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Morgan Stanley-US ETF Weekly Update
July 29, 2013--US ETF Weekly Update
Weekly Flows: $3.6 Billion Net Inflows
ETF Assets Stand at $1.5 Trillion, up 14% YTD
Two ETF Launches Last Week
Direxion Announces Share Splits on Nine ETFs
US-Listed ETFs: Estimated Flows by Market Segment
ETFs posted net inflows of $3.6 bln last week, the fifth consecutive week of net inflows
Over the last five weeks, ETFs have generated net inflows totaling $41.0 bln
International - Developed ETFs posted net inflows of $1.4 bln, the most of any category we measured last week
ETF assets stand at $1.5 tln, up 14% YTD; $107.2 bln net inflows YTD
13-week flows remain mostly positive among asset classes; combined $47.8 bln in net inflows
US Sector & Industry ETFs have posted $11.2 bln in net inflows over the last 13 weeks, only trailing US Large-Cap ETFs; over this
period, meaningful money has flowed into Financials, specifically the Financials Select Sector SPDR (XLF) had $4.1 bln
Commodity ETFs continue to exhibit large net outflows ($8.2 bln over the last 13 weeks); Commodity ETF market share has
declined to 5% from 9% over the last year
US-Listed ETFs: Estimated Largest Flows by Individual ETF
iShares Russell 2000 ETF (IWM) posted net inflows of $565 mln, the most of any ETF
IWM has generated net inflows nine of the last 10 weeks for a combined $5.1 bln in net inflows
Despite recent interest rate volatility, the iShares 7-10 Year Treasury Bond ETF (IEF) posted net inflows of $510 mln last week;
over the last 13 weeks, IEF has generated $318 mln in net inflows while the yield on the 10-year Treasury is up nearly 100 basis
points
Notably, the iShares MSCI USA Minimum Volatility ETF (USMV) has exhibited net outflows nine of the last 13 weeks; similarly, its
closest competitor, the PowerShares S&P 500 Low Volatility Portfolio (SPLV) has also struggled recently, posting net outflows
eight of the last 13 weeks
US-Listed ETFs: Short Interest Data Updated: Based on data as of 7/15/13
United States Oil Fund (USO) had the largest increase in USD short interest at $299 mln
USO’s shares short are at their highest level since 10/31/11 and more than 100% above their one-year average
Shares short for the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) have declined for the second straight period amid a
renewed bid for the high yield asset class
Aggregate ETF USD short interest decreased by $3.7 bln over the period ended 7/15/13
The average shares short/shares outstanding for ETFs is currently 4.1%, down from 4.6% the prior period
Three of the 10 most heavily shorted ETFs as a % of shares outstanding are currency based; interestingly, over the last month
(6/14-7/15), all three have posted negative returns
Based on multiple borrowings and the ability to continuously create new shares, shares short as a % of shares outstanding can
exceed 100% (only five 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 Wealth Management ETF Research. Data estimated as of 7/26/13 based on daily change in share counts and daily NAVs.
$8.3 bln in total market cap of ETFs less than 1-year old
International Equity ETFs account for 43% of ETFs launched over the past year; specifically, the iShares Core MSCI
Emerging Markets ETF (IEMG) and the iShares Core MSCI EAFE ETF (IEFA) have a combined market cap of $2.8 bln
76 new ETF listings and 30 closures/delistings YTD relative to 119 new listings and only 17 closures at this point last year
The top 10 most successful launches make up 68% of the market cap of ETFs launched over the past year
Six ETF sponsors and two asset classes represented in top 10 most successful launches; we note that the representation of funds
with an income orientation has declined (currently six)
Notably, the iShares MSCI USA Quality Factor ETF (QUAL) generated net inflows of $99 mln last week, the most of any
recently launched ETF; QUAL tracks an index of US large- and mid-cap stocks that are selected based on high return on equity,
stable earnings growth, and low financial leverage
AltaVista Research- 2Q13 Reporting Monitor, Week Three: Financials, Health Care & Industrials Lead Surprises
July 29, 2013--Highlights:
With just over half of S&P firms having reported, earnings look like they rose 4.3% YoY. The largest contributor to growth by far was Financials (XLF). Excluding the sector, S&P earnings would have been down fractionally. Five sectors saw annual declines...
