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DB Global Equity Index & ETF Research : US ETP Market Weekly Review: US ETP AUM aiming for $1 trillion at the year end
December 17, 2010--Market Review
The market sentiment was overall favorable for the US market last week. Many Wall Street analysts and economists released positive outlooks for the US, followed by encouraging developments in Washington related to the Tax Deal, on top of additional positive economic data releases.
All this information caused the US equity market to move steadily upward one day at a time, finishing the week on its higher level in the past two years (as measured by the S&P 500). The S&P 500 was up by 1.28%, and the MSCI World increased by 0.56%, while the MSCI EM declined by 0.62%. At the same time, Gold price in USD was down by 1.99% and the USD appreciated 1.4% against the EUR. Total US ETP flows experienced strong above-average inflows of $9.7 bn vs $0.3 bn inflows the previous week. The weekly average ETP flows stands at $2.3 bn year to date. US ETPs AUM reached an all-time high of $981 bn, and now prepare to attempt the 1 trillion dollar year end mark for the first time.
Equity ETP flows: Investors pour money heavily into US Broad ETF
Equity ETPs recorded a massive $10.4 bn in inflows vs $1.1 bn in outflows in the previous week. Equity inflows were mainly driven by geographic and market size exposure, flowing abundantly into Long US focused and Broad Market ETPs (Figure 1 and 2).
It is worth to point out that half of the equity inflow ($5.2 bn) was driven by one single ETF, namely, the Vanguard Total Stock Market ETF (VTI), which recorded a 31% increase in its shares outstanding last Thursday. As it is common to most of Vanguard ETFs, VTI is a share class of an index fund which includes other mutual fund share classes as well. Hence although the assets for the ETF are around $20 bn, that is just a small portion of the overall fund assets of about $150 bn, and consequently the $5 bn inflow could have been easily driven by a share class conversion performed by large clients.
Last week also saw healthy inflows to the Long Small Cap ($2.1 bn) and Long Mid Cap ETFs ($1.2 bn). In the case of the Small Cap ETFs, the flows were probably driven by the relatively better performance of this segment (S&P 600, +2.51%) when compare to Large (S&P 500, 1.28%) or Mid Cap (S&P 400, +1.39%)
Fixed Income ETP flows drain away, Corporates and Foreign Sovereigns hang on
Apparently the come back to Fixed Income ETFs, didn’t last long. Last week $696 mm were drained away, more than offsetting the $542 mm inflows in the previous week. Notwithstanding, the year to date flows total still remain at a respectable $34 bn mark. Corporates and Foreign Sovereigns helped to offset the impact of this money flight by contributing with $104 mm and with $60 mm inflows, respectively.
The flows dynamics keep changing within the Precious Metals 2.0
Commodity ETPs experienced $259 mm in outflows during the last week, vs $961 mm inflows in the previous week. Concerns regarding an imminent rate hike in China in order to keep inflation under control, combined with profit taking after a couple of bullish weeks, kept commodities on the bearish side. Energy related ETPs experienced the largest outflows ($302 mm), while within Precious Metals products the $316 mm outflows in gold were mostly offset by the other glittering metals.
New Launch Calendar
Last week there were 9 new ETPs listed in the US. All of the new products were listed in NYSE Arca and were issued by 3 different ETP Providers. The products offer new Equal-Weight, Long/Short and Gold company exposure/themes.
Rydex launched 5 ETFs with an equal-weight approach offering International, Emerging Market, and Size exposure. Direxionshares brought 3 ETFs to market, two of which offer access to Gold mining companies on a leverage long and short basis, and one non-leverage, their first ever, tracking an equally weighted Airline index. Last but not least,. ProShares unveiled a fund that tracks a combined fundamental long/short investment approach.
Turnover Review
US ETP Avg. Daily Turnover dropped 5.4% totaling $64 bn at the end of the week. Equity ETPs registered the largest absolute decrease with $3.3 bn or -5.5% week over week.
Assets Under Management (AUM) Review
Strong Flows pushed US ETP assets to a new record high. Overall assets rose by 1.2%, reaching $981 bn at the end of the week. Year to date US ETPs AUM have increased $199 bn or 25.5%.
To request a copy of the report
Source: Deutsche Bank Global Equity Index & ETF Research
U.S. Option Trading Jumps to Second-Highest Level on Dividend Transactions
December 17, 2010--Trading of U.S. stock options soared to the second-highest level in nearly four decades of history yesterday, boosted by investors using the contracts to capture dividends paid by the biggest exchange-traded funds.
