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Morgan Stanley-ETF Weekly Update
November 25, 2013--US ETF Weekly Update
Weekly Flows: $6.0 Billion Net Inflows
$154.8 Billion Net Inflows YTD
ETF Assets Stand at $1.6 Trillion, up 22% YTD
Two ETF Launches Last Week
US-Listed ETFs: Estimated Flows by Market Segment
ETFs posted net inflows for the second consecutive week ($6.0 bln in net inflows last week)
Last week's net inflows were led by International -Developed ETFs at $2.3 bln; conversely, US Dividend Income ETFs posted net outflows of $1.1 bln, the most of any category we measured
ETFs have exhibited net inflows 32 out of 47 weeks YTD
ETF assets stand at $1.6 tln, up 22% YTD; $154.8 bln net inflows YTD
2013 net inflows are ahead of last year's pace (at this point last year, ETFs had posted only $134.9 bln in net inflows)
13-week flows remain mostly positive among asset classes; combined $57.9 bln in net inflows
International - Developed ETFs generated net inflows of $22.5 bln over the last 13 weeks, the most of any category we measured; International - Developed ETFs accounted for 39% of ETF net inflows over the past 13 weeks
Commodity ETFs continue to struggle, posting net outflows of $3.6 bln over the last 13 weeks; specifically, the SPDR Gold Trust (GLD) has exhibited $2.8 bln in net outflows over the 13-week period
US-Listed ETFs: Estimated Largest Flows by Individual ETF
iShares Russell 2000 ETF (IWM) posted net inflows of $2.0 bln this past week, the most of any ETF
The iShares MSCI Japan ETF (EWJ) and the WisdomTree Japan Hedged Equity Fund (DXJ) generated a combined $750 mln in net inflows last week as investors have piled into Japan ETFs in 2013 as Japanese equities have been strong performers YTD
Two of the largest US Dividend Income ETFs, iShares Select Dividend ETF (DVY) and SPDR S&P Dividend ETF (SDY), exhibited a combined $1.1 bln in net outflows last week
Despite posting $749 mln in net outflows last week, the SPDR S&P 500 ETF (SPY) has generated $5.4 bln in net inflows over the last 13 weeks, the most of any ETF
US-Listed ETFs: ETF Dollar Volume
ETF monthly $ volume as a % of listed trading volume was essentially flat for the fourth consecutive month (27% of listed trading volume)
Over the past 5 years, ETFs peaked at 36% of listed trading volume in November 2008
ETFs traded $275 bln last week, up $22 bln from the prior week, however 7% below their 13-week average
Fixed Income ETFs accounted for only 6% of ETF $ volume last week, but make up 15% of ETF market share
US-Listed ETFs: Short Interest Data Unchanged: Based on data as of 10/31/13
The iShares 20+ Year Treasury Bond ETF (TLT) had the largest increase in USD short interest at $728 mln
TLT's shares short (30.4 mln) are at their all-time highest level
723 ETFs exhibited short interest increases while 467 experienced short interest declines over the last period
Aggregate ETF USD short interest decreased by $1.7 bln over the period ended 10/31/13
The average shares short/shares outstanding for ETFs is currently 4.3%, flat from last period
The SPDR Oil & Gas Exploration & Production ETF (XOP) eclipsed the SPDR Retail ETF (XRT) as the most heavily shorted ETF with a shares short as a % of shares outstanding of 280%
Based on multiple borrowings and the ability to continuously create new shares, shares short as a % of shares outstanding can exceed 100% (only seven ETFs exhibited shares short as a % of shares outstanding greater than 100%)
US-Listed ETFs: Most Successful Recent Launches by Assets
$6.0 bln in total market cap of ETFs less than 1-year old -Active ETFs account for 26% of market capitalization of ETFs launched over the past year, the most of any category; over the last 13 weeks, recently launched Active ETFs have generated net inflows of $385 mln
133 new ETF listings and 48 closures/delistings YTD
The top 10 most successful launches make up 49% of the market cap of ETFs launched over the past year
Eight 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 five (down from seven at the end of the second quarter)
The db X-trackers Harvest CSI 300 China A-Shares Fund (ASHR) cracked the top 10 most successful launches over the past year with a market cap of $156 mln; ASHR is a China ETF that owns the 300 largest, most liquid stocks in the China A-share market
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Hedged ETPs looking to move beyond currency niche
November 25, 2013--Monetary policy, volatility and interest rate regimes, among other factors, have caught the attention of money managers offering exchange-traded products.
With institutional investors now willing to expand their ETP holdings beyond market-weighted index funds to fundamental and factor-based strategies, fund sponsors have introduced more products with embedded, programmatic hedges.
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Source: Pensions & Investments
S&P Names Citi Executive Sahai President
November 25, 2013--McGraw Hill Financial Inc. ( MHFI ) said on Monday it hired Citigroup Inc. ( C ) executive Neeraj Sahai to run its Standard & Poor's Ratings Services unit, the world's largest ratings agency.
Mr. Sahai joins the company as it battles the U.S. federal government in a high-stakes lawsuit that accuses the company of inflating its letter-grade ratings to win business from bankers and other clients. He succeeds Douglas Peterson, who became chief executive of McGraw Hill earlier this month. Mr. Peterson, also a former Citi executive, was the prior president of S&P, named to that position in September 2011.
