typically have a narrow geographical range.

Foreign Large Blend

Foreign large-blend ETF invest in a variety of big international stocks. Most of these ETFs divide their assets among a dozen or more developed markets, including Japan, Britain, France, and Germany. These ETFs primarily invest in stocks that have market caps in the top 70% of each economically integrated market (such as Europe or Asia ex-Japan). The blend style is assigned to ETFs where neither growth nor value characteristics predominate. These ETFs typically will have less than 20% of assets invested in U.S. stocks.

Foreign Large Growth

Foreign large-growth ETFs focus on high-priced growth stocks, mainly outside of the United States. Most of these ETFs divide their assets among a dozen or more developed markets, including Japan, Britain, France, and Germany. These ETFs primarily invest in stocks that have market caps in the top 70% of each economically integrated market (such as Europe or Asia ex-Japan). Growth is defined based on fast growth (high growth rates for earnings, sales, book value, and cash flow) and high valuations (high price ratios and low dividend yields). These ETFs typically will have less than 20% of assets invested in U.S. stocks.

Foreign Large Value

Foreign large-value ETFs invest mainly in big international stocks that are less expensive or growing more slowly than other large-cap stocks. Most of these ETF divide their assets among a dozen or more developed markets, including Japan, Britain, France, and Germany. These ETF primarily invest in stocks that have market caps in the top 70% of each economically integrated market (such as Europe or Asia ex-Japan). Value is defined based on low valuations (low price ratios and high dividend yields) and slow growth (low growth rates for earnings, sales, book value, and cash flow). These ETF typically will have less than 20% of assets invested in U.S. stocks.

Foreign Small/Mid Blend

Foreign small/mid-blend ETFs invest in a variety of international stocks that are smaller. These ETFs primarily invest in stocks that fall in the bottom 30% of each economically integrated market (such as Europe or Asia ex-Japan). The blend style is assigned to ETFs where neither growth nor value characteristics predominate. These ETFs typically will have less than 20% of assets invested in U.S. stocks.

Foreign Small/Mid Growth

Foreign small/mid-growth ETFs invest in international stocks that are smaller, growing faster, and higher-priced than other stocks. These ETFs primarily invest in stocks that fall in the bottom 30% of each economically integrated market (such as Europe or Asia ex-Japan). Growth is defined based on fast growth (high growth rates for earnings, sales, book value, and cash flow) and high valuations (high price ratios and low dividend yields). These ETFs typically will have less than 20% of assets invested in U.S. stocks.

Foreign Small/Mid Value

Foreign small/mid-value ETFs invest in international stocks that are smaller and less expensive than other stocks. These ETFs primarily invest in stocks that fall in the bottom 30% of each economically integrated market (such as Europe or Asia ex-Japan). Value is defined based on low valuations (low price ratios and high dividend yields) and slow growth (low growth rates for earnings, sales, book value, and cash flow). These ETFs typically will have less than 20% of assets invested in U.S. stocks.

Global Small/Mid Stock

World small/mid stock ETFs invest in a variety of international stocks that are smaller. World-stock ETFs have few geographical limitations. It is common for these ETFs to invest the majority of their assets in developed markets, with the remainder divided among the globe’s smaller markets. These ETFs typically have 20%-60% of assets in U.S. stocks.

Greater China Region

China-region stock ETFs invest almost exclusively in stocks from China, Taiwan, and Hong Kong. These ETFs invest at least 70% of total assets in equities and invest at least 75% of stock assets in one specific region or a combination of China, Taiwan, and/or Hong Kong.

India Equity

India-stock ETFs emphasize companies based in India. These ETFs invest at least 70% of total assets in equities and invest at least 75% of stock assets in India.

Japan Stock

Japan-stock ETFs emphasize companies based in Japan. The Japanese stock market is one of the largest in the world, so these ETFs' holdings vary significantly. Some ETFs concentrate on Japan's larger companies, while others concentrate on the nation's smaller firms. These ETFs invest at least 70% of total assets in equities and invest at least 75% of stock assets in Japan.