Sales growth was a lackluster 1.2% overall, but without the drag from Energy (XLE) revenue would have grown a respectable 2.7% YoY. Financials showed real improvement in margins vs. Q2 2012, but Utilities (XLU), Tech (XLK) and Materials (XLB) all saw significant declines...
Financials, Health Care (XLV) and Industrials (XLI) are beating expectations handily so far, while Tech and Materials are falling short...
Looking ahead to Q3, S&P profits are forecast to increase 3% sequentially, with the large Tech sector rebounding from the sequential decline it saw this quarter...
ETFs should be available from fund dealers, Luukko
Once mutual fund dealers can sell ETFs, their clients will gain access to more investment choices and lower fees.
July 27, 2013--It's strange but true: There are mutual funds that mutual fund dealers aren't allowed to sell. The products that are off-limits to them are exchange-traded funds.
ETFs, most of which charge low fees and track indexes, fall within the definition of mutual funds under securities legislation. And while there are some minor differences in how ETFs and traditional mutual funds are regulated, these differences are narrowing.
JPMorgan Mulls Physical Commodities Exit Amid U.S. Review
July 27, 2013--JPMorgan Chase & Co. (JPM) said it plans to get out of the business of owning and trading physical commodities ranging from metals to oil, three days after a U.S. Senate panel questioned whether banks are abusing their ownership of raw materials to manipulate markets.
The announcement also comes as JPMorgan negotiates a settlement with the Federal Energy Regulatory Commission that may include a $400 million fine and other penalties, according to a person familiar with the negotiations.
Fidelity's early ETF strategy leans heavily on BlackRock
July 26, 2013-Fidelity Investments disclosed on Friday its plans to use U.S. money manager BlackRock Inc as subadviser on a slate of 10 new sector-oriented exchange-traded funds.
The disclosure follows up a previously stated plan to have BlackRock help Fidelity develop its own line of equity sector ETFs.
Schwab pushing fee-based programs
Problem is, the move is pushing up compensation expenses
July 26, 2013--The Charles Schwab Corp, is running full steam ahead with its long-term plan to build fee-based revenue.
In a meeting with analysts today, chief executive Walt Bettinger said that his goal is to move Schwab away from transactional business to the point where “the vast majority of revenue” is from fee-based managed assets and interest revenue.
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Bond fund fears over poor liquidity
July 26, 2013--Real-money investors are becomingly increasingly concerned about their ability to enter and exit bond positions, following the violent sell-off in risk markets in June that led to an evaporation of liquidity across a wider-than-expected range of asset classes.
Regulation has led banks to shrink their bond inventories to a fraction of their former sizes, making them less vulnerable to sell-offs, but also reducing their ability to buffer flows between buyers and sellers.
WisdomTree Announces Second Quarter 2013 Results
$5.0 Billion Net Inflows in Quarter
Net Inflow Market Share 29% in Second Quarter, 15% First Half
Record Revenues, Up 83% From Year Ago Quarter
Record Net Income $12.2 Million, Up 56% From Prior Quarter
July 26, 2013--WisdomTree Investments, Inc. (Nasdaq:WETF), an exchange-traded fund ("ETF") sponsor and asset manager, today reported net income of $12.2 million for the second quarter of 2013, or $0.09 per share on a fully diluted basis.
This compares to $0.1 million in the second quarter of 2012 and $7.9 million in the first quarter of 2013.
