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EGA-Emerging Market Volatility-Remedies for the Chronically Underweight
February 12, 2013--Wealth managers often contemplate aligning emerging market (EM) allocations with global market capitalization weights. Yet such increases may come at the
price of higher overall portfolio volatility.
It is possible to construct EM portfolios with lower volatility profiles. Doing so may not only allow for more meaningful EM allocations, but can also help wealth managers differentiate their value propositions.
We believe that U.S. investors will increasingly make choices in EM which reflect their own patterns and expertise. For example, if they consider volatility when choosing equities at home, we think they will also do so in emerging markets. In other words, they will view equity portfolio preferences more universally. We call this trend “normalization” of EM investing.
This EGA Expert Series edition addresses normalization relative to volatility.
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Source: Emerging Global Advisoers (EGA)
Canada's Lowest Cost ETF Surpasses $1 Billion in Assets
February 11, 2013-- Horizons Exchange Traded Funds Inc. ("Horizons ETFs") and its affiliate Horizons ETFs Management (Canada) Inc. are pleased to announce that the Horizons S&P/TSX 60(TM) Index ETF ("HXT"), Canada's lowest cost ETF, has joined the select few of Canadian ETFs that have surpassed $1 billion in assets under management.
On October 1, 2012, Horizons ETFs announced a management fee rebate of 2 basis points which is in effect until at least September 30, 2013, reducing the annual management fee on HXT during this time from seven basis points (0.07%) to five basis points (0.05%), plus applicable sales taxes. Since then, HXT has raised more than $600 million in additional assets, more than doubling its size while average daily trading volume has also increased to almost 1 million units.
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Source: Horizons Exchange Traded Funds
Morgan Stanley-US ETF Weekly Update
February 11, 2013--Weekly Flows: $1.9 Billion Net Outflows
First Week of Net Outflows in 2013
ETF Assets Stand at $1.4 Trillion, up almost 6% YTD
No ETF Launches Last Week
ProShares Announces Fee Reduction and Name Change on ETF
iShares Announces Index Changes on 11 Country ETFs
US-Listed ETFs: Estimated Flows by Market Segment
ETFs posted net outflows of $1.9 bln last week, the first week of net outflows in 2013
Net outflows were driven by US Large-Cap ETFs ($6.8 bln in net outflows last week); we note that two US-Large Cap ETFs accounted for a combined $6.5 bln in net outflows this past week
International ¡V Developed was the only segment to post net inflows of more than $1 bln last week ($1.3 bln in net inflows)
ETF assets stand at $1.4 tln, up almost 6% YTD; $29.2 bln net inflows YTD
13-week flows were mostly positive among asset classes; combined $73.8 bln in net inflows
International-Emerging ETFs generated net inflows of $17.6 bln over the last 13 weeks, the most of any ETF category
The $33.1 bln combined net inflows into International-Developed and International- Emerging ETFs accounted for 45% of the net inflows into US-listed ETFs over the past 13 weeks, which is greater than their combined 22% market share
US-Listed ETFs: Estimated Largest Flows by Individual ETF
WisdomTree Japan Hedged Equity Fund (DXJ) posted net inflows of $710 mln last week, the most of any ETF
YTD, DXJ has had net inflows of $2.0 billion, accounting for almost 60% of its current market cap
The Vanguard Dividend Appreciation ETF (VIG) had net inflows of $369 million last week, its highest since the week ending 1/28/11, when it had net inflows of $426 million
Three of the 10 ETFs with the highest net outflows last week track US large-cap indices; SPDR S&P 500 ETF (SPY), PowerShares QQQ (QQQ), and SPDR Dow Jones Industrial Average ETF (DIA) combined for net outflows of $6.8 bln last week
US-Listed ETFs: Short Interest
Data Unchanged: Based on data as of 1/15/13
Vanguard FTSE Emerging Markets ETF (VWO) had the largest increase in USD short interest at $900 mln
VWO’s shares short are at their highest level of all time; we find the data point interesting because VWO is not typically the vehicle that investors use to get short emerging markets
SPDR S&P 500 ETF (SPY) shares short are at their lowest level since 10/15/12
Aggregate ETF USD short interest decreased by $2.2 bln over the past two weeks ended 1/15/13
The average shares short/shares outstanding for ETFs is currently 5.5%
SPDR Retail ETF (XRT) shares short/shares outstanding eclipsed 1,000% on 1/15/13 as flows into and out of XRT have been very volatile the past few weeks; retail ETFs are consistently some of the most heavily shorted ETFs
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 Smith Barney Research. Data estimated as of 2/8/13 based on daily change in share counts and daily NAVs.
$10.2 billion in total market cap of ETFs less than 1-year old
Newly launched Active ETFs account for 47% of the market cap of ETFs launched over the past year; PIMCO Total Return ETF (BOND) is the largest actively managed ETF with a market cap of $4.1 bln
Issuance off to a slow start in 2013; three new ETF listings and three closures YTD (13 announced closures)
The top 10 most successful launches make up 70% of the market cap of ETFs launched over the past year
Six different ETF sponsors and two asset classes represented in top 10 most successful launches
Seven out of the 10 most successful launches over the past year have an income orientation
The Market Vectors Morningstar Wide Moat Research ETF (MOAT) entered the top 10 this past week; MOAT has a market cap of $145 mln and provides exposure to the 20 most attractively valued US stocks that have a sustainable competitive
advantage, according to Morningstar’s equity research team
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Source: Morningstar
Nasdaq talked with Carlyle about going private-sources
February 11, 2013--Private equity firm Carlyle Group recently approached Nasdaq OMX Group about taking the exchange operator private, but the talks fell apart over a disagreement on price, sources familiar with the deal said on Monday.
