Americas ETP News
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Vanguard's economic and investment outlook
January 24, 2012--In just-published research, the head of Vanguard's Investment Strategy Group, Joseph Davis, and his colleague, Roger Aliaga-Díaz, discuss the firm's outlook for U.S. economic growth, inflation, interest rates, and returns for stocks and bonds in the decade ahead.
The report also examines the potential implications for strategic asset allocation based on Vanguard's distinct approach to forecasting within the investment industry.
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Source: Vanguard
ETF-Based Strategies Grew 43% as Investors Avoid Active Funds
January 23, 2012-- Money overseen by U.S. investment managers who buy exchange-traded funds instead of individual stocks and bonds rose by 43 percent in the last year, even faster than the growth for ETFs, according to a report from Morningstar Inc.
The 370 ETF-based investment strategies tracked by Morningstar grew to $27 billion in the year ended Sept. 30, the Chicago-based research firm said today. That outpaced the 7.5 percent increase for ETFs and 0.8 percent decline for mutual funds, the company said.
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Source: Bloomberg
Citi and Research Affiliates Launch Fundamentals-based Bond Index Series
January 23, 2012--Citi and Research Affiliates are launching a new global sovereign bond index series based on measures of size. The Citi RAFI(R) Bond Index Series decreases exposure to aging and debt-laden economies such as Japan and the United States and increases exposure to younger, resource-rich countries such as Australia and Canada.
The series extends the pioneering Research Affiliates Fundamental Index(R) (RAFI(R)) methodology to sovereign debt.
Traditional bond indices weight securities based on market capitalization, which results in investors making their biggest bets on the biggest debtors. The new series weights each country by its economic footprint. Specifically, each country's weight is calculated via an equally weighted average of four factors -- GDP, energy consumption, population and rescaled land area. As a result, this methodology results in country weights that reflect each nation's ability to service its debt, which has become a growing concern as the sovereign debt crisis evolves.
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Source: Wall Stret Journal
DB Global Equity Research: ETP market kept consolidating a good year-start by adding $32bn in assets last week
January 23, 2012--Net Cash Flows Review
Equity markets remained in winning streak during last week. The US (S&P 500) advanced by 2.0%; while other developed and emerging markets outside the US did even better; the MSCI EAFE (in USD), and the MSCI EM (in USD) were up by 4.0% and 4.4% during the week, respectively.
Moving on to other asset classes, the 10Y Treasury yield rose by 16bps last week, while the DB Liquid Commodity Index increased by 0.33%. Other sectors were mixed. The Agriculture sector (DB Diversified Agriculture Index), Gold and Silver prices rose by 0.55%, 1.69%, and 8.34%, respectively; while the WTI Crude Oil price fell by 0.24%. Last but not least, Volatility (VIX) dropped by 12.6% ending the week at a sub-twenty reading.
ETP inflows were even stronger during last week taking the YTD cash flow figure to almost $22bn. The total US ETP flows from all products registered $10.0bn of inflows during last week vs $7.0bn of inflows the previous week, setting the YTD weekly flows average at +$7.3bn.
ETF markets experienced positive flows across all asset classes during last week. Equity, Fixed Income, and Commodity ETPs experienced flows of +$8.1bn, +$1.6bn, and +$0.3bn last week vs. +$4.7bn, +$2.1bn, and +$0.2bn the previous week, respectively.
Within Equity ETPs, Large Cap products experienced the largest inflows (+$3.8bn), followed by US sector ETPs (+$1.3bn); while Leveraged vehicles experienced the largest outflows (-$0.5bn). Within Fixed Income ETPs, Corporate products experienced the largest inflows (+$1.0bn) followed by Sovereign ETPs (+0.3bn). Within Commodity ETPs, flows were again shy, with Precious Metals products recording the largest inflows (+$0.1bn).
New Launch Calendar: adding emerging market exposures
There were 2 new ETFs listed on the NASDAQ during the previous week. The new equity funds offer additional access to emerging market regions such as EMEA and Latin America.
Turnover Review: ETP trading remains subdued on lower volatility
Total weekly turnover dropped by 11.5% to $223bn vs. $252bn in the previous week, and more than one-third down from last year’s weekly average of $341bn. The largest decrease was on Equity ETP turnover, which dropped by $24.1bn or 11.0% to $195bn. Fixed Income and Commodity ETP turnover followed with a retreat of 18.0% (-$2.8bn) and 13.1% (-$1.9bn), respectively.