Pacific/Asia ex-Japan Stk

Pacific/Asia ex-Japan stock ETFs cover a wide geographic range. Most of these ETFs focus on export-oriented nations such as Hong Kong, Singapore, Taiwan, and Korea. These ETFs invest at least 70% of total assets in equities and invest at least 75% of stock assets in Pacific countries, with less than 10% in Japan.

Alternative

Systematic Trend

These ETFs primarily trade liquid global futures, options, swaps, and foreign exchange contracts, both listed and over the counter. A majority of these ETFs follow trend-following, price-momentum strategies. Other strategies included in this category are systematic mean-reversion, discretionary global macro strategies, commodity index tracking, and other futures strategies. More than 60% of the ETF's exposure is invested through derivative securities. These ETFs obtain exposure primarily through derivatives; the holdings are largely cash instruments.

Commodities

Commodities Broad Basket

Broad-basket ETFs can invest in a diversified basket of commodity goods including but not limited to grains, minerals, metals, livestock, cotton, oils, sugar, coffee, and cocoa. Investment can be made directly in physical assets or commodity-linked derivative instruments, such as commodity swap agreements.

Taxable Bond

Bank Loan

Bank-loan ETFs primarily invest in floating-rate bank loans and floating-rate below investment grade securities instead of bonds. In exchange for their credit risk, these loans offer high interest payments that typically float above a common short-term benchmark such as the London Interbank Offered Rate, or LIBOR.

Corporate Bond

Corporate bond ETFs concentrate on investment-grade bonds issued by corporations in U.S. dollars, which tend to have more credit risk than government or agency-backed bonds. These ETFs hold more than 65% of their assets in corporate debt, less than 40% of their assets in non-U.S. debt, less than 35% in below-investment-grade debt, and durations that typically range between 75% and 150% of the three-year average of the effective duration of the Morningstar Core Bond Index.

Emerging Markets Bond

Emerging-markets bond ETFs invest more than 65% of their assets in foreign bonds from developing countries. The largest portion of the emerging-markets bond market comes from Latin America, followed by Eastern Europe. Africa, the Middle East, and Asia make up the rest.

Emerging-Markets Local-Currency Bond

Emerging-markets local-currency bond ETFs invest more than 65% of their assets in foreign bonds from developing countries in the local currency. ETFs in this category have a mandate to maintain exposure to currencies of emerging markets. The largest portion of the emerging-markets bond market comes from Latin America, followed by Eastern Europe, Africa, the Middle East, and Asia.

Global Bond

World bond ETFs typically invest 40% or more of their assets in fixed-income instruments issued outside of the U.S. These ETFs invest primarily in investment-grade rated issues, but their strategies can vary. Some follow a conservative approach, sticking with high-quality bonds from developed markets. Others are more adventurous, owning some lower-quality bonds from developed or emerging markets. Some ETFs invest exclusively outside the U.S., while others invest in both U.S. and non-U.S. bonds. Many consistently maintain significant allocations to non-U.S. dollar currencies, while others have the flexibility to make sizeable adjustments between their U.S. dollar and non-U.S. currency exposures.

Global Bond-USD Hedged

USD hedged ETFs typically invest 40% or more of their assets in fixed-income instruments issued outside of the U.S. These ETFs invest primarily in investment-grade rated issues, but their strategies can vary. Some follow a conservative approach, sticking with high-quality bonds from developed markets. Others are more adventurous, owning some lower-quality bonds from developed or emerging markets. Some ETFs invest exclusively outside the U.S., while others invest in both U.S. and non-U.S. bonds. ETFs in this category hedge most of their non-U.S.-dollar currency exposure back to the U.S. dollar.

High Yield Bond

High-yield bond ETFs concentrate on lower-quality bonds, which are riskier than those of higher quality companies. These ETFs generally offer higher yields than other types of ETFs, but they are also more vulnerable to economic and credit risk. These ETFs primarily invest in U.S. high-income debt securities where at least 65% or more of bond assets are not rated or are rated by a major agency such as Standard & Poor's or Moody's at the level of BB (considered speculative for taxable bonds) and below.

Inflation-Protected Bond

Inflation-protected bond ETFs invest primarily in debt securities that adjust their principal values in line with the rate of inflation. These bonds can be issued by any organization, but the U.S. Treasury is currently the largest issuer for these types of securities.

