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Morgan Stanley-US ETF Weekly Update
November 11, 2013--Weekly Flows: $242 Million Net Outflows
$147.5 Billion Net Inflows YTD
ETF Assets Stand at $1.6 Trillion, up 20% YTD
Six ETF Launches Last Week
No ETF News Items Last Week
US-Listed ETFs: Estimated Flows by Market Segment
ETFs posted modest net outflows of $242 mln last week; first net outflows in five weeks
Last week's net outflows were led by US Small- & Micro-Cap ETFs at $2.4 bln; conversely, International - Developed ETFs posted net inflows of $2.7 bln, the most of any category we measured
ETFs have exhibited net inflows 30 out of 45 weeks YTD
ETF assets stand at $1.6 tln, up 20% YTD; $147.5 bln net inflows YTD
13-week flows remain mostly positive among asset classes; combined $35.8 bln in net inflows
International - Developed ETFs generated net inflows of $22.0 bln over the last 13 weeks, the most of any category we measured; European ETFs or international equity ETFs with significant European exposure were the primary driver to the category's large net inflows
Over the last 13 weeks, four of the 15 categories that we measured posted net outflows totaling $5.4 bln (Commodity, US Large-Cap, Fixed Income, Active)
US-Listed ETFs: Estimated Largest Flows by Individual ETF
ProShares Ultra S&P500 (SSO) posted net inflows of $1.4 bln this past week, the most of any ETF
SSO's shares outstanding nearly doubled over the last week and its market cap surged to $2.9 bln from $1.6 bln
For the second consecutive week, the iShares Russell 2000 ETF (IWM), exhibited large net outflows; over the last two weeks, IWM has posted net outflows of $4.0 bln
The Vanguard FTSE Europe ETF (VGK) had another strong week, generating net inflows of $328 mln; VGK has posted net inflows for 22 consecutive weeks totaling $5.6 bln
The Vanguard FTSE Emerging Markets ETF (VWO) exhibited net outflows of $415 mln last week; VWO has posted net outflows eight of the last 13 weeks, totaling $3.1 bln
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 $297 bln last week, down $20 bln from the prior week and in-line with their 13-week average
US Sector & Industry ETFs accounted for 12% of ETF $ volume last week, trailing on US Large-Cap ETFs
US-Listed ETFs: Short Interest Data Unchanged: Based on data as of 10/15/13
The SPDR S&P 500 ETF (SPY) had the largest increase in USD short interest at $2.2 bln
Shares short of the iShares MSCI EAFE ETF (EFA) declined to 30.2 mln from 40.4 mln the prior period; EFA's shares short are at their lowest level since 7/31/13; EFA is up over 10% on a market price basis since 7/31/13
585 ETFs exhibited short interest increases while 609 experienced short interest declines over the last period
Aggregate ETF USD short interest increased by $5.3 bln over the period ended 10/15/13
The average shares short/shares outstanding for ETFs is currently 4.3%, up from 3.9% last period
For the fourth straight period, the SPDR Retail ETF (XRT) exhibited the highest shares short as a % of shares outstanding; XRT's shares short are currently 282%, up from last period's 247%
Based on multiple borrowings and the ability to continuously create new shares, shares short as a % of shares outstanding can exceed 100% (only eight ETFs exhibited shares short as a % of shares outstanding greater than 100%)
US-Listed ETFs: Most Successful Recent Launches by Assets
$5.5 bln in total market cap of ETFs less than 1-year old
Active ETFs account for 27% 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 $435 mln
130 new ETF listings and 43 closures/delistings YTD
The top 10 most successful launches make up 49% of the market cap of ETFs launched over the past year
Seven 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)
Despite not cracking the top 10 most successful launches, the Riverfront Strategic Income Fund (RIGS) posted net inflows of $24 mln last week, the most of any recently launched ETF; RIGS is an actively managed fixed income ETF seeking to optimize duration and yield
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Source: Morgan Stanley
Momentum builds for allowing some trades in 5-cent increments
November 11, 2013--A group of investors, financial institutions and exchanges introduced a proposal to the Treasury Department to allow shares of companies with market capitalization of less than $750 million to trade in increments of a nickel.
The expectation is that the change would make it easier for those companies to raise capital and therefore create jobs.
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Source: Smartbrief
Consumers win as Fidelity sits on ETF costs
November 9, 2013--Fidelity Investments recently proved the line about how an 800-pound gorilla gets to sit "anywhere it wants" when the company announced a new suite of sector-oriented exchange-traded funds,
and squatted squarely in the territory of low costs, essentially ensuring that investors are about to enjoy the fruits of a cost-cutting war as the industry's big apes slug it out.
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Source: The Seattle Times
Senate to grill watchdogs on Wall Street commodity bets
November 8, 2013--U.S. senators will question financial regulators over Wall Street's role in commodity markets, a person familiar with the matter said, in a hearing that will draw close attention from the largest investment banks.
