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Understanding the Master Limited
October 28, 2013--In the last five years, we have seen significant growth of Master Limited Partnership (MLP) investments within both the mutual
fund and alternative investment sectors. Whether you are
interested in increasing your exposure to MLP investments within your existing funds or are considering structuring a fund that focuses primarily on MLPs, there are several factors that
should be considered.
U.S. Bancorp Fund Services offers
consultative support and tax preparation services for multiple
fund structures that invest in MLPs.
General Characteristics of MLPs
MLPs are generally considered publicly traded partnerships (PTPs) that are sold on a primary or secondary
market or exchange where they are priced throughout an open day of trading, much like a typical corporate stock. PTPs are traded in units rather than in shares, but because of their corporate open market trading
characteristics, they can be classified as corporations for U.S. financial reporting and tax purposes.
The IRS allows MLPs that derive 90 percent or more of their annual gross income amount from passive sources to be classified as Qualified Publicly Traded Partnerships (QPTPs). While PTPs that fail to qualify as QPTPs are taxed as corporations for U.S. tax purposes, QPTPs are taxed as partnerships. Because QPTP classification is based on an annual fiscal gross income test, MLP designation as a taxable corporation or partnership can change, and therefore must be monitored. MLPs that are U.S. corporations for tax purposes issue annual 1099 income reporting statements to their underlying investors, while MLPs taxed as partnerships issue K-1 statements.
Currently a significant portion of MLPs are classified as oil, gas, or other types of energy exploratory companies. Per the National Association of PTPs (NAPTP), there has been significant growth in total U.S. MLP structures over the past five years. See the illustration below for the current industry composite of MLPs.
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Source: U.S. Bancorp Fund Services
DB-Synthetic Equity & Index Strategy-North America-US ETF Market Weekly Review-Equity dominated the weekly flows with +$8.7bn in new cash
October 28, 2013--Data in this report is as of Friday, October 25
Market and Net Cash Flows Review
Markets were mixed during last week. The US (S&P 500) edged higher by 0.88%; while, outside the US, the MSCI EAFE (in USD) rose by 0.44% and the MSCI EM (USD) dropped by 1.41%. In the meantime, performance was mostly positive across US sectors. The Industrials (+2.22%) and Utilities (+2.00%) sectors recorded the largest weekly gains; while, Energy (-0.41%) and Financials (-0.35%) recorded the only decreases. The DB Liquid Commodity Index fell by 1.53%; Similarly, the Agriculture sector (DB Diversified Agriculture Index) and the WTI Crude Oil retreated by 0.64% and 2.94%, respectively; meanwhile, Gold and Silver prices rose by 2.62% and 2.80%, respectively. Moving into other asset classes, the 10Y US Treasury Yield dropped by 7 bps ending at 2.53%. Last but not least, Volatility (VIX) rose slightly (+0.38%) during the same period.
The total US ETP flows from all products registered $9.3bn (+0.6% of AUM) of inflows during last week vs. $14.7bn (+0.9%) of inflows the previous week, setting the YTD weekly flows average at +$3.5bn (+$149.2bn YTD in total cash flows).
Equity, Fixed Income and Commodity ETPs experienced flows of +$8.7bn (+0.7%), +$0.8bn (+0.3%) and -$0.2bn (-0.3%) last week vs. +$15.2bn (+1.2%), -$0.1bn (-0.0%) and -$0.5bn (-0.8%) in the previous week, respectively.
Among US sectors, Information Technology (+$0.4bn, +1.7%) and Energy (+$0.3bn, +1.0%) received the top inflows.
Top 3 ETPs & ETNs by inflows: MDY (+$0.8bn), EEM (+$0.8bn), EFA (+$0.7bn)
Top 3 ETPs & ETNs by outflows: SPY (-$2.9bn), VWO (-$0.4bn), GLD (-$0.4bn)
New Launch Calendar: US Sectors, robotics and broad commodities
There were twelve new ETPs listed during the previous week. Fidelity listed ten new ETFs offering exposure to each one of the GICS US sectors; meanwhile, Exchange Traded Concepts launched an ETF which offers thematic exposure to robotics and automation related companies; Last but not least, First Trust listed an actively manage ETV which offers broad exposure to commodities.
Turnover Review: Floor activity decreased by 16.8%
Total weekly turnover decreased by 16.8% to $273.3bn vs. $328.7bn from the previous week. However, last week's turnover level was 1.4% over last year's weekly average. Equity, Fixed Income and Commodity ETPs turnover decreased by $52.9bn (-17.7%), $0.9bn (-5.0%) and $0.1bn (-0.6%) during the same period, respectively.
Assets under Management (AUM) Review: assets increased by 1.1%
US ETP assets rose by $17.7bn (+1.1%) totaling $1.623 trillion at the end of the week. As of last Friday, US ETPs had accumulated an asset growth of +21.7% YTD. Assets for Equity, Fixed Income and Commodity ETPs moved +$15.2bn, +$1.6bn and +$0.8bn during last week, respectively.