Intermediate Core Bond

Intermediate-term core bond ETFs invest primarily in investment-grade U.S. fixed-income issues including government, corporate, and securitized debt, and hold less than 5% in below-investment-grade exposures. Their durations (a measure of interest-rate sensitivity) typically range between 75% and 125% of the three-year average of the effective duration of the Morningstar Core Bond Index.

Intermediate Core-Plus Bond

Intermediate-term core-plus bond ETFs invest primarily in investment-grade U.S. fixed-income issues including government, corporate, and securitized debt, but generally have greater flexibility than core offerings to hold non-core sectors such as corporate high yield, bank loan, emerging-markets debt, and non-U.S. currency exposures. Their durations (a measure of interest-rate sensitivity) typically range between 75% and 125% of the three-year average of the effective duration of the Morningstar Core Bond Index.

Intermediate Government

Intermediate-government ETFs have at least 90% of their bond holdings in bonds backed by the U.S. government or by government-linked agencies. This backing minimizes the credit risk of these ETFs, as the U.S. government is unlikely to default on its debt. These ETFs have durations typically between 3.5 and 6.0 years. Consequently, the group's performance—and its level of volatility—tends to fall between that of the short government and long government bond categories. Morningstar calculates monthly breakpoints using the effective duration of the Morningstar Core Bond Index in determining duration assignment. Intermediate is defined as 75% to 125% of the three-year average effective duration of the MCBI.

Long Government

Long-government ETFs have at least 90% of their bond holdings invested in bonds backed by the U.S. government or by government-linked agencies. This backing minimizes the credit risk of these ETFs, as the U.S. government is unlikely to default on its debt. They are not risk-free, though. Because these ETFs have durations of typically more than 6.0 years, they are more sensitive to interest rates, and thus riskier, than ETFs that have shorter durations. Morningstar calculates monthly breakpoints using the effective duration of the Morningstar Core Bond Index in determining duration assignment. Long term is defined as 125% of the three-year average effective duration of the MCBI.

Long-Term Bond

Long-term bond ETFs invest primarily in investment-grade U.S. fixed-income issues including government, corporate, and securitized debt. Their durations (a measure of interest-rate sensitivity) typically range above 125% of the three-year average of the effective duration of the Morningstar Core Bond Index.

Multisector Bond

Multisector-bond ETFs seek income by diversifying their assets among several fixed-income sectors, usually U.S. government obligations, U.S. corporate bonds, foreign bonds, and high-yield U.S. debt securities. These ETFs typically hold 35% to 65% of bond assets in securities that are not rated or are rated by a major agency such as Standard & Poor's or Moody's at the level of BB (considered speculative for taxable bonds) and below.

Nontraditional Bond

Inclusion in nontraditional bond is informed by a balance of factors determined by Morningstar analysts. Those typically include a mix of: absolute return mandates; goals of producing returns not correlated with the overall bond market; performance benchmarks based on ultrashort-term interest rates such as Fed ETFs, T-bills, or Libor; the ability to use a broad range of derivatives to take long and short market and security-level positions; and few or very limited ETF constraints on exposure to credit, sectors, currency, or interest-rate sensitivity. ETFs in this group typically have the flexibility to manage duration exposure over a wide range of years and to take it to zero or a negative value.

Preferred Stock

Preferred stock ETFs concentrate on preferred stocks and perpetual bonds. These ETFs tend to have more credit risk than government or agency backed bonds, and effective duration longer than other bond ETFs. These ETFs hold more than 65% of assets in preferred stocks and perpetual bonds.

Short Government

Short-government ETFs have at least 90% of their bond holdings in bonds backed by the U.S. government or by government-linked agencies. This backing minimizes the credit risk of these ETFs, as the U.S. government is unlikely to default on its debt. These ETFs have durations typically between 1.0 and 3.5 years, so they have relatively less sensitivity to interest rates and, thus, low risk potential. Morningstar calculates monthly breakpoints using the effective duration of the Morningstar Core Bond Index in determining duration assignment. Short is defined as 25% to 75% of the three-year average effective duration of the MCBI.