Assets Under Management (AUM) Review: assets soared on strong markets
Last week, total ETP assets increased by 3.0% to $1.11 trillion, driven by bullish markets and sturdy inflows. Assets for equity, fixed income and commodity ETPs moved +$28.8bn, +$1.7bn, and +$1.3bn during last week, respectively. As of last Friday, total assets had grown by 6.6% or $69bn YTD.
to request report
Source: Deutsche Bank - Global Equity Research
With Two New ETFs, iShares Delves Deeper Into Emerging Markets
January 23, 2012--Funds limit their exposure to equities that are based in Latin America and in the Europe-Middle East-Africa region.
January 23, 2012--In an effort to slice and dice emerging markets further, on Thursday, Jan. 19, iShares launched two more emerging-markets-themed exchange-traded funds, focused on specific corners of the world.
The two new ETFs, iShares MSCI Emerging Markets Latin America Index Fund (EEML) and iShares MSCI Emerging Markets EMEA Index Fund (EEME), limit their exposure to equities that respectively are based in Latin America and in the Europe-Middle East-Africa region.
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Source: Morningstar
ETF Research Center Reporting Monitor: 4Q11 Week One
January 23, 2012--At the outset of earnings season, it looks as if S&P earnings will increase about 5% to $211 billion, or $23.38 per share. The largest contributors to profits growth are likely to be the Energy (XLE) and Tech (XLK) sectors while the Financial sector (XLF) was a drag...
Sales are forecast to have increased about 4% YoY, with the Financial sector looking like a significant drag. Margins are also under pressure, with eight out of nine sectors likely to see a sequential decline in margins...page 2.
Surprises have been decidedly negative among Financial firms that have already reported results, and even the Tech sector has fallen short of expectations. However the Materials (XLB) and Industrials (XLI) sectors have beaten expectations so far...
visit www.etfresearchcenter.com for more info.
Source: AltaVista Research
Morgan Stanley-ETF Weekly Update
January 23, 2012--US ETF Weekly Update
Weekly Flows: $10.0 Billion Net Inflows
Only 10% of ETFs Posted Net Outflows Last Week
ETF Assets Stand at $1.1 Trillion, up 6.7% YTD
2 ETF Launches Last Week
US-Listed ETFs: Estimated Flows by Market Segment
ETFs posted net inflows for the fifth consecutive week ($33.4 bln in net inflows over the period)
ETFs generated net inflows of $10.0 bln last week, bringing the total net inflows this year to $21.9 billion
US Large Cap ETFs exhibited net inflows of $3.8 bln last week, the most of any asset class
ETF assets stand at $1.1 tln, up 6.7% YTD
13-week flows were mostly positive among asset classes; combined $58.2 bln net inflows
Over the past 13 weeks, US Dividend Income ETFs have generated net inflows that equate to 18% of their market cap
Fixed Income ETFs have consistently generated weekly net inflows (23 consecutive weeks of net inflows)
US-Listed ETFs: Estimated Largest Flows by Individual ETF
SPDR S&P 500 ETF (SPY) posted net inflows of $3.2 bln last week, the most of any ETF
iShares Russell 2000 Index Fund (IWM) posted the second highest net inflows of $943 mln last week after it had exhibited the second largest net outflows in the prior week
22% of ETFs exhibited net cash inflows last week compared to just 10% that had net cash outflows
US Equity ETFs accounted for 6 of the top 10 spots of ETFs with the largest net cash outflows last week
US-Listed ETFs: Short Interest Data Unchanged: Based on data as of 12/30/11
SPY exhibited the largest decline in USD short interest since last updated
$17.2 billion in reduced short interest
Lowest level of shares short for SPY since 2/15/11
XRT’s shares short divided by shares outstanding in excess of 400%
Retail continues to be one of the most heavily shorted areas of the ETF market
Based on multiple borrowings and the ability to continuously create new shares, short interest as a % of market cap can exceed 100%
US-Listed ETFs: Most Successful Recent Launches by Assets
Data estimated as of 1/20/12 based on daily change in share counts and daily NAVs.