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Soure: NASDAQ OMX
Hedge Funds Prefer ETFs For Shorting: Goldman Sachs
November 25, 2013--Even hedge funds like ETFs.
But not for the same reasons as you and me. The latest "Hedge Fund Trend Monitor" study from Amanda Sneider, David J. Kostin, Stuart Kaiser, Ben Snider, Rima Reddy and Aaron Woodside of Goldman Sachs Portfolio Research says hedge funds use ETFs primarily for just that-hedging.
Hedge funds using ETFs as hedging tool
"Hedge funds use ETFs more as a hedging tool than as a directional investment vehicle, based on our analysis of 13-F and short interest filings."
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Source: ValueWalk
U.S. Fed's Tarullo wants more tools to counter shadow bank risks
November 22, 2013-- Global financial watchdogs should have more policy tools and powers over firms such as hedge funds to counter the risk of a devastating run on investment banks, the U.S. Federal Reserve's top regulator said on Friday.
Fed Governor Daniel Tarullo unveiled new details of the central bank's plans to require banks to hold more capital if they rely heavily on raising short-term cash from other banks, and he pushed regulators writing global rules to do more.
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Source: Reuters
Five Reasons Why This Association Hit the Pause Button
November 22, 2013--The National Exchange Traded Funds Association's efforts to represent the trillion-dollar investment banking industry have been shelved due to "lack of demand." Its stunted start offers insights for other budding groups.
The National Exchange Traded Funds Association (NETFA) website currently sits dormant, replaced with a placeholder site full of unrelated links. For an association launched less than two years ago with fanfare, it was an unceremonious end-at least, for now.
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Source: Associationsnow.com
CFTC.gov Commitments of Traders Reports Update
November 22, 2013--The current reports for the week of November 19, 2013 are now available.
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Source: CFTC.gov
ProShares Launches First Short Term Emerging Markets Bond ETF
November 21, 2013--Short duration fund offers attractive yield potential with reduced interest rate sensitivity
November 21. 2013--ProShares, a premier provider of alternative ETFs, today launched the Short Term USD Emerging Markets Bond ETF (EMSH), the first short term emerging markets bond ETF in the United States.
The ETF is designed to offer attractive yield potential with reduced interest rate sensitivity.
"Investors concerned about rising interest rates have been flooding into short term bond ETFs," said Michael Sapir, Chairman and CEO of ProShare Advisors LLC, ProShares' investment advisor. "We are pleased to introduce the nation's first short term emerging markets bond ETF, which offers exposure to this attractive-yielding asset class while limiting the impact of rising interest rates."
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Source:ProShares
IndexUniverse & ISA Announce Partnership
November 21, 2013--IndexUniverse LLC and Index Strategy Advisors (ISA) today announced the launch of a partnership to build and deliver high-quality ETF portfolios to clients.
Under the terms of the agreement, ISA will leverage IndexUniverse's ETF Analytics and due diligence platform to select ETFs for clients, based on ISA's proprietary asset allocation models. -
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Source: Index Strategy Advisors (ISA)
State Street-Whitepaper: Leveraging the Best of Passive and Active
November 21, 2013--The active versus passive debate is often emotional and polarizing. However, when you push
beyond the black and white divides, it becomes clear that combining passive and active investment strategies is actually the most beneficial approach for portfolios, especially when
considering the growth of advanced indexes. That is, while certain efficient asset classes may
be best accessed with low cost passive investments, others may have greater potential for excess returns and, therefore, are best suited for active management.
At the same time, active
and passive solutions can complement each other within asset classes and allows investors to tilt portfolios to the best opportunities within and across markets. This approach harnesses
the best of passive and active and can help build the most cost effective, resilient and robust portfolios possible
THE EVOLUTION OF PASSIVE INVESTING
The debate over the merits of active management ignited in 1965
with the publication of Michael Jensen's "The Performance of
Mutual Funds in the Period 1945-1965". Proponents of passive
investing, also known as index investing, typically view markets
as efficient. Accordingly, rather than seek to outperform a
benchmark, passive investors seek to track the performance of a
market index by owning the same assets, in similar proportions,
as the underlying index. In contrast, active investors tend to
believe that markets are inefficient. Therefore, active managers
tend to over and underweight securities, sectors or countries in
order to generate excess returns relative to an index.
Although actively managed funds account for nearly three quarters of the overall market, passive funds have gained significant market share over the past few years. Interestingly, passive investing only became a reality in 1971 with the launch of the first fund seeking to track a rules-based index. Thus, in the grand scheme of the investing world, passive remains a relative newcomer.
Much of passive's asset growth was sparked by recent prolonged periods of market volatility starting in the early 2000s when many active managers failed to live up to expectations. The Global Financial Crisis exacerbated this trend and caused investors to reassess the role of active investment approaches, especially when many managers experienced liquidity difficulties and marked underperformance during the worst of the crisis. Accordingly, passive assets, as a percentage of total mutual fund industry assets, have risen from approximately 10% in 2001 to 26% today. At the same time, investors of all shapes and sizes have become more cost conscious and are highly scrutinizing management fees.
to view white paper visit www.statestreetspdrs.com
Source: SPDR(R) University Research