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Source: Deutsche Bank-Synthetic Equity & Index Strategy-North America
Morgan Stanley-US ETF Weekly Update
October 28, 2013--Highlights
Weekly Flows: $9.0 Billion Net Inflows
ETF Assets Stand at $1.6 Trillion, up 21% YTD
12 ETF Launches Last Week
EGShares Beyond BRICs ETF (BBRC) Changes Benchmark
Guggenheim BRIC ETF (EEB) Undergoes Benchmark Tweak
Vanguard S&P 500 ETF (VOO) Experiences 1 for 2 Reverse Split
US-Listed ETFs: Estimated Flows by Market Segment
ETFs posted net inflows of $9.0 bln last week; third consecutive week of net inflows
Last week’s net inflows were led by International - Developed ETFs at $3.3 bln; conversely, US Large-Cap ETFs posted net outflows of $1.8 bln, the most of any category we measured
ETFs have exhibited net inflows 29 out of 43 weeks YTD
ETF assets stand at $1.6 tln, up 21% YTD; $146.9 bln net inflows YTD
13-week flows remain mostly positive among asset classes; combined $39.7 bln in net inflows
International - Developed ETFs generated net inflows of $20.8 bln over the last 13 weeks, the most of any category we measured; European ETFs or international equity ETFs with significant European exposure were the primary driver to the category’s large net inflows
Over the last 13 weeks, Fixed Income ETFs have posted net outflows of $4.6 bln; however, over this time period, there have been weeks when Fixed Income ETFs managed net inflows (last week posted net inflows of $659 mln)
US-Listed ETFs: Estimated Largest Flows by Individual ETF
SPDR S&P MidCap 400 ETF (MDY) posted net inflows of $789 mln this past week, the most of any ETF
The iShares MSCI Emerging Markets ETF (EEM) generated $754 mln in net inflows last week, trailing only MDY; over the last 13 weeks, EEM has exhibited net inflows of $5.5 bln, the most of any ETF
Notably, the Vanguard FTSE Emerging Markets ETF (VWO), also a broad emerging markets fund similar to EEM, posted net outflows over the last 1-, 4-, and 13-week periods; EEM is typically seen as a more institutional product whereas VWO is viewed to be used by more retail clients based on its relatively lower cost and trading volume -We continue to see strong net inflows into Europe as the trade becomes consensus; specifically, two pure plays on Europe, the Vanguard FTSE Europe ETF (VGK) and the SPDR EURO STOXX 50 ETF (FEZ) exhibited a combined $904 mln in net inflows last week
US-Listed ETFs: ETF Dollar Volume
ETF monthly $ volume as a % of listed trading volume was essentially flat in September relative to August at 27%
Over the past 5 years, ETFs peaked at 36% of listed trading volume in November 2008
ETFs traded $273 bln last week, down $55 bln from the prior week and 5% below their 13-week average
International - Developed ETFs accounted for only 5% of volume last week, however, make up 12% of ETF market cap
US-Listed ETFs: Short Interest Data Updated:
Based on data as of 10/15/13
The SPDR S&P 500 ETF (SPY) had the largest increase in USD short interest at $2.2 bln
Shares short of the iShares MSCI EAFE ETF (EFA) declined to 30.2 mln from 40.4 mln the prior period; EFA’s shares short are at their lowest level since 7/31/13; EFA is up over 10% on a market price basis since 7/31/13
585 ETFs exhibited short interest increases while 609 experienced short interest declines over the last period
Aggregate ETF USD short interest increased by $5.3 bln over the period ended 10/15/13
The average shares short/shares outstanding for ETFs is currently 4.3%, up from 3.9% last period
For the fourth straight period, the SPDR Retail ETF (XRT) exhibited the highest shares short as a % of shares outstanding; XRT’s shares short are currently 282%, up from last period’s 247%
Based on multiple borrowings and the ability to continuously create new shares, shares short as a % of shares outstanding can exceed 100% (only eight ETFs exhibited shares short as a % of shares outstanding greater than 100%)
US-Listed ETFs: Most Successful Recent Launches by Assets
$4.9 bln in total market cap of ETFs less than 1-year old - Fixed Income ETFs account for 28% of market capitalization of ETFs launched over the past year, the most of any category
After a month-long lull in issuance from the end of August through the end of September, 31 ETFs have launched over the past five weeks
122 new ETF listings and 43 closures/delistings YTD
The top 10 most successful launches make up 49% of the market cap of ETFs launched over the past year
Six ETF sponsors and two asset classes represented in top 10 most successful launches; we note that the representation of funds with an income orientation is currently five (down from seven at the end of the second quarter)
Four new funds cracked the top 10 most successful launches; notably, two of the four ETFs to drop off the list as they eclipsed the one-year mark (iShares Core MSCI Emerging Markets ETF-IEMG, iShares Core MSCI EAFE ETF-IEFA) combine for $3.9 bln in market cap
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Source: Morgan Stanley
US trading watchdog to drop appeal in commodity limits case
October 28, 2013--The U.S. derivatives regulator promised to drop its legal fight to retain a rule that would set limits on commodity speculation, instead opting for a rewritten version, which it is set to adopt in a vote next month.
