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DB-Synthetic Equity & Index Strategy-North America-Monthly ETF Market Review-Rotation among risky assets, but no flight to safety
November 12, 2012--US ETP assets fell by 1.0% in October
ETP assets in the US dropped by $12.2bn to $1.27 trillion (YTD + 21.6%) last month.
Global ETP industry assets pulled back to $1.74 trillion, or 21.5% up YTD.
Investor flows suggest slight de-risking during October
US ETP flows experienced inflows of $2.8bn during October (+$133.6bn YTD, 12.8% of last year’s AUM).
Within long-only ETPs, total flows were +$2.8bn in October vs. +$35.4bn in September.
Equity, Fixed Income, and Commodity long-only ETPs experienced cash flows of -$4.7bn, +$5.9bn, and +$1.9bn, respectively.
After a couple of months of strong risk-on momentum, investors booked profits during October by pulling out from US-focused Equity products (-$11.8bn). In addition, flows suggest that the appetite for risky assets also decreased within the Credit space with HY ETF flows ending about flat and IG fund flows attracting most of the new assets (+$4.0bn). However the flow figures don’t suggest a straight flight to safety, but rather a rotation within risky assets coupled with a search for downside protection. For example, Corporate debt products (+$3.3bn) were preferred over Sovereign (-$0.6bn); and within equity, international exposure ETFs still received strong inflows such as the $1.3bn received by China-focused products.
New Launch Calendar: Core equity allocations and quant strategies
There were eleven new ETFs and two new ETNs listed during the previous month. Twelve of them were listed in the NYSE Arca, with the remaining one in the NASDAQ. The new products were mostly focus on core equity exposure across regions and quantitative strategies.
Turnover Review: Floor activity increased by 6%
ETP turnover totaled $1.08 trillion last month, up by 5.8% (+$59.4bn) from the previous month figure of $1.02 trillion, but still 34% below last year’s monthly average of $1.65 trillion.
ETP trading made up 25.4% of all US cash equity trading in October, down from last year’s peak of 37.5% in August, and still below its 3-year monthly average of 29.0%.
Equity and Fixed Income ETPs turnover rose by $73.2bn or 8.4% and $4.0bn (6.0%), respectively; meanwhile Commodity ETPs turnover fell 20.9% (-$15.3bn) during last month.
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Source: Deutsche Bank - Synthetic Equity & Index Strategy -North America
Morgan Stanley-ETF Weekly Update
November 12, 2012--Weekly Flows: $2.4 Billion Net Inflows
ETF Assets Stand at $1.3 Trillion, up 20% YTD
One ETF Launch Last Week
No News Items Last Week
US-Listed ETFs: Estimated Flows by Market Segment
ETFs generated net inflows for the second consecutive week ($2.4 bln last week)
Emerging Market Equity ETFs led the way last week, exhibiting net inflows of $1.1 bln
ETF assets stand at $1.3 tln (up 20% YTD) and have posted net inflows 35 out of 45 weeks in 2012 ($137.0 bln YTD)
13-week flows were mostly positive among asset classes; combined $50.0 bln net inflows
Fixed Income ETFs have posted net inflows 63 out of the past 65 weeks; including $11.7 bln over the past 13 weeks
The Currency category was the lone area that we measured to exhibit net outflows over the last 13 weeks; specifically, the PowerShares DB US Dollar Index Bullish Fund (UUP) posted net outflows of $299 mln over that time period
US-Listed ETFs: Estimated Largest Flows by Individual ETF
iShares MSCI Emerging Markets Index Fund (EEM) generated net inflows of $917 mln, the most of any ETF
EEM has posted net inflows of $2.2 bln over the last 4 weeks, also the most of any ETF; positive flows coincide with Vanguard transitioning its emerging markets ETF, Vanguard MSCI Emerging Markets ETF (VWO), to FTSE from MSCI
Over the past 13 weeks, the SPDR Gold Trust (GLD) has posted net inflows of $4.5 bln, the most of any ETF, as investors have flocked to the precious metal amid global monetary easing
US-Listed ETFs: Short Interest
Data Updated:
Based on data as of 10/31/12
SPDR S&P 500 ETF (SPY) had the largest increase in USD short interest at $1.9 bln
Despite an increase in short interest last period, SPY’s shares short remained 26% below their average level over the past year
Aggregate ETF USD short interest increased by $3.9 bln over the past two weeks ended 10/31/12
The average shares short/shares outstanding for ETFs is currently 4.4%
Smaller ETFs by market cap may skew the results (3 of the top 10 with the highest % of shares short have market caps <$25 mln)
Notably, the iShares Barclays 20+ Year Treasury Bond Fund (TLT) cracked the top ten 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 seven 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 11/9/12 based on daily change in share counts and daily NAVs.