Short-Term Bond

Short-term bond ETFs invest primarily in corporate and other investment-grade U.S. fixed-income issues and typically have durations of 1.0 to 3.5 years. These ETFs are attractive to conservative investors, because they are less sensitive to interest rates than ETFs with longer durations. Morningstar calculates monthly breakpoints using the effective duration of the Morningstar Core Bond Index in determining duration assignment. Short-term is defined as 25% to 75% of the three-year average effective duration of the MCBI.

Target Maturity

Taxable target maturity ETFs typically invest in corporate and other taxable U.S. investment-grade fixed-income instruments that are all expected to mature in the same year.

Ultrashort Bond

Ultrashort-bond ETFs invest primarily in investment-grade U.S. fixed-income issues and have durations typically of less than one year. This category can include corporate or government ultrashort bond ETFs, but it excludes international, convertible, multisector, and high-yield bond ETFs. Because of their focus on bonds with very short durations, these ETFs offer minimal interest-rate sensitivity and therefore low risk and total return potential. Morningstar calculates monthly breakpoints using the effective duration of the Morningstar Core Bond Index in determining duration assignment. Ultrashort is defined as 25% of the three-year average effective duration of the MCBI.

Municipal Bond

High Yield Muni

High-Yield Muni ETFs typically invest a substantial portion of assets in high-income municipal securities that are not rated or that are rated at the level of or below BBB (considered high-yield within the municipal-bond industry) by a major ratings agency such as Standard & Poor's or Moody's.

Muni California Intermediate

Muni California intermediate ETFs invest at least 80% of assets in California municipal debt. Because the income from these bonds is generally free from federal taxes and California state taxes, these ETFs are most appealing to residents of California. These ETFs have durations of 4.0 to 6.0 years (or average maturities of five to 12 years).

Muni California Long

Muni California long ETFs invest at least 80% of assets in California municipal debt. Because the income from these bonds is generally free from federal taxes and California state taxes, these ETFs are most appealing to residents of California. These ETFs have durations of more than 6.0 years (or maturities of more than 12 years).

Muni National Interm

Muni national intermediate ETFs invest in bonds issued by various state and local governments to fund public projects. The income from these bonds is generally free from federal taxes. To lower risk, these ETFs spread their assets across many states and sectors. These ETFs have durations of 4.0 to 6.0 years (or average maturities of five to 12 years).

Muni National Long

Muni national long ETFs invest in bonds issued by various state and local governments to fund public projects. The income from these bonds is generally free from federal taxes. To lower risk, these ETFs spread their assets across many states and sectors. These ETFs have durations of more than 6.0 years (or average maturities of more than 12 years).

Muni National Short

Muni national short ETFs invest in bonds issued by state and local governments to fund public projects. The income from these bonds is generally free from federal taxes and/or from state taxes in the issuing state. To lower risk, some of these ETFs spread their assets across many states and sectors. Other ETFs buy bonds from only one state in order to get the state-tax benefit. These ETFs have durations of less than 4.0 years (or average maturities of less than five years).

Muni New York Intermediate

Muni New York intermediate ETFs invest at least 80% of assets in New York municipal debt. Because the income from these bonds is generally free from federal taxes and New York state taxes, these ETFs are most appealing to residents of New York. These ETFs have durations of 4.0 to 6.0 years (or average maturities of five to 12 years).

Muni New York Long

Muni New York long ETFs invest at least 80% of assets in New York municipal debt. Because the income from these bonds is generally free from federal taxes and New York state taxes, these ETFs are most appealing to residents of New York. These ETFs have durations of more than 6.0 years (or average maturities of more than 12 years).

Muni Target Maturity

Muni target maturity ETFs typically invest in bonds issued by various U.S. state and local governments to fund public projects, all of which are expected to mature in the same year. The income from these bonds is generally free from federal taxes.

Nontraditional Equity

Long-Short Equity

Long-short ETFs hold sizeable stakes in both long and short positions in equities, exchange-traded ETFs, and related derivatives. Some ETFs that fall into this category will shift their exposure to long and short positions depending on their macro outlook or the opportunities they uncover through bottom-up research. At least 75% of the assets are in equity securities or derivatives, and ETFs in the category will typically have beta values to relevant benchmarks of between 0.3 and 0.8 during a three-year period.

