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Morgan Stanley-US ETF Weekly Update
June 17, 2013--US ETF Weekly Update
Weekly Flows: $916 Million Net Outflows
ETF Assets Stand at $1.5 Trillion, up 9% YTD
No ETF Launches Last Week
MSCI Announces Results of 2013 Annual Classification Review
AdvisorShares Closes Active ETF
US-Listed ETFs: Estimated Flows by Market Segment
ETFs posted net outflows of $916 mln last week, the fourth consecutive week of net outflows
The streak of net outflows (totaling $12.4 bln) is the longest since the beginning of 2010
10 of the 15 categories we measured posted net outflows last week
Net outflows were primarily driven by International - Emerging Equity ($3.0 bln) and Fixed Income ($1.5 bln) ETFs
ETF assets stand at $1.5 tln, up 9% YTD; $70.4 bln net inflows YTD
13-week flows remain mostly positive among asset classes; combined $21.7 bln in net inflows
US Large-Cap Equity ETFs have generated $8.8 bln in net inflows over the last 13 weeks, the most of any measured
category; the category is generally dictated by the SPDR S&P 500 ETF (SPY), however five US Large-Cap ETFs posted net
inflows greater than $500 mln over the last 13 weeks
International-Emerging Equity and Commodity ETFs have posted a combined $27.0 bln in net outflows over the last 13 weeks,
the most of any categories we measured
US-Listed ETFs: Estimated Largest Flows by Individual ETF
The SPDR S&P 500 ETF (SPY) posted net inflows of $3.9 bln, the most of any ETF
The iShares MSCI Emerging Markets Index Fund (EEM) exhibited large net outflows for the third consecutive week; over the last
three weeks, EEM has posted a combined $6.5 bln in net outflows as money continues to flee the emerging markets space
Two Treasury-based ETFs, one on the long end of the Treasury curve and one on the short end (iShares Barclays 20+ Year
Treasury Bond Fund (TLT) and the iShares Barclays Short Treasury Bond Fund (SHV)), generated strong net inflows last week
($809 mln in aggregate)
Broad corporate bond ETFs continue to struggle; the iShares iBoxx $ Investment Grade Corporate Bond Fund (LQD) and the
iShares iBoxx $ High Yield Corporate Bond Fund (HYG) have each posted net outflows for five consecutive weeks totaling $4.3
bln; notably, Morgan Stanley Wealth Management’s Fixed Income strategists prefer investment grade corporates over high yield
and recommend shortening duration
US-Listed ETFs: Short Interest Data Updated: Based on data as of 5/31/13
iShares MSCI Emerging Markets Index Fund (EEM) had the largest increases in USD short interest at $529 mln
EEM’s shares short are at their highest level since 2/15/11
Notably, the iShares MSCI EAFE Index Fund (EFA) is at its lowest level of shares short since 10/31/12
Aggregate ETF USD short interest decreased by $1.8 bln over the period ended 5/31/13
The average shares short/shares outstanding for ETFs is currently 4.3%
The iShares Barclays 20+ Year Treasury Bond Fund (TLT) cracked the top 10 most heavily shorted ETFs as a % of shares
outstanding as investors fret rising rates; for contrarian investors, TLT’s increase may be a positive sign for rates and a signal that
the recent sell-off is overdone
Based on multiple borrowings and the ability to continuously create new shares, shares short as a % of shares outstanding can
exceed 100% (only three 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 6/14/13 based on daily change in share counts and daily NAVs.
$7.4 bln in total market cap of ETFs less than 1-year old
Newly launched International Equity ETFs account for 39% of the market cap of ETFs launched over the past year; conversely,
US Equity ETFs account for only 16% of market cap while few ETFs have been launched in traditional US Equity categories
(ie. US size and style)
Issuance has been light in 2013 relative to the past three years; 53 new ETF listings and 30 closures/delistings YTD
The top 10 most successful launches make up 65% 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; seven have an income orientation
The iShares MSCI Frontier 100 Index Fund (FM) generated net inflows of $36 mln last week and $202 mln YTD, one of the lead
asset gatherers for newly minted ETFs; notably, FM has posted positive double digit returns relative to broad emerging market
benchmarks which are down in excess of 10% YTD
request report
Source: Morgan Stanley
CFTC's Division of Market Oversight Provides Time-Limited No-Action Relief to Provide for Transition to SEF Registration
June 17, 2013--The Commodity Futures Trading Commission's (CFTC) Division of Market Oversight (DMO) today announced the issuance of a time-limited no-action letter providing temporary no-action relief to, among other things, prevent facilities that have been operating pre-Dodd Frank trading platforms
(which were exempt from the Commission’s regulations) from being unduly disrupted during the transition to registration with the Commission as swap execution facilities (SEFs).