$7.6 billion in total market cap of ETFs less than 1-year old
Over the past 13 weeks, newly launched US Dividend Income ETFs generated most net inflows at $807 mln
14 new listings in 2012; 225 new ETF listings and 26 liquidations in 2011
Over past year, 3 of the top 10 most successful ETF launches focus on dividend paying equities
8 different ETF sponsors and 2 asset classes represented in top 10 most successful launches
iShares High Dividend Equity Fund (HDV) and PowerShares S&P 500 Low Volatility Portfolio (SPLV) each have market caps in excess of $1 bln
Top 10 account for 57% of market cap of ETFs launched over the past year
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Source: Morgan Stanley
Russell files with the SEC
January 23, 2012--Russell has filed a Amended Application for exemptive relief with the SEC.
view filing
Source: SEC.gov
Morningstar Issues Comprehensive Research Reports on ETF Managed Portfolio Strategies and ETF Tax Efficiency
January 23, 2012--Morningstar, Inc., a leading provider of independent investment research today issued two research reports—the "ETF Managed Portfolios Landscape Report" that explores current trends, asset growth, and the industry outlook for ETF managed portfolios, and another, "ETFs Under the Microscope: Tax Efficiency Survey" that tests the claims of the tax efficiency of ETFs.
ETF managed portfolios are investment strategies that typically have more than half of their portfolio assets invested in exchange-traded funds. They are primarily available as separate accounts, and they represent one of the fastest-growing segments of the investment industry. In September 2011, Morningstar announced plans to research and rank ETF managed portfolios. The company is now tracking nearly 370 strategies from 95 firms through its separate account database with collective assets under advisement of approximately $27 billion. As part of this effort, Morningstar has developed a proprietary portfolio attribute classification system based on its analysis of the ETF managed portfolio's investment strategy as well as a historical review of disclosed holdings. Morningstar's new system evaluates four main attributes: Universe (which looks at the starting scope of a strategy's investment process on a global basis), Asset Breadth, Portfolio Implementation, and Primary ETF Exposure Type. The information is now available in Morningstar Direct(SM), the company's web-based global investment analysis platform for institutional investors.
view the ETF Managed Portfolios Landscape Report
view the ETFs Under the Microscope: Tax Efficiency Survey
Source: Morningstar
Statement of Dissent to the CFTC-SEC Report on International Swap Regulation Pursuant to Section 719(c) of the Dodd-Frank Act (the "Report")
January 23, 2012--The staff of the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) must be commended on their outreach with other international regulatory bodies to harmonize the new rules and regulations over the swaps markets. I am confident that this level of coordination and cooperation has never been achieved previously.
I respectfully dissent in the issuance of this Report. First, it fails to properly capture the entirety of the regulatory landscape. Second, it should acknowledge in greater detail the challenges in harmonizing our rules. This Report provides a general, but incomplete, picture of the international rulemaking process. While it is accurate to say that there is international coordination on general policy considerations, significant questions remain regarding the extraterritorial application of the specific rulemakings currently underway at the Commissions. Further, significant questions remain regarding the pace of rulemakings among the various regulatory bodies going forward.
As of the date of this Report, neither the CFTC nor the SEC has disclosed the extraterritorial application of our proposed or final rules. Under both the proposed and final rules it appears that U.S. rulemakings would apply to entities and activities in foreign jurisdictions. For example, the application of the proposed rule regarding the CFTC’s entity definitions would make U.S. financial and non-financial entities subject to mandatory clearing and capital requirements, even if they operate outside the U.S., while foreign competitors may not be so constrained. Until the Commissions specifically define the extraterritorial application of these rules we exacerbate the significant regulatory uncertainty for global market participants. We also delay progress towards mutual recognition or mutual accommodation, which are essential to avoiding duplicate or contradictory regulatory obligations for such market participants.
Finally, the CFTC has been made aware of a significant problem by our colleagues in both Europe and Asia of a statutory requirement to indemnify the swap data repositories and the Commission as mandated under Section 728(d) of the Dodd-Frank Act. Many jurisdictions are not able to comply with this requirement and have demanded that change be made or they will not cooperate with the U.S. swaps data collection efforts. The staff has correctly pointed out in this Report that a statutory change may be necessary to ensure that the U.S. is able to fully cooperate with international regulators to share critical information regarding global risk exposure and trade data.
In closing, I commend the staff for their hard work to deliver unprecedented international coordination on broad policy questions. However, our effort to harmonize our rules and to enable mutual recognition or accommodation remains incomplete in both words and actions.
Source: CFTC.gov
