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ETFs' huge appetite extends to SMAs
August 12, 2024--Conversions of separately managed accounts are taking place in both the US and Europe, suggesting demand is growing
The ballooning exchange traded fund industry is threatening to take a bite out of separately managed accounts, having already eaten the lunch of the mutual fund sector.
Since the start of 2021 mutual funds have suffered outflows of more than $1tn in the US even as flashy upstart ETFs have pulled in $2tn, according to figures from Morningstar. ETFs have also gained market share in Europe and Asia, albeit at a slower pace. This has prompted a flurry of mutual fund-to-ETF conversions as asset managers have pivoted towards the ascendant fund structure.
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Source: ft.com
ESMA publishes latest edition of its newsletter
August 8, 2024--The European Securities and Markets Authority (ESMA), the EU's financial markets regulator and supervisor, has today published its latest editionof the Spotlight on Markets Newsletter.
Your one-stop-shop in the world of EU financial markets focuses in July on the latest developments in relation to the Regulation on the Markets in Crypto-Assets (MiCA) and the Digital Operational Resilience Act (DORA).
ESMA published an opinion on global crypto firms using their non-EU execution venues. Under DORA, the European Supervisory Authorities published the second batch of policy products and the Final report on the draft technical standards on subcontracting ICT services and have announced the EU systemic cyber incident coordination framework.
On a different note, ESMA set out its long-term vision on the functioning of the Sustainable Finance Framework and published the results of its fifth stress test exercise for Central Counterparties.
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Source: esma.europa.eu
Vanguard's latest monthly summary of flows in the European ETF market-Equity and bond ETFs both see inflows in July
August 8, 2024--Equity and fixed income ETF exposures both saw inflows in July during what was a mixed month for financial markets.
European-domiciled ETFs attracted $22.9 billion of assets in July, with equity and fixed income products seeing $12.3 billion and $11.0 billion in flows respectively.
The Vanguard UCITS ETF range captured net inflows of $3.2 billion in July, with the majority of ETFs in the range recording positive flows.
Monthly recap: A mixed month for markets as both equity and bond ETFs see inflows
July was a mixed month for financial markets. During the first half of the month, continued optimism around US growth pushed equity markets higher. Later in July, concerns around company earnings in the technology sector and the publication of weak economic data in the US fuelled a more risk-off sentiment.
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Source: Vanguard
Regulatory update: New Overseas Funds Regime European Long-Term Investment Funds
August 7, 2024--Two major regulatory changes have been announced this month for EU and UK based asset managers:
The new Overseas Funds Regime is a major opportunity to win business in the UK. It allows overseas investment funds to apply to become recognised in the UK and marketed to UK investors.
The European Commission has also published its regulatory technical standards for European Long-Term Investment Funds.
These now more power over liquidity management into the hands of asset managers in both EU and UK.
Overseas Funds Regime
Taken together, these sought-after changes will streamline and improve processes whether related to a post-Brexit environment or navigating long term investment funds in Europe.
The new Overseas Funds Regime (OFR) re-opens the UK market for funds which were not registered under the Temporary Permissions Regime (TMPR). The new regime- announced in May and updated in July- allows overseas investment funds to apply to become recognised in the UK and marketed to UK investors.
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Source: carnegroup.com
New equity ETF from iShares on Xetra: access to climate-friendly Japanese companies with currency hedging
August 7, 2024--Since today, a new exchange-traded fund from iShares has been tradable via Xetra and Börse Frankfurt.
The iShares MSCI Japan ESG Enhanced UCITS ETF EUR Hedged (Acc) offers investors the opportunity to invest in a portfolio of a subset of Japanese equities within the MSCI Japan Index. The fund aims to exceed the decarbonisation and other minimum standards of the CTB Benchmark Regulation.
Stock selection takes an ESG optimisation approach to maximise exposure to sustainable companies and reduce carbon emissions exposure relative to the parent index.
This is a currency hedged share class against the euro.
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Source: Xetra
UK official holdings of international reserves: July 2024
August 5, 2024--This release details movements in the international reserves of gold and assets held by the UK government.
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Source: gov.uk
New ETF from First Trust on Xetra: access to the US equity market for companies with the highest momentum ranking
August 5, 2024--Since Monday, a new exchange-traded fund from First Trust has been tradable on Xetra and Börse Frankfurt.
The First Trust US Momentum UCITS ETF tracks the performance of the iNDEX US Momentum Index. The benchmark index is currently composed of 180 companies with the highest momentum ranking out of over 750 of the largest listed companies in the United States.
The momentum ranking per company is determined by a) the difference between the current price and the average price over the last eight months and b) the difference between the average price over the last 50 days and the average price over the last 200 days.
In addition, no more than 40 companies may belong to the same sector.
The composition of the index is updated quarterly.
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Source: Xetra
ECB Working Paper-Climate risk, bank lending and monetary policy
August 2, 2024--Combining euro-area credit register and carbon emission data, we provide evidence of a climate risk-taking channel in banks’ lending policies. Banks charge higher interest rates to firms featuring greater carbon emissions, and lower rates to firms committing to lower emissions, controlling for their probability of default.
Both effects are larger for banks committed to decarbonization. Consistently with the risk-taking channel of
monetary policy, tighter policy induces banks to increase both credit risk premia and carbon emission premia, and reduce lending to high emission firms more than to low emission ones.
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Source: ecb.europa.eu
DWS bucks trend with launch of Chinese mid-cap ETF
August 15, 2024--Fund debut comes despite closure of similar products by rival managers
The Xtrackers CSI500 Swap Ucits ETF uses indirect replication to track the CSI 500 Net Total Return index, which consists of the 500 predominantly medium and small-cap companies trading on the Shanghai Stock Exchange or Shenzhen Stock Exchange.
Launched at the end of July, the ETF has a total expense ratio of 0.35 per cent and has been registered for sale across much of Europe, including France, Germany and Italy
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Source: ft.com
ESMA delivers opinion on global crypto firms using their non-EU execution venues
July 31, 2024--The European Securities and Markets Authority (ESMA), the EU's financial markets regulator and supervisor authority, issued today an Opinion to address the risks presented by global crypto firms seeking authorisation under the Markets in Crypto Assets (MiCA) Regulation for part of their activities (crypto brokerage) while keeping a substantial part of their group activities (intra-group execution venues) outside the European Union (EU) regulatory scope.
ESMA recognises risks associated with global crypto firms' complex structures where execution venues fall outside of the scope of MiCA. Such structures may include the involvement of an EU-authorised broker effectively routing orders to an intra-group execution venue based outside the EU, potentially leading to diminished consumer protection and to an unlevel playing field with EU-authorised execution venues.
Considering these risks ESMA recommends National Competent Authorities (NCAs) to be vigilant during the authorisation process and to assess business structures of global firms to ensure that they do not bypass obligations established in MiCA, to protect consumers and ensure transparent and orderly functioning of crypto markets.
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Source: esma.europa.eu
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