A District Court last year knocked out the rule on so-called position limits issued by the Commodity Futures Trading Commission. The agency then appealed, while at the same time starting to write a new rule.
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Source: Reuters
Guggenheim Investments Transitions Guggenheim BRIC ETF (EEB) to BNY Mellon BRIC Select DR Index
October 25, 2013--Guggenheim Investments, the investment management division of Guggenheim Partners, today announced that the Guggenheim BRIC ETF (NYSE Arca:EEB) will change its benchmark index to the BNY Mellon BRIC Select DR Index effective October 31, 2013.
"Transitioning to the BNY Mellon BRIC Select DR Index will provide more representative exposure to the BRIC super region," said William Belden, Managing Director at Guggenheim Investments. "We see this as an opportunity to track an index where the capitalization weights of the four countries--Brazil, Russia, India and China are more appropriately weighted."
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Source: Wall Street Journal
Emerging Global Advisors Chooses "FTSE Beyond BRICs" Index for ETF
FTSE expands ETF offering with exposure to frontier markets
Index 75% exposed to emerging and 25% to frontier markets
Over 100 ETFs tracking a FTSE benchmark in North America
October 25, 2013--FTSE Group ("FTSE"), the global index provider, has been selected by Emerging Global Advisors, the asset manager to the EGShare ETF offering, as the index provider for EGShares "Beyond BRICs" exchange-traded fund (BBRC).
The ETF, which is listed on NYSE, has transitioned from the Indxx Beyond BRICs Index to track the FTSE Beyond BRICs Index. FTSE’s index includes exposure to emerging markets beyond the BRIC countries (Brazil, Russia, India, China) including frontier markets as defined by FTSE's country classification process.
The FTSE Beyond BRICs Index is designed to track the performance of a diversified basket of 90 liquid companies in emerging and frontier markets excluding Brazil, Russia, India, China (BRIC), Taiwan and Argentina. The index is composed of the top 75 qualifying emerging markets securities ranked by full market capitalization and the top 15 frontier market securities ranked by the six-month average daily trading value (ADTV). The index provides market participants with exposure to emerging countries that are typically underweighted in traditional emerging indices and to tradable frontier markets.
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Source: FTSE
Guggenheim Investments Transitions Guggenheim BRIC ETF (EEB) to BNY Mellon BRIC Select DR Index
October 25, 2013--Guggenheim Investments, the investment management division of Guggenheim Partners, today announced that the Guggenheim BRIC ETF (NYSE Arca:EEB) will change its benchmark index to the BNY Mellon BRIC Select DR Index effective October 31, 2013.
"Transitioning to the BNY Mellon BRIC Select DR Index will provide more representative exposure to the BRIC super region," said William Belden, Managing Director at Guggenheim Investments. "We see this as an opportunity to track an index where the capitalization weights of the four countries -Brazil, Russia, India and China are more appropriately weighted."
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Source: Guggenheim Investments
CFTC.gov Commitments of Traders Reports Update
October 25, 2013--The current reports for the week of October 1, 2013 are now available.
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Source: CFTC.gov
iShares emphatic about quasi-active ETFs
October 25, 2013--Six months after entering the active exchange traded fund space, BlackRock's iShares is looking to stake out more ground.
Its focus on so-called enhanced active ETFs is part of an industry wide effort to straddle traditional active strategies and passive strategies with quantitative or rules-based products.
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Source: FT.com
Frontier Market Exposure Added to EGShares Beyond BRICs ETF (TICKER: BBRC)
Emerging Global Advisors completed the index transition of BBRC to the FTSE Beyond BRICs Index
October 25, 2013--Emerging Global Advisors (EGA), the asset manager to the EGShares exchange-traded fund (ETF) offering, today announced it completed the transition of the EGShares Beyond BRICs ETF (BBRC) to track the FTSE Beyond BRICs Index.
The FTSE Beyond BRICs Index generally has 75% exposure to companies in more developed emerging markets (excluding Brazil, Russia, India, China, South Korea and Taiwan) and 25% exposure to companies in frontier markets, which are less developed. While the index is free-float market capitalization-weighted, it addresses potential concentration issues by including diversification parameters such as position and country caps, as well by liquidity-ranking the frontier markets company exposure.
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Source: Emerging Global Advisors (EGA)