Volume jumped to 30.7 million contracts on stocks, indexes and ETFs, according to Chicago-based Options Clearing Corp., which clears and settles all trades in exchange-listed contracts. The SPDR S&P 500 ETF Trust, which tracks the benchmark measure of U.S. stocks, accounted for about a third of that volume. The record of 30.8 million was set on May 6, when U.S. stocks lost $862 billion in value in less than 20 minutes.
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Source: Bloomberg
State Street Abandons Dow Jones Style-Box ETFs
December 17, 2010--
Nine SPDR ETFs from State Street will undergo significant changes on Monday, December 20, 2010. All will receive new names and new underlying indexes, and six will get lower expense ratios. The seven style-box ETFs will receive new ticker symbols, while the two bond ETFs will retain their current symbols. None will have their history erased or CUSIP changed.
The seven revised style-box ETFs will change their underlying indexes from Dow Jones to S&P. This moves State Street, and the SPDR brand, away from providing unique style-box ETFs to being the third provider offering S&P style-box ETFs. It places SPDR head-to-head with iShares and Vanguard with Vanguard currently enjoying a clear price advantage
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Source: Benzinga
U.S. ETF and ETP Assets Break Through $1 Trillion Milestone
December 17, 2010--Assets in U.S.-listed exchange traded funds (ETFs) and exchange traded products (ETPs) broke through the $1 trillion milestone – reaching $1.027 trillion -- for the first time on 16 December 2010, according to BlackRock’s Global ETF Research and Implementation Strategy Team.
As of 16 December 2010, in the U.S., there were 894 ETFs with assets of $887.2 billion from 28 providers on two exchanges. At the end of December 2009 the U.S. ETF industry had 772 ETFs, assets of $705.5 billion, from 29 providers on two exchanges. Year to date, 171 new ETFs have been launched in the U.S. with another 828 new ETFs in the pipeline, while 49 ETFs were delisted.
Additionally, as of 16 December 2010, there were 185 ETPs listed in the U.S. with assets of $115.5 billion, from 20 providers on one exchange. At the end of December 2009, there were 142 ETPs with assets of $88.1 billion from 17 providers on one exchange.
ETFs are index based open-ended funds that can be bought and sold like ordinary shares on a stock exchange. They have become popular and widely used investment vehicles to facilitate many investment and diversification strategies — from short-term tactical applications to longer-term strategic applications. The ETP industry includes other product structures such as trusts, partnerships, commodity pools and notes.
Capturing Benchmark Performance
Growth in the U.S. market for ETFs and ETPs reflects expansion in the use of the vehicle through retail channels, as well as their continuing popularity among institutional investors of all kinds, said Deborah Fuhr, Global Head of ETF Research and Implementation Strategy at BlackRock.
“Increasingly both retail and institutional investors are building global, multi-asset portfolios that are designed to capture the performance of key ‘benchmarks’ for attractive market sectors -- an application for which ETFs and ETPs are particularly well suited,” Ms. Fuhr said.
“ETF providers are expanding their product ranges into more specialized areas to cater to the growing number of professional and retail investors using ETFs as advanced portfolio construction tools,” she said. “The increasing availability of these highly-specialized ETFs and ETPs across the full spectrum of equities, fixed-income and alternative investments means that investors can use these vehicles to instantly deploy capital to take advantage of new investment opportunities – with complete transparency into the underlying investments as well as low cost.
“Cost features make ETFs and ETPs among the most ‘democratic’ of investments, as a product’s pricing is consistent regardless of the type of investor or level of assets invested,” she said.
Growing Interest in North American Equity, and Emerging Markets
Net new asset flows for U.S.-listed ETFs for 2010 to date provide evidence of growing interest in both developed and emerging markets equity ETFs/ETPs, with these flows greater this year than in 2009, Ms. Fuhr said. At the same time, net new asset flows indicate less focus on fixed income and commodities.
Through November, net new flows into North American equity ETFs/ETPs have totaled $21 billion, compared with just $2 billion in 2009. Over the same time period this year, flows into emerging markets equity ETFs/ETPs overall have totaled $29 billion, compared with $27 billion last year. Of this total, flows into “multi-region” emerging markets products have totaled $26 billion year to date, compared with $16.7 billion last year.
Flows into fixed income products have totaled $31.2 billion, compared with $44.8 billion last year, and flows into commodity products have totaled $11.4 billion, compared with $32.6 billion last year.
