Americas ETP News
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An Active Approach to ETFs
Eaton Vance is developing a hybrid ETF that melds aspects of passive investing with active money management. Will the SEC let it fly?
February 6, 2012--While most exchange-traded funds only venture as far as their underlying benchmarks allow, a small yet growing cadre is taking a more freewheeling approach.
So-called actively managed ETFs, for which teams of managers and analysts construct portfolios, attracted slightly more than $5 billion in domestic assets in 2011. That marked a 72% increase from the prior year, but represents only a sliver of the $1.1 trillion U.S. ETF market, says data researcher IndexUniverse.
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Source: Barrons
Bill Gross…and Fund Fees
Other firms are likely to feel pressure to follow Pimco into low-cost ETFs.
February 6, 2012--The business of running and selling traditional, actively managed mutual funds is already under stress, thanks to exchange-traded funds. The new Pimco Total Return ETF, debuting March 1, seems likely to only add to the pressure.
Should the ETF version of Bill Gross's Pimco Total Return prove a success in attracting investors, the pressure will build on competitors to follow suit.
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Source: Wall Street Journal
First Trust files with the SEC
February 6, 2012--First Trust has filed a post-effective amendment, registration statement with the SEC for the FIRST TRUST EXCHANGE-TRADED ALPHADEX FUND II.
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Source: SEC.gov
SEC CF Disclosure Guidance-European Sovereign Debt Exposures
January 6, 2012--Summary: This guidance provides the Division of Corporation Finance’s views regarding disclosure relating to registrants’ exposures to certain European countries.
Supplementary Information: The statements in this CF Disclosure Guidance represent the views of the Division of Corporation Finance. This guidance is not a rule, regulation or statement of the Securities and Exchange Commission. Further, the Commission has neither approved nor disapproved its content.
Introduction
Due to the recent uncertainties with regard to European sovereign debt holdings, we are concerned about the risks to financial institutions that are SEC registrants from direct and indirect exposures to these holdings. To date we note that disclosures about the nature and extent of these exposures that registrants, including foreign private issuers, have provided in reports filed or furnished with the Commission have been inconsistent in both substance and presentation. We believe this inconsistency may lead to disclosures that lack transparency and comparability for investors.
In response to our comments on their disclosure documents, registrants have provided incremental improvements in disclosures of exposures to sovereign debt in several countries during the year. However, we find that expanded and enhanced disclosures are not consistent from registrant to registrant. Therefore, we determined that investors would benefit from our providing additional guidance to assist registrants in their assessment of what information about exposures to European countries they should consider disclosing and how they should disclose this information with the goal of greater clarity and comparability.
In periodic reports filed by these registrants in 2011, we noted discussions of financial stress experienced by certain European countries. As examples of what we viewed as inconsistent discussions on the relevant issues, registrants generally provided information that addressed:
Disclosure of aggregate exposure or separate quantification of exposure to each country of concern;
Disclosure of aggregate exposure to sovereign debt, corporate-level debt and loans to retail customers in the identified countries or quantification of exposures with respect to each type of disclosure;
Disclosure of net exposures or disclosure of both gross and net exposures; and
Disclosure of the effect of purchased credit default swap contracts based on notional values or based on fair market values.
In reviewing these disclosures, we issued comments requesting enhanced disclosures for investors relating to European sovereign debt exposures. Our comments requested that for each country, registrants disclose:
Gross sovereign, financial institutions, and non-financial corporations’ exposure, separately by country;
Quantified disclosure explaining how gross exposures are hedged; and
A discussion of the circumstances under which losses may not be covered by purchased credit protection. Disclosure Requirements and Guidance Management’s Discussion and Analysis (MD&A)1 requires registrants to identify, among other items, known trends or known demands, commitments, events, or uncertainties that will result or that are reasonably likely to result in a material increase or decrease in liquidity and to describe any known trends or uncertainties that have had, or that a registrant reasonably expects may have, a material favorable or unfavorable impact on income.
