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Morgan Stanley-US ETF Weekly Update
August 20, 2013--Weekly Flows: $6.5 Billion Net Outflows
Ended Stretch of Seven Consecutive Weeks of Net Inflows
ETF Assets Stand at $1.5 Trillion, up 11% YTD
Seven ETF Launches Last Week
US-Listed ETFs: Estimated Flows by Market Segment
ETFs exhibited net outflows of $6.5 bln last week, ending a stretch of seven consecutive weeks of net inflows
Net outflows were led by US Large-Cap ETFs at $6.1 bln even though only eight of the 61 ETFs in the segment exhibited
outflows; the weakness was driven by the SPDR S&P 500 ETF (SPY), which had net outflows of $6.3 billion last week
International- Developed ETFs posted the highest net inflows last week at $1.8 bln as ETFs providing high
exposure to Europe continued to draw interest
ETF assets stand at $1.5 tln, up 11% YTD; $105.2 bln net inflows YTD
13-week flows remain mostly positive among asset classes; combined $22.3 bln in net inflows
Despite exhibiting net outflows of $6.1 bln last week, US Large-Cap ETFs still have the highest net inflows over the past 13
weeks at $11.3 bln with the three ETFs tracking the S&P 500 Index accounting for 53% of the inflows
International-Emerging ETFs have posted net outflows of $9.6 bln over the last 13 weeks, the most of any category; the
two largest ETFs in the space account for $7.4 bln in net outflows (77% of the net flows)
US-Listed ETFs: Estimated Largest Flows by Individual ETF
iShares MSCI EAFE ETF (EFA) posted net inflows of $592 mln this past week, the most of any ETF
ETFs providing exposure to Europe (EFA has ~64% exposure to Europe) continue to draw interest, accounting for the four
ETFs with the highest net inflows this past week
The SPDR Gold Trust (GLD) exhibited its first week of net inflows ($195 mln last week) since early December 2012
Interestingly, the iShares 20+ Year Treasury Bond ETF (TLT), one of the longer duration fixed income ETFs available, had
the eighth highest net inflow this past week at $165 mln and it has now exhibited net inflows for four consecutive weeks
We note that Fixed Income ETFs exhibited $1.1 bln in net outflows last, including four of the top 10 net outflows
US-Listed ETFs: Short Interest Data Unchanged: Based on data as of 7/31/13
SPDR S&P 500 ETF (SPY) had the largest increase in USD short interest at $1.3 bln
SPY’s shares short are at their highest level since 3/28/13 and nearly 10% above their one-year average
The Vanguard FTSE Emerging Markets ETF (VWO) is coming off its highest level of shares short ever last period; VWO’s
short interest declined $845 mln and its shares short were down 22 mln
Aggregate ETF USD short interest increased by $187 mln over the period ended 7/31/13
The average shares short/shares outstanding for ETFs is currently 4.3% - For the third consecutive period, three of the 10 most heavily shorted ETFs as a % of shares outstanding have been currency based - Based on multiple borrowings and the ability to continuously create new shares, shares short as a % of shares outstanding can exceed 100% (only six ETFs exhibited shares short as a % of shares outstanding greater than 100%)
US-Listed ETFs: Most Successful Recent Launches by Assets Source: Bloomberg, Morgan Stanley Wealth Management ETF Research. Data estimated as of 8/16/13 based on daily change in share counts and daily NAVs.
$8.2 bln in total market cap of ETFs less than 1-year old
-While the largest and most liquid fixed income ETFs have generally seen significant net outflows over the past 13 weeks,
newly launched fixed income ETFs have exhibited net inflows of $825 mln over the same period
90 new ETF listings and 30 closures/delistings YTD
The top 10 most successful launches make up 64% of the market cap of ETFs launched over the past year
Five 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 six
The FlexShares Quality Dividend Index Fund (QDF) and the PowerShares S&P 500 High Dividend Portfolio (SPHD) are now
among the most successful launches over the past year; while both provide exposure to US dividend-paying stocks, QDF
utilizes a proprietary approach to target higher-quality companies whereas SPHD holds 50 stocks from the S&P 500 Index
that have historically provided high dividend yields and low volatility
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Source: Morgan Stanley
FINRA Warns Investors of Marijuana Stock Scams
August 20, 2013--The Financial Industry Regulatory Authority (FINRA) issued a new Investor Alert called Marijuana Stock Scams to warn investors about potential related scams.
