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Russell research explores “defensive equity” and whether the market is mispricing risk
Report challenges the presumption that less risky stocks deliver lower returns
July 26, 2011- Recent research from Russell Investments observes that the market doesn't seem to offer a premium to adequately compensate investors who choose to invest in riskier stocks as opposed to more stable ("defensive") stocks. The report outlines a substantial body of evidence suggesting that a return premium for riskier stocks does not exist.
The standard theory of how markets work says that investors should only take extra risk if they think they are going to be compensated for doing so," said Bob Collie, chief research strategist, Americas Institutional, and one of the research authors. "But there's scant evidence that riskier stocks systematically outperform their defensive counterparts."
As for the explanation, several possible causes have been put forward. "There's good reason to believe that the widespread use of market-relative benchmarking by mutual funds and institutional investors is one contributing factor," adds Collie. "That's too entrenched and useful a practice for us to believe that it's going to go away any time soon. So we may continue to see the defensive effect persist in the future."
Based on these findings, the authors argue for a re-think of how investors run their investment programs, including the mandates and benchmarks that are given to investment managers and how they approach equity portfolio construction.
view Defensive equity: Is the market mispricing risk?
Source: Russell Investments
US money market funds build liquidity
July 26, 2011--US money market funds are stockpiling cash in case Congress fails to raise the debt ceiling, distorting the short-term market for US government debt and raising borrowing costs for banks and other financial institutions.
While the funds will continue to hold US Treasuries in the event of a downgrade or default, they are building up liquidity and shunning certain securities due to fears that a failure to raise the debt ceiling could trigger client redemptions.
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Source: FT.com
Inflation fears take their toll in Brazil
July 26, 2011--Brazil is shaping up to be one of this year’s worst-performing equity markets. A toxic combination of rising inflation and political interference in the country’s biggest companies has hampered public offerings. But it has also opened up buying opportunities.
In spite of the country’s booming economy, the Bovespa stock index is trading at about a 14-month low and foreign investment in the market fell 70 per cent in the first half of the year, central bank data show. The exchange operator itself has seen its shares tumble 25 per cent in 2011.
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Source: FT.com
Brown Brothers Harriman Goes Live On Fidessa's Trading Platform - Robust And Flexible System To Support Global Trading And Future Growth
Robust and flexible system to support global trading and future growth
July 26, 2011--Fidessa group plc (LSE: FDSA), provider of high-performance trading, investment management and information solutions for the world's financial community, has today announced that Brown Brothers Harriman (BBH) has successfully gone live with Fidessa's US sellside
trading system on a Software as a Service (SaaS) basis.
BBH will also be employing Fidessa’s
fully integrated global trading service. By automating workflow and allowing BBH to consolidate a
number of existing systems, the implementation will yield significant operational efficiency benefits.
read more
Source: Fidessa
BlackRock Launches The iShares COLCAP Exchange Traded Fund In Colombia - Firm Brings The First ETF To Colombian Investors
July 26, 2011--BLACKROCK ,the largest asset manager in the world, officially introduced to the Colombian market its first Exchange Traded Fund, iShares COLCAP, which invests in the 20 most liquid and largest stocks of the Colombian Stock Exchange that comprise the COLCAP index. The ETF was developed by BlackRock under its iShares brand, with the participation of CitiTRUST as the Fund’s Management Company. The Fund is based on the COLCAP index, developed and managed by the BVC
Daniel Gamba, CEO of BlackRock Latin America and Iberia and representatives of CitiTRUST and BVC introduced iShares COLCAP to the Colombian market with a traditional bell ringing at the beginning of the trading day (WHERE) . "iShares COLCAP is the first ETF listed on the BVC which represents a great opportunity to invest through a single transaction in the Colombian stock market which is one of the strongest and fastest growing economies in Latin America," said Gamba. "This demonstrates BlackRock's serious commitment towards the development of the Latin American markets and in particular to the Colombian market. "
The iShares COLCAP, which began trading in Colombia on July 6 on the Stock Exchange of Colombia (BVC, for its acronym in Spanish), seeks investment results that correspond generally to the price and yield performance of the COLCAP index.
With iShares COLCAP, BlackRock continues its business in Latin America, where it already has iShares ETFs authorized in countries such as Brazil, Mexico, Peru and Chile.
Source: BlackRock
U.S. Regulators Seek Public Input for a Joint CFTC-SEC Study on International Swap Regulation
July 25, 2011--The Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) have approved for publication in the Federal Register a request for comment that is expected to assist in conducting a joint study on international swap regulation.