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Source: SEC.gov
PowerShares files with the SEC
February 6, 2012--PowerShares has filed a post-effective amendment, registration statement with the SEC for the PowerShares S&P International Developed High Beta Portfolio (IDHB)
PowerShares S&P Emerging Markets High Beta Portfolio (EEHB)
view filing
Source: SEC.gov
DB Global Equity Research: US ETF Market Monthly Review : ETPs experienced strongest year-start ever in January
February 6, 2012--US ETP assets soared by 8.5% in January on bull markets and strong inflows
ETP assets in the US rose by $88.9bn to $1.13 trillion last month, accumulating an increase of 8.5% YTD after the first month of the year.
Global ETP industry assets rose to $1.55 trillion, or 8.4% up YTD.
ETP flows turned to risk and recorded an all-time January high of +$28.0bn
US ETP flows were the strongest ever for a January month with $28.0bn in inflows. This figure is the fifth all time high monthly flow since 1993.
Within long-only ETPs, flows were +$27.0bn in Jan. vs. +$16.0bn in Dec.
Investors flocked to equities with inflows of $18.0bn from long-only ETPs; while pouring $7.9bn and $1.5bn into fixed income and commodity long-only ETPs in January.
Risk-on segments were the most favored by the January rally, adding significant inflows to US-focused equity (+$11.4bn), corporate debt (+$7.9bn), and EM broad equity (+$5.0bn) products.
Among equity sectors, Domestic and Global Cyclicals ETPs recorded inflows of $2.0bn and $1.7bn, respectively; while Defensives had outflows of $0.5bn. In terms of size allocations, Large Caps had $5.6bn in inflows.
Within fixed income long-only ETPs, inflows continued to be strong, but this time, rather concentrated in the corporate segment with flows of +$6.2bn, and a more balance distribution between investment grade and high yield debt.
ETFs continued to grow at a much faster pace than Mutual Funds. At the end of 2011, ETF inflows contributed 12.6% to the annual ETF AUM growth, while only 0.3% of the annual Mutual Fund AUM growth was attributable to new cash.
New Launch Calendar: filling the gaps
There were 23 new ETFs listed during the previous month.
BATS exchange listed their first ever primary listed ETFs
The new products cover three different asset classes, and in most cases offer access to market completion, domestic economies, low volatility portfolios, and fixed income strategies.
Floor activity reaches its lowest level since Dec 2010 on similar low volatility
Total monthly turnover decreased by 13.1% to $1.1 trillion vs. $1.3 trillion in the previous month.
US ETP trading made up 26.9% of all US cash equity trading in January, down from both its recent peak of 37.5% last August and its 3-year monthly average of 30.9%.
The largest decline was on Equity ETP turnover, which dropped by $167bn or 14.4% to $1.0 trillion, followed by Commodity products turnover which fell by $8.2bn, totaling $72.3bn at the end of January. Meanwhile, Fixed Income ETP turnover rose by $3.6bn to $66.8bn last month.
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Source: Deutsche Bank - Global Equity Research
Morgan Stanley-US ETF Weekly Update
February 6, 2012--Highlights
Weekly Flows: $1.4 Billion Net Inflows
Seventh Consecutive Week of ETF Net Inflows
ETF Assets Stand at $1.2 Trillion, up 11% YTD
7 ETF Launches Last Week
Select Sector SPDR Fees Reduced
US-Listed ETFs: Estimated Flows by Market Segment
ETFs posted net inflows for the seventh consecutive week ($41.5 bln in net inflows over the period)
ETFs generated net inflows of $1.4 bln last week, the smallest weekly net inflows YTD
Flows among asset classes were mixed last week (8 out of 15 posted net inflows); International - Emerging Market Equity
led the way ($2.4 bln net inflows)
ETF assets stand at $1.2 tln, up 11% YTD
13-week flows were mostly positive among asset classes; combined $52.2 bln net inflows
generated weekly net inflows (25 consecutive weeks of net inflows)
Leveraged/Inverse ETFs is one of two categories to exhibit net outflows the past 13 weeks (net outflows of $1.3 bln)
US-Listed ETFs: Estimated Largest Flows by Individual ETF
iShares Russell 2000 Index Fund (IWM) posted net inflows of $1.2 bln last week, the most of any ETF
Emerging Market Equity ETFs accounted for 3 of the top 10 spots of ETFs with the largest net cash inflows last week (combined $2.1 bln in net inflows)
Only 15% of ETFs exhibited net outflows last week
For the second straight week, SPDR S&P 500 ETF (SPY) posted net outflows ($3.8 bln net outflows over the 2 weeks)
US-Listed ETFs: Short Interest Data Unchanged: Based on data as of 1/13/12
SPY exhibited the largest increase in USD short interest since last updated
$3.5 billion in increased short interest
Despite the increase in short interest, SPY’s shares short are 42% below their all-time high reached on 9/15/11
Financials make up 3 of the 10 most heavily shorted ETFs (defined as shares short/shares outstanding)
SPDR Retail ETF (XRT) continues to be the most heavily shorted ETF as a % of shares outstanding
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
Source: Bloomberg, Morgan Stanley Smith Barney Research. Data estimated as of 2/3/12 based on daily change in share counts and daily NAVs.