The November 20 meeting of the powerful Senate Banking Committee will be the second called by Senator Sherrod Brown, an Ohio Democrat, and follows a session in which brewers complained that beer cans were too expensive because banks kept the price of aluminum artificially high.
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Source: Reuters
Mexico aims to allay swaps trading fear
November 8, 2013--The Bolsa Mexicana de Valores is in talks with Mexican banks to use its derivatives exchange for trading swaps, to allow local dealers to comply with tough new US rules but prevent market liquidity draining to its North American neighbour.
The bourse has floated the idea with five local broker-dealers of using the Mercado Mexicano de Derivados (MexDer) as a local version of a US swap execution facility, or Sef.
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Source: FT.com
Morgan Stanley ETF Fund Flows-ETFs Exhibited Net Inflows of $52.6 Billion in 3Q13
October 8, 2013--There were 31 new ETFs listed in the US in the third quarter of 2013.
An additional 29 ETFs have been launched since the end of the third
quarter, bringing year-to-date ETF issuance to 124. However, there have
also been 43 closures/delistings this year, and as of 11/5/13, there were 41
issuers with 1,320 ETFs listed in the US.
Net inflows into US-listed ETFs were $52.6 billion during 3Q13. This
is well above the average quarterly rate of net cash inflows over the past
three years of $38.4 billion and is a large increase from the second quarter
net inflows of $17.0 billion. Through the first three quarters of 2013, net
inflows into ETFs were $121.2 billion, which is slightly below last year’s
net inflows of $133.4 billion through the first three quarters, but still
shaping up to be a strong year.
The largest net cash inflows this past quarter went into International
- Developed ETFs. International - Developed ETFs had net cash inflows
of $16.6 billion this past quarter, bringing net inflows for the first three
quarters of 2013 to $39.4 billion, the most of any segment. While ETFs
providing exposure to Japan were the primary drivers of flows into this
segment for the first half of the year, ETFs allocated to Europe led the
way in the third quarter.
Commodity ETFs had the largest net outflows in the third quarter of
2013. Net outflows from these ETFs were $2.0 billion. Notably, one ETF
providing exposure to gold had net outflows of $2.6 billion and was the
main driver of the weakness in this segment.
US ETF industry assets of over $1.6 trillion are ~21% higher year to
date. Despite the growth of the ETF market, it remains concentrated with
three providers and 20 ETFs accounting for almost 75% and 42% of
industry assets, respectively.
There have been 295 US-listed ETFs terminated since the end of 2007. There have been 43 ETFs liquidated so far in 2013. The rate of liquidations this year has slowed from 2012’s pace, when 82 ETFs closed, and is more in line with the rate of liquidations in years prior to 2012. The number of ETFs liquidated in 2008, 2009, 2010, 2011 was 44, 51, 49, and 26, respectively. Many newer listings have struggled to gain meaningful traction. The 422 ETFs launched since the start of 2011 (excluding liquidations) have average assets of $181.0 million but a median asset level of just $20.4 million. While some of the products offer unique exposure, many of the newer ETFs, particularly those with a narrower focus and those based on less well-known indices, have struggled to gain assets.
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Source: Morgan Stanley
CFTC.gov Commitments of Traders Reports Update
November 8, 2013--The current reports for the week of November 5, 2013 are now available.
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Source: CFTC.gov
Global X Funds Launches Next Emerging & Frontier ETF
November 7, 2013--Global X Funds, the New York-based provider of exchange-traded funds (ETFs), today launched the Global X Next Emerging & Frontier ETF (NYSE Arca: EMFM).
This new product will provide investors with access to 35 countries exhibiting high growth potential and favorable demographical trends that may stimulate their rise as economic powers. Importantly, the index does not include equities from the BRIC countries (Brazil, Russia, India, and China) and other, more advanced economies like South Korea or Taiwan.
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Source: Wall Street Journal
Why did Vanguard reverse-split a popular ETF?
November 7, 2013--Q: Why did Vanguard reverse-split a popular ETF?
A: Some Vanguard investors thought they hit the jackpot on Oct. 24. It appeared the shares of the Vanguard's popular Standard & Poor's 500 exchange traded fund doubled in value in one day.
According to the price quote for shares of the ETF, which trades under the symbol "VOO", it soared from $79.97 to $160.46. What actually happened with the ETF was far less exciting.
On Oct. 24, Vanguard did a somewhat unusual 1-for-2 reverse stock split of the its S&P 500 ETF. The stock price doubled because Vanguard reduced the number of shares outstanding by half.
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Source: USA Today
Investment-Grade ETF Uses Interest-Rate Hedge to Lure Investors
November 7, 2013--A new investment-grade bond exchange-traded fund from ProShare Advisors LLC is embedding interest-rate protection to accommodate investors who expect rates to rise as the Federal Reserve curbs its unprecedented stimulus.
U.S. government bond futures will be used to hedge against rising interest rates in the ProShares Investment Grade-Interest Rate Hedged ETF, which will aim for zero duration, Bethesda, Maryland-based ProShares said in a statement distributed by Business Wire today.
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Source: Bloomberg