Miscellaneous

Single Currency

Currency ETFs invest in a single currency through the use of short-term money market instruments; derivative instruments including and not limited to forward currency contracts, index swaps, and options; and cash deposits.

Trading--Inverse Commodities

These ETFs seek to generate returns equal to an inverse multiple of short-term returns of a commodity index. The compounding of short-term returns results in performance that does not correspond to those of investing in the index with external leverage. For example, a ETF attempting to achieve negative 2 times the returns of a given index on a daily basis is unlikely to deliver anything like negative 2 times the index’s returns over periods longer than one day. Many of these ETFs seek to generate a multiple typically negative 1 to negative 3 times of the daily or weekly return of the reference index. Trading ETFs are not considered suitable for a long-term investor and are designed to be used by active traders.

Trading--Inverse Debt

These ETFs seek to generate returns equal to an inverse fixed multiple of short-term returns of a fixed income index. The compounding of short-term returns results in performance that does not correspond to those of investing in the index with external leverage. For example, a ETF attempting to achieve negative 2 times the returns of a given index on a daily basis is unlikely to deliver anything like negative 2 times the index’s returns over periods longer than one day. Many of these ETFs seek to generate a multiple typically negative 1 to negative 3 times of the daily or weekly return of the reference index. Trading ETFs are not considered suitable for a long-term investor and are designed to be used by active traders.

Trading--Inverse Equity

These ETFs seek to generate returns equal to an inverse fixed multiple of short-term returns of an equity index. The compounding of short-term returns results in performance that does not correspond to those of investing in the index with external leverage. For example, a ETF attempting to achieve negative 2 times the returns of a given index on a daily basis is unlikely to deliver anything like negative 2 times the index’s returns over periods longer than one day. Many of these ETFs seek to generate a multiple typically negative 1 to negative 3 times the daily or weekly return of the reference index. Trading ETFs are not considered suitable for a long-term investor and are designed to be used by active traders.

Trading--Leveraged Commodities

These ETFs seek to generate returns equal to a fixed multiple of short-term returns of a commodity index. The compounding of short-term returns results in performance that does not correspond to those of investing in the index with external leverage. For example, an ETF attempting to achieve 2 times the returns of a given index on a daily basis is unlikely to deliver anything like 2 times the index’s returns over periods longer than one day. Many of these ETFs seek to generate a multiple of the daily or weekly return of the reference index. Trading ETFs are not considered suitable for a long-term investor and are designed to be used by traders.

Trading--Leveraged Debt

These ETFs seek to generate returns equal to a fixed multiple of the short-term returns of a fixed income index. The compounding of short-term returns results in performance that does not correspond to those of investing in the index with external leverage. For example, an ETF attempting to achieve 2 times the returns of a given index on a daily basis is unlikely to deliver anything like 2 times the index’s returns over periods longer than one day. Many of these ETFs seek to generate a multiple of the daily or weekly return of the reference index. Trading ETFs are not considered suitable for a long-term investor and are designed to be used by active traders.

Trading--Leveraged Equity

These ETFs seek to generate returns equal to a fixed multiple of the short-term returns of an equity index. The compounding of short-term returns results in performance that does not correspond to those of investing in the index with external leverage. For example, an ETF attempting to achieve 2 times the returns of a given index on a daily basis is unlikely to deliver anything like 2 times the index’s returns over periods longer than one day. Many of these ETFs seek to generate a multiple of the daily or weekly return of the reference index. Trading ETFs are not considered suitable for a long-term investor and are designed to be used by active traders.

Trading--Miscellaneous

These ETFs seek to generate returns equal to a fixed multiple (positive or negative) of short-term returns of an index. The reference index for this category is not equity, fixed-income, or commodity linked. The compounding of short-term returns results in performance that does not correspond to those of investing in the index with external leverage. For example, an ETF attempting to achieve 2 times the returns of a given index on a daily basis is unlikely to deliver anything like 2 times the index’s returns over periods longer than one day. Many of these ETFs seek to generate a multiple of the daily or weekly return of the reference index. Trading ETFs are not considered suitable for a long-term investor and are designed to be used by active traders.