Medical marijuana is legal in almost 20 states, and recreational use of the drug was recently legalized in two states. As a result, the cannabis business has been getting a lot of attention – including the attention of scammers. Like many investment scams, pitches for marijuana stocks may arrive in a variety of ways – from faxes to email or text message invitations, to webinars, infomercials, tweets or blog posts.
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Source: FINRA
Are you ready? New Swap Trading Requirements For Pension Plan Asset Managers
August 20, 2013--The Dodd-Frank Act and its implementing regulations bring significant new regulatory oversight to the over-the-counter (OTC) derivatives markets. As the markets respond, the menu
of derivatives instruments available to asset managers, and
the costs associated with those instruments, will change significantly.
As the first new swap rules have come into effect earlier this year, market participants have started to identify
risks and costs, as well as opportunities, arising from this new
regulatory landscape.
For US pension plans and separately managed accounts, mandatory swap clearing for certain interest rate swaps (IRS) and credit default swaps (CDS) is required by September 9, 2013. This memorandum highlights some of the steps that affected asset managers must take to prepare for clearing and other regulatory requirements.
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Source: Consultant 360 (BNY Mellon)
Horizons ETFs announces unit consolidation for HXT
August 20, 2013--Horizons ETFs Management (Canada) Inc. ("Horizons ETFs"), the manager and trustee of the Horizons S&P/TSX 60TM Index ETF (the "ETF" or "HXT"), listed on the Toronto Stock Exchange ("TSX") under the symbols HXT and HXT.U, has announced today that it intends to consolidate the units of the ETF as indicated in the table below.
Unit Consolidation
After the close of trading on Friday, September 6, 2013 on the TSX, the units of HXT will be consolidated on the basis of the ratio (the "Consolidation Ratio") set out below, and will begin trading on a post consolidated basis on Monday, September 9, 2013,...
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Source: Horizons ETFs Management (Canada) Inc.
AGF U.S. AlphaSector Class Rethinks Risk from a Client's Perspective
August 19, 2013--AGF Investments Inc. today introduced AGF U.S. AlphaSector Class, an innovative solution for Canadian advisors seeking to manage their clients' portfolio risk in volatile markets. The fund offers a different approach to risk by managing the impact of down markets.
"Canadian investors are conservative by nature and market volatility often leaves them on the sidelines," said Gordon Forrester, Executive Vice-President, Product and Marketing and Head of Retail, AGF Investments Inc. "This fund addresses a Canadian market need with a unique solution that considers risk from a client's perspective. We are pleased to introduce this innovative investment strategy to Canada."
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Source: Wall Street Journal
Federal Reserve Board Releases Paper On Capital Planning At Large Bank Holding Companies
August 19, 2013--Large bank holding companies have considerably improved their capital planning processes in recent years, but have more work to do to enhance their practices for assessing the capital they need to withstand stressful economic and financial conditions, the Federal Reserve said in a paper released on Monday.
In the paper, the Federal Reserve discussed in detail its expectations for internal capital planning at large bank holding companies and described the range of practices it has observed at these companies during the past three Comprehensive Capital Analysis and Review (CCAR) exercises. The Federal Reserve conducts the CCAR annually to help ensure that companies have forward-looking capital planning processes that account for their unique risks and result in sufficient capital to enable the institutions to continue lending to households and businesses during times of economic and financial stress.
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Source: FRB
Obama asks regulators to speed up Wall Street reforms
August 19, 2013--President Barack Obama called top U.S. financial regulators to the White House on Monday, instructing them to speed up Wall Street reforms in the face of intense bank lobbying.
Roughly five years after the depths of the financial crisis, regulators have completed about 40 percent of the rules called for in the 2010 Dodd-Frank financial reform law.
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Source: CNBC
Top Canadian Discount Brokerages with Commission Free ETFs
August 19, 2013--A young reader who is currently in University emailed me about investing possibilities. The student's financial situation is relatively stable where he has excess cash after paying tuition from a summer part time job.
Typically, I recommend paying down debt before starting the investing route, but in this case, he has no debt and no foreseeable future expenses (house etc).