Through November, the ETF average daily trading volume in U.S. dollars has increased by 26 percent, to US $57.7 billion. ETF trading volume in November accounted for 24.1% of all United States equity turnover.
An Educational Need Market-Wide
Growth in the utilization of ETFs and ETPs – as well as the expanding diversity of the product set – is leading to greater urgency of a market wide educational need, Ms. Fuhr said. “Investors need to understand that under the overall ETF/ETP umbrella, many different product structures, underlying investments (securities, futures, physical commodities, etc.), regulatory regimes and tax treatments are represented,” she said. “Within the ‘gold’ category, for example, an investor can find funds and notes based on physical gold, gold futures, gold mining stocks – each with quite different performance, regulatory and tax implications.
“As market growth and product innovation proceeds, it will become only more essential for investors of all kinds to deeply understand the full range of ETF and ETP structures, benchmarks, underlying features and applications, if they are to most effectively realize all the many potential benefits of the ETF/ETP approach,” she said.
Source: BlackRock
CME Pulls Back on ETF Futures
December 17, 2010--CME Group Inc.'s Chicago Mercantile Exchange plans to stop listing futures contracts based on exchange-traded funds.
The exchange operator, which has listed futures on the Nasdaq-100 Tracking Stock (QQQQ), Standard & Poor's 500 Depositary Receipts (SPY) and the iShares Russell 2000 (WM) since 2005, said it will refrain from listing any new futures contracts on the ETFs.
The company won't delist any contract months while there are open positions.
The move, announced by CME Thursday morning in a memo reviewed by Dow Jones Newswires, reflects weak volumes seen in the ETF futures contracts.
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Source: Wall Street Journal
CFTC.gov Commitments of Traders Reports Update
December 17, 2010--The CFTC.gov Commitments of Traders Reports for the for the week of December 14, 2010 are now available.
view current reports
Source: CFTC.gov
Standard & Poor's Announces Changes in the S&P/TSX Venture Composite Index
December 17, 2010--Standard & Poor's will make the following changes in the S&P/TSX Venture Composite Index after the close of trading on Friday, December 17, 2010:
Antares Minerals Inc. (TSXV:ANM) will be removed from the index.
The shares of the company have been acquired by First Quantum Minerals Ltd. (TSX:FM) pursuant to an arrangement agreement.
Company additions to and deletions from an S&P equity index do not in any way reflect an opinion on the investment merits of the company.
Source: Standard & Poors
ListSearchPrint Standard & Poor's Announces Changes In The S&P/TSX Canadian Indices
December 17, 2010--Standard & Poor's Canadian Index Operations announces the following index changes:
The unitholders of Enbridge Income Fund (TSX:ENF.UN) have approved the conversion of the company to a corporate structure through a Plan of Arrangement. The units will be exchanged on a 1-for-1 basis for Enbridge Income Fund Holdings Inc. (TSX:ENF).
As a result of the conversion, Enbridge Income Fund Holdings Inc. will be added to the S&P/TSX Equity SmallCap Index. The conversion is effective after the close of Monday, December 20, 2010. The name and ticker change, with no change in capitalization, will be effective in the S&P/TSX SmallCap Index.
Company additions to and deletions from an S&P equity index do not in any way reflect an opinion on the investment merits of the company.
Source: Standard & Poors
CFTC Delays Consideration of Proposal Aimed at Restricting Oil Speculation
December 17, 2010--The top U.S. commodities regulator delayed consideration of a plan to curb speculation in raw materials including oil, gold and wheat as part of the most sweeping rewrite of Wall Street rules since the 1930s.
The Commodity Futures Trading Commission postponed an expected vote today on publishing a two-part proposal to restrict the number of contracts one firm can hold for a 60-day public comment period. The plan, if approved, would limit traders to 25 percent of deliverable supply in the contract nearest to expiration, followed by an all-month ceiling of 10 percent of open interest up to the first 25,000 contracts and 2.5 percent thereafter.
Source: Blomberg
Obama woos private capital back to mortgage market
December 16, 2010--The Obama administration is planning to encourage private capital back to the mortgage market by scaling down government guarantees even if Congress fails to pass housing finance reform, according to people familiar with the so-called Plan B for the mortgage market.
The Treasury is due to deliver plans for comprehensive reform in January but officials are already preparing to sidestep what is likely to be a long and bitter battle in Congress over the future of Fannie Mae and Freddie Mac, the government-owned companies that now guarantee more than 90 per cent of all new mortgages.
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Source: FT.com