Carlyle initiated the discussions and was in early stages of due diligence when differences emerged, bringing the talks to an end, a source familiar with the matter told Reuters.
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Source: Reuters
Advisers Reap Rewards as First ETF Turns 20 .
February 8, 2013--Despite skeptical clients and limited choices in the early going, portfolio managers who have been on the leading edge of bringing exchange-traded funds into the forefront of investing say they feel a sense of vindication.
The first ETF--the SPDR S&P 500 (SPY)--turned 20 late last month, and in the last two decades the U.S. marketplace has swelled to nearly 1,500 different funds and more than $1.4 trillion in assets.
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Source: Wall Street Journal
Guggenheim files with the SEC
February 8, 2013--Guggenheim has filed a second amended and restated application for exemptive relif with the SEC.
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Source: SEC.gov
ETFs And ETPs In Canada Reach A New All-Time High Of $56.7 Billion US Dollars At The End Of January 2013
February 8, 2013--Assets invested in Exchange Traded Funds (ETFs)and Exchange Traded Products (ETPs) listed in Canada reached a new all-time high of $56.7 billion at the end of January 2013, according to figures from ETFGI's monthly Canada ETF and ETP industry insights.
Market performance contributed to the increase in the value of assets held in ETFs and ETPs as 18 of the top 20 markets globally showed gains in January, including the S&P/TSX composite index in Canada which was up 2% in local currency terms. Two of the markets with strong gains were the US and the UK where history has shown that a strong January tends to be a good predictor for the rest of the year. A review of history in both markets shows that strong January performance is typically followed by positive returns in the subsequent 11 months.
The FTSE 100 index was up 6.5% in January, which ranks as the best start to the year since 1989. According to FTSE, 14 of the 17 Januaries with positive performance since 1984 (when the index was launched) were followed by 11 months of positive returns. Similarly, the S&P 500 index was up 5.0% in January, which ranked as the 12th best January since 1950 and the 19thJanuary since 1950 when the index was up more than 4%. Again, since 1950, January gains of at least 4% in the S&P 500 have been followed on average by gains of 15.1% in the subsequent 11 months of the year. Only once since 1950 did the S&P 500 rise by more than 4% in January and then finish the year lower than it did at January’s end – and that was in 1987.
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Source: ETFGI
Foreign bonds back in Vanguard pipeline
February 8, 2013--Vanguard says it is ready to launch its first international bond fund, after backtracking twice previously on a rollout.
The Total International Bond Index Fund, with an accompanying exchange traded fund share class, is now scheduled to appear sometime before midyear, according to a company announcement.
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Source: FT.com
PIMCO To Launch Foreign Currency Strategy Exchange Traded Fund (FORX)
PIMCO To Launch Foreign Currency Strategy Exchange Traded Fund (FORX)
An actively managed ETF that provides access to a basket of currencies likely to benefit from dollar weakness
February 8, 2013--PIMCO, a leading global investment management firm, will list Feb. 12 the PIMCO Foreign Currency Strategy Exchange Traded Fund (Ticker: FORX), created to offer investors the potential to benefit from fundamental changes in global currency dynamics by diversifying away from the dollar.
The fund will be jointly managed by Scott Mather, managing director and head of global portfolio management; Vineer Bhansali, managing director and head of quantitative investment portfolios; and Thomas Kressin, senior vice president and head of European foreign exchange.
Rising debt levels, limited fiscal flexibility and easy monetary policy in the U.S. may weigh on the dollar for years. FORX is a portfolio of currencies and local currency bonds actively managed to help investors diversify out of the dollar and preserve their purchasing power. The active management is a notable difference for an ETF marketplace made up mostly of passive products in which investors generally must form their own views on individual currencies or currency indexes.
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Source: PIMCO
Credit Suisse AG Announces the Repurchase of its Four ELEMENTS(TM) Notes
February 8, 2013--The four notes are the ELEMENTS(TM) Linked to the MLCX Gold Index-Total Return due April 10, 2023, the ELEMENTS(TM) Linked to the Credit Suisse Global Warming Index, Exchange Series due April 10, 2023, the ELEMENTS(TM) Linked to the MLCX Livestock Index-Total Return due April 10, 2023 and the
ELEMENTS™ Linked to the MLCX Precious Metals Plus Index—Total Return due April 10, 2023 (collectively, the "Notes").
Credit Suisse AG expects to deliver notice via The Depository Trust Company of the repurchase of the Notes on or about February 14, 2013. Investors will receive a cash payment in an amount equal to the applicable daily repurchase value on the valuation date. The valuation date in each case is expected to be February 15, 2013. The repurchase date for each Note is expected to be February 21, 2013, which is three business days after the valuation date.
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Source: Credit Suisse AG