In this case, the student has small amounts per month to invest and is interested in investing in the stock market. In the past when investing small amounts per month, low cost mutual funds were the way to go because they avoid commissions with every purchase. While ETFs are lower cost overall with lower management expense ratios (MERs), investing a small amount monthly would be quite expensive with the trading fees.
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Source: Milliondollarjournay.com
DB-Synthetic Equity & Index Strategy-North America-US ETF Market Weekly Review-Equity ETPs dominated the weekly flows with $5.6bn in net redemptions
August 19, 2013--Data in this report is as of Fri, Aug 16th
Market and Net Cash Flows Review
Equity markets pulled back during last week. The US (S&P 500) fell by 2.10%; while, outside the US, the MSCI EAFE (in USD) slightly dropped by 0.07% and the MSCI EM (USD) rose by 0.76%.
In the meantime, performance was negative across all US sectors. Real Estate (-6.79%) and Utilities (-4.36%) recorded the biggest drop; The DB Liquid Commodity Index rose by 2.79%. Similarly, the Agriculture sector (DB Diversified Agriculture Index), the WTI Crude Oil, Gold and Silver prices rose by 1.47%, 1.41%, 4.75% and 13.13%, respectively. Moving into other asset classes, the 10Y US Treasury Yield rose 27 bps ending at 2.84%. Last but not least, Volatility (VIX) rose by 7.16% during the same period.
The total US ETP flows from all products registered $6.5bn (-0.4% of AUM) of outflows during last week vs. $0.3bn (+0.0%) of inflows the previous week, setting the YTD weekly flows average at +$3.2bn (+$107.2bn YTD in total cash flows). Last week’s outflows were greatly influenced by SPY, which saw $6.3bn in net redemptions.
Equity, Fixed Income and Commodity ETPs experienced flows of -$5.6bn (-0.5%), -$1.1bn (-0.4%) and +$0.2bn (+0.3%) last week vs. +$1.2bn (+0.1%), -$0.8bn (-0.3%) and -$34mn (-0.0%) in the previous week, respectively.
Among US sectors, Information Technology (+$0.1bn, +0.5%) and Energy (+$0.1bn, +0.0%) received the top inflows, while Financials (-$1.0bn, -1.8%) and Consumer Discretionary (-$0.7bn, -7.4%) experienced the largest outflows.
Top 3 ETPs & ETNs by inflows: EFA (+$0.6bn), VGK (+$0.4bn), EZU (+$0.3bn)
Top 3 ETPs & ETNs by outflows: SPY (-$6.3bn), IYR (-$0.6bn), EWZ (-$0.5bn)
New Launch Calendar: EM income and fundamental factors
There were seven new ETFs listed during the previous week on the NYSE Arca. EGShares added one new product offering access to high-yielding stocks in Emerging Markets; meanwhile, Charles Schwab launched six fundamental factor ETFs offering exposure to the US, DM ex US and EM with focus on Small Cap, Large Cap and Broad markets.
Turnover Review: Floor activity increased by 27.3%
Total weekly turnover increased by 27.3% to $274.2bn vs. $215.4bn from the previous week. Last week's turnover level was 1.7% over last year's weekly average. Equity, Fixed Income and Commodity ETPs turnover increased by $46.5bn (+24.4%), $7.3bn (+51.2%) and $4.6bn (+58.7%) during the same period, respectively.
Assets under Management (AUM) Review: assets dropped by $23bn
US ETP assets dropped by $22.8bn (-1.5%) totaling $1.501 trillion at the end of the week. As of last Friday, US ETPs had accumulated an asset growth of +12.6% YTD. Assets for Equity, Fixed Income and Commodity ETPs moved -$23.1bn, -$3.4bn and +$3.8bn during last week, respectively.
Visit https://eqindex.db.com/etf/ for report
Source: Deutsche Bank-Synthetic Equity & Index Strategy-North America
Bank of the West Adds to Investment Advisory Solutions with Introduction of Proprietary ETF Portfolios
August 19, 2013--Bank of the West Wealth Management today announced the launch of Bank of the West ETF portfolios. The portfolios incorporate ETFs selected by the group's Investment Advisory and Management Team to provide exposure to a global set of investment opportunities.
Combined with the Bank's recently launched mutual fund portfolios, the ETF portfolios mark the second major enhancement to its open architecture Investment Advisory Solutions (IAS) platform in the past several months. Previously, these portfolios were only available to the firm's Trust Services clients.
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Source: PR Newswire