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Source: CFTC.gov
CFTC Certifies Futures Contracts on the MSCI World Index, MISCI Europe Index, MSCI Japan Index, and the MSCI All Countries Asia Pacific ex-Japan Index Submitted by Eurex Deutschland
June 17, 2013--The Commodity Futures Trading Commission's Division of Market Oversight issued a letter advising Eurex Deutschland that its MSCI World Index, MSCI Europe Index, MSCI Japan Index, and MSCI All Countries Asia Pacific ex-Japan Index futures contracts
submitted for review on April 29, 2013 were deemed certified.
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Source: CFTC.gov
Fidelity still working out the kinks in some new ETFs
O'Hanley concerned about performance of actively managed bond ETFs under stress
June 17, 2013--If you're anxiously awaiting Fidelity Investment's foray into the exchange-traded fund world, you may have to take a deep breath.
The company received the OK from the Securities and Exchange Commission to launch actively managed ETFs in May and is working out the kinks in corporate-bond and mortgage securities ETFs it has proposed to offer,
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Source: Investment News
Markets on edge as investors seek exit
June 16, 2013--Mom and pop investors who flocked to the great bull run in bonds are now facing a messy exit thanks to striking changes in one of Wall Street's biggest markets.
The rise of exchange traded funds has given retail investors instant access to a range of debt including high-yield, inflation-indexed and investment grade bonds.
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Source: FT.com
Fund lobby groups attacked by investors
June 16, 2013--Concerns are mounting that the fund industry is damaging the interests of end investors by aggressively lobbying against new regulation.
A number of regulatory initiatives designed to protect investors have been watered down or blocked in recent weeks, and investor groups believe the increasingly co-ordinated fund lobby is to blame.
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Source: FT.com
Treasury International Capital Data for April
June 14, 2013--The U.S. Department of the Treasury today released Treasury International Capital (TIC) data for April 2013. The next release, which will report on data for May 2013, is scheduled for July 16, 2013.
The sum total in April of all net foreign acquisitions of long-term securities, short-term U.S. securities, and banking flows was a monthly net TIC inflow of $12.7 billion. Of this, net foreign private inflows were $42.1 billion, and net foreign official inflows were negative $29.4 billion.
Foreign residents decreased their holdings of long-term U.S. securities in April – net sales were $24.8 billion. Net sales by private foreign investors were $17.8 billion, and net sales by foreign official institutions were $6.9 billion.
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Source: US Department of the Treasury
IntercontinentalExchange Sets Daily Record for Combined Agriculture and Financial Product Set; New Daily Record for ICE Russell 1000 Growth Index
June 14, 2013-IntercontinentalExchange, a leading operator of global markets and clearing houses, today reported a record daily volume in agriculture and financial contracts traded on ICE Futures U.S. of 889,193 contracts on June 13.
The previous daily volume record was 851,852 on June 12, 2012.
ICE also reported a record daily volume in the ICE Russell 1000 Growth Index futures contract with 11,595 contracts traded on June 13. The previous daily volume record was 11,064 contracts on March 12, 2013.
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Source: IntercontinentalExchange
JPMorgan's private equity unit to become independent
June 14, 2013--JPMorgan Chase & Co said on Friday its private equity unit, One Equity Partners, will become independent, as the largest U.S. bank increases its focus on client businesses.
One Equity Partners, which manages $4.5 billion of investments, will raise its next investment fund externally rather than from JPMorgan, becoming similar to stand-alone private equity firms that pool funds from a variety of investors.
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Source: Reuters
Concluding Statement of the 2013 Article IV Mission to The United States of America
June 14, 2013--1. The U.S. recovery has remained tepid over the past year, but underlying fundamentals have been gradually improving. The modest growth rate of 2.2 percent in 2012 reflected legacy effects from the financial crisis, fiscal deficit reduction, a weak external environment, and temporary effects of extreme weather-related events.
These headwinds notwithstanding, the nature of the recovery appears to be changing. In particular, house prices and construction activity have rebounded, household balance sheets have strengthened, labor market conditions have improved, and corporate profitability and balance sheets remain strong, especially for large firms. With the sizeable output gap and well-anchored inflation expectations keeping inflation subdued, the Fed appropriately continued to add monetary policy accommodation over the past year by increasing its asset purchases and linking the path of short-term rates to quantitative measures of economic performance, thus helping to maintain long-term rates at exceptionally low levels. Overall financial conditions have eased, as risk spreads narrowed, stock market valuations surpassed their pre-crisis peak, and bank credit conditions gradually eased.
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Source: IMF