$7.2 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 $764 mln
30 new ETF listings in 2012; 225 new ETF listings and 26 liquidations in 2011
Over past year, many of the successful launches have a dividend/income orientation
7 different ETF sponsors and 2 asset classes represented in top 10 most successful launches
Over the past 4 weeks, iShares MSCI China Index Fund (MCHI) has seen a noteworthy surge in net inflows ($188 mln)
Top 10 most successful launches account for 61% of market cap of ETFs launched over the past year.
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Source: Morgan Stanley
TABB Says Trading Of VIX Products Has Grown At A 5-Year CAGR Of 130%, Introducing Lucrative Arbitrage Opportunities
New Research Says that VIX ETPs May Be Influencing the Price of the Index Products They are Designed to Track
February 5, 2012 – Traders tell TABB Group that VIX exchange-traded products (ETPs) have been a key driver behind the trading of VIX futures and options, expanding at a five-year compound annual growth rate (CAGR) of 130%, quite possibly influencing the price of the index the products they have been designed to track.
“Although this may be a ‘tail wagging the dog’ situation,” says Henry Chien, author of new research published today, “VIX Trading: The Structure of Uncertainty,” “this opens the door to a number of lucrative arbitrage opportunities.”
Based on the VIX ETP market’s year-end assets, says Chien, a New York-based TABB research analyst, levered and inverse ETPs accounted for 13% of all VIX ETP notional value traded in 2011, with the VIX product set of futures, options and ETPs trading $3.4 billion average in daily notional value. During this period, the S&P 500 volatility market reached an estimated 202 million average daily notional Vega (gross): SPX Options (75 million); VIX futures (48 million); VIX Options (39 million); VIX ETPs (30 million); and SPX Variance Swaps (10 million).
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Source: TABB Group
CFTC.gov Commitments of Traders Reports Update
February 3, 2012--The current reports for the week of January 31, 2012 are now available.
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Source: CFTC.gov
Morgan Stanley-ETF Fund Flows
February 3, 2012--ETFs Exhibited Net Inflows of $40.8 and $114.7 Billion in 4Q11 and in 2011
There were 225 new ETFs listed in the US in 2011, of which 37 were issued in the fourth quarter. In 2011, 26 ETFs were liquidated, resulting in net new issuance of 199 ETFs. As of January 30, 2012, there were 33 issuers with 1,189 ETFs listed in the US.
Net inflows into US-listed ETFs were $40.8 billion during
4Q11 and were $114.7 billion for 2011. While the $40.8 billion is
an improvement from the net inflows of $37.9 billion in the fourth
quarter of 2010, it is below the average fourth quarter net cash flows
of $45.1 billion since 2004.
The largest net cash inflows this past quarter and for 2011 went into Fixed Income ETFs. ETFs tracking fixed income indices had the highest net cash inflows this past quarter at $15.5 billion, bringing their total net cash inflows for 2011 to $43.4 billion. US Large-Cap and US Dividend Income ETFs also had strong fourth quarters with net inflows of $8.4 billion and $6.0 billion, bringing total 2011 net inflows for these segments to $16.2 billion and $13.0 billion, respectively. Leveraged/Inverse ETFs had the highest net cash outflows this past quarter at $1.0 billion, but still had net cash inflows of $8.6 billion for the year. For 2011, US Small- & Micro- Cap ETFs had the highest net cash outflows at $4.4 billion.
US ETF industry assets of $1.1 trillion are ~9% higher than their level at the end of 2011. Despite the growth of the ETF market, it remains concentrated with three providers and 20 ETFs accounting for almost 78% and 48% of industry assets, respectively.
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Source: Morgan Stanley