Section 719(c) of the Dodd-Frank Wall Street Reform and Consumer Protection Act requires that the CFTC and the SEC jointly study and then report to Congress on swap regulation and clearinghouse regulation in the United States, Asia, and Europe. The report to Congress must identify areas of regulation that are similar and other areas of regulation that could be harmonized. In addition, the report must identify major swap contracts, dealers, exchanges, clearinghouses, and regulators in each geographic area, and must describe the methods for clearing swaps and systems used for setting margin in each area.
Comments must be received on or before 60 days after publication in the Federal Register.
Source: SEC.gov
Morgan Stanley -ETF Weekly Update
July 25, 2011-Weekly Flows: $4.2 Billion Net Inflows
ETF Assets at $1.1 Trillion, Up 12% YTD
No ETF Launches
FaithShares to Close Christian Values ETF
US-Listed ETFs: Estimated Flows by Market Segment
ETFs rebounded last week generating net inflows of $4.2 bln
US Equity ETFs experienced aggregate net inflows of $3.7 bln last week
Conversely, EM Equity ETFs posted net outflows of $465 mln last week, but still exhibited net inflows of $1.2 bln
over the past 13 weeks
ETF assets stand at $1.1 trillion, up 12% YTD; we estimate from both net new money and market appreciation
13-week flows remained mostly positive among asset classes; combined $30.4 bln net inflows
Fixed Income up $10.5 bln versus Commodities down $1.9 bln over the past 13 weeks
We estimate ETFs have generated net inflows 18 out of 29 weeks YTD; YTD net inflows of $70.8 bln
US-Listed ETFs: Estimated Largest Flows by Individual ETF
iShares Russell 2000 Fund (IWM) generated net inflows of $1.3 bln last week, the most of any ETF
Seven of the top 10 ETFs to post net inflows last week were US equity focused (four broad market ETFs, three
sector/industry ETFs)
Despite posting net outflows of $463 mln last week, the Vanguard MSCI Emerging Markets ETF (VWO) has
exhibited net inflows of $3.3 bln over the past 13 weeks (second largest of any ETF)
US-Listed ETFs: Change in Short Interest
Data Unchanged: Based on data as of 6/30/11
XLE exhibited the largest increase in USD short interest since last updated
Roughly $485 million in additional short interest
Highest level of shares short for XLE since 10/31/08
SPY exhibited the largest decline in USD short interest since last updated
Roughly $4.1 billion in reduced short interest
We note that two broad emerging market ETFs (EEM & VWO) exhibited $1.3 bln in reduced short interest
request report
Source: Morgan Stanley
Fundamentals: Equity Allocations: Thinking Outside of the Box
July 25, 2011-Investors typically use one of three "standard" strategies to construct their equity portfolios. But none of them is optimal. In the July issue of Fundamentals, we suggest an alternative approach of achieving superior equity performance. But it requires some "out-of-the-box" type thinking.
The phrase “thinking outside of the box” has become so overused in recent years as to become trite. And yet, how many investors actually deviate from the
norm with their equity allocations?
Indeed, most investors follow the
pack, implementing one of three
“standard” strategies.
read more
Source: Research Affiliates,
Faithshares Pulls Plug on Final Christian Values Fund
July 25, 2011--Faithshares is getting out of the Christian values exchange-traded fund business, confirming this week it will shutter its last remaining religious values-based ETF, the Christian Values Fund ETF (FOC), sometime next month.
Four other funds aimed at specific religious denominations -- including Catholics, Baptists, Lutherans and Methodists -- were closed in July.
“Partly it was a problem with a lack of marketing,” Faithshares CEO Garrett Stevens told On Wall Street. “We didn’t get out there as aggressively as we should have.”
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Source: On Wall Street
ETF Securities Marks Two-Year Anniversary in the U.S
July 25, 2011--ETF Securities has offered U.S. physically-backed precious metal exchange traded products (ETPs) since July 2009. In two years, the firm has grown its U.S. assets under management (AUM) to $4.2 billion as of July 19, 2011.
ETF Securities (ETFS), the leading global provider of commodity ETFs, celebrates its two-year anniversary as a U.S. exchange traded product (ETP) provider in July 2011. Its first product listed on the NYSE Arca, ETFS Physical Silver Shares (SIVR), has seen assets grow to $725M as of July 19, 2011, and offers the lowest management fee of any physically-backed silver ETF in the market.
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Source: ETF Securities