$7.5 billion in total market cap of ETFs less than 1-year old
Newly launched Active ETFs account for 52% of the market cap of ETFs launched over the past year
142 new ETF listings and 76 closures YTD (additional 3 liquidations have been announced)
The top 10 most successful launches make up 72% of the market cap of ETFs launched over the past year
Five 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 a fixed income orientation and include both actively and passively managed ETFs
BlackRock accounted for 31% of new launches over the past year, but only 25% of market cap; PIMCO Total Return ETF (BOND), with a market cap of $3.5 bln, dominates the market cap of newly launched ETFs (47% of total market cap)
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Source: Morgan Stanley
For Passive Investors, Rolling Commodities Gather a Loss
November 11, 2012--Even when commodities win, investors can still lose.
Despite fundamental market pressures and a volatile year, prices for front-month natural gas futures have gained a healthy 24% so far in 2012.
But if you bought units in the United States Natural Gas Fund at the start of the year, you would instead have lost one-fifth of your investment.
The disconnect gets worse the further back you look. On a five-year view, gas futures are down by just over half, but the fund's units have lost almost 94% of their value.
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Source: Wall Street Journal
BNY Mellon DR Indices Monthly Performance-October 2012
November 10, 2012--The BNY Mellon DR Index Monthly Performance Review October 2012 is now available.
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Source: BNY Mellon
Watch the costs at fund of funds
November 10, 2012--Is your financial adviser recommending that you invest in a fund of other funds? If so, think twice and ask why, as many experts think the extra costs entailed in funds of funds are not justified by their performance.
A fund of funds is a unit trust run by an asset manager who invests not in shares or bonds, but in other funds. There are two types: fettered, where the fund invests in funds managed by its own company, and unfettered, which gives the manager freedom to invest in funds run by other managers. These products typically offer investors exposure to a variety of asset classes, such as bonds, equities and property, and a range of investment styles.
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Source: Target Info
CME Group Sues Regulator Over Swap-Reporting Rules .
November 9, 2012--CME Group Inc.(CME) filed a lawsuit to block new federal requirements around the reporting of swap transactions, one component of the wide-ranging Dodd-Frank financial law.
Such rules, which would hit CME as the operator of a clearinghouse for derivatives trades, "would impose costly, cumbersome and duplicative requirements" on clearinghouses, CME charged in the lawsuit filed Thursday.
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Source: Wall Street Journal
ETF Asset Flows Don't Sway Metal Prices, SEC Unit Says
November 9, 2012--Asset flows from exchange-traded products linked to metals don't have a significant impact on the price of the commodity, according a study for U.S. regulators weighing JPMorgan Chase & Co. (JPM)'s plan for a copper-backed fund.
The analysis, from a division of the Securities and Exchange Commission, is part of deliberations on a proposal by NYSE Arca Inc. to list the JPM XF Physical Copper Trust, a Nov. 6 SEC filing showed. A group of industrial copper users and at least one U.S. lawmaker oppose the plan, saying it would disrupt metal supplies and drive up prices.
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Source: Bloomberg
CFTC.gov Commitments of Traders Reports Update
November 9, 2012--The current reports for the week of November 6, 2012 are now available.
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Source: CFTC.gov
Exclusive: SEC left computers vulnerable to cyber attacks-sources
November 9, 2012--Staffers at the U.S. Securities and Exchange Commission failed to encrypt some of their computers containing highly sensitive information from stock exchanges, leaving the data vulnerable to cyber attacks, according to people familiar with the matter.
While the computers were unprotected, there was no evidence that hacking or spying on the SEC's computers took place, these people said.
The computers and other electronic devices in question belonged to a handful of employees in an office within the SEC's Trading and Markets Division. That office is responsible for making sure exchanges follow certain guidelines to protect the markets from potential cyber threats and systems problems, one of those people said.
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Source: Chicago Tribune
Agencies Provide Guidance on Regulatory Capital Rulemakings
November 9, 2012--The U.S. federal banking agencies issued three notices of proposed rulemaking in June that would revise and replace the current regulatory capital rules. The proposals suggested an effective date of January 1, 2013.
Many industry participants have expressed concern that they may be subject to a final regulatory capital rule on January 1, 2013, without sufficient time to understand the rule or to make necessary systems changes.
In light of the volume of comments received and the wide range of views expressed during the comment period, the agencies do not expect that any of the proposed rules would become effective on January 1, 2013. As members of the Basel Committee on Banking Supervision, the U.S. agencies take seriously our internationally agreed timing commitments regarding the implementation of Basel III and are working as expeditiously as possible to complete the rulemaking process. As with any rule, the agencies will take operational and other considerations into account when determining appropriate implementation dates and associated transition periods.
Source: FBR