WisdomTree CEO and President Jonathan Steinberg commented, "With $5.0 billion in net inflows for the quarter and nearly $11 billion in the first half of 2013, we continued our positive momentum from the first quarter to achieve a strong second quarter with record market share gains. WisdomTree was the third best asset gatherer across all U.S. mutual fund and ETF complexes in the second quarter according to Morningstar."
CFTC.gov Commitments of Traders Reports Update
June 26, 2013--The updated current reports for the week of July 23, 2013 are now available.
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Exchange Traded Concepts Trust files with the SEC
July 26, 2013--Exchange Traded Concepts Trust has filed a post-effective amendment, registration statement with the SEC for the Hull Tactical US ETF.
view filing
Fidelity files with the SEC-10 ETFs
July 26, 2013--Fidelity has filed a post-effective amendment no.9, registration statement with the SEC
Fidelity MSCI Consumer Discretionary Index ETF
Fidelity MSCI Consumer Staples Index ETF
Fidelity MSCI Energy Index ETF
Fidelity MSCI Financials Index ETF
Fidelity MSCI Health Care Index ETF
Fidelity MSCI Industrials Index ETF
Fidelity MSCI Information Technology Index ETF
Fidelity MSCI Materials Index ETF
Fidelity MSCI Telecommunications Services Index ETF
Fidelity MSCI Utilities Index ETF
Fidelity files with the SEC-Fidelity(R) Total Bond ETF
July 26, 2013--Fidelity has filed a pre-effective amendment no.2, registration statement with the SEC for the Fidelity(R) Total Bond ETF.
view filing
IMF-United States: 2013 Article IV Consultation-Staff Report
July 26, 2013--KEY ISSUES
Context: The U.S. economic recovery remains modest but is gaining ground, supported by a rebound in the housing market, still easy financial conditions, and a boost to
household net worth from higher house and stock prices. These factors are helping to offset the impact of strong fiscal adjustment on consumer spending.
But the economy is still far from normal conditions, with high unemployment and a large negative output
gap.
Fiscal Policy: The fiscal consolidation should be more balanced and gradual. The automatic spending cuts (sequester) not only reduce growth in the short term but could also undermine potential in the medium term through indiscriminate cuts to education and infrastructure. They should be replaced with back-loaded entitlement savings and new revenues. Even though the fiscal deficit is declining rapidly, approving a plan to restore long-run fiscal sustainability remains a priority. Early action is needed for measures that slow entitlement spending, as their effects build gradually over time.
Monetary Policy: Given the still-large output gap and well-anchored inflation expectations, the highly accommodative monetary policy stance is appropriate. While unwinding monetary policy accommodation is likely to present challenges, including for financial stability, the Fed has a range of tools to help manage the exit. Effective communication and careful timing will be critical to avoid disruptions, for both the United States and other countries.
view the IMF-United States: 2013 Article IV Consultation-Staff Report
IMF United States: Selected Issues
July 26, 2013--THE U.S. MANUFACTURING RECOVERY: UPTICK OR RENAISSANCE?1
A. Introduction
1. A notable rebound of manufacturing production following the Great Recession has generated renewed interest in this sector among analysts and policy makers alike. Amid
increasing anecdotes of a "renaissance" in U.S. manufacturing, many commentators have argued that the sector may contribute more significantly to domestic GDP and global industrial output
going forward.2
They note that a number of favorable conditions—including a more depreciated
exchange rate, lower domestic energy prices, volatile shipping costs, and significant increases in labor costs in emerging markets—could support steady increases in U.S. manufacturing output and employment, beyond those that could be attributed to just a cyclical rebound. The potential for
growing demand from booming shale oil and gas activity have also been noted.
At the same time, promoting manufacturing as an engine of high-wage jobs and growth is a key part of the U.S. administration’s economic policies.3 Others analysts are more skeptical, and argue that manufacturing output is merely rebounding to its pre-crisis level.4
2. This chapter investigates whether a renaissance is evident in U.S. macroeconomic data, and whether manufacturing could make a first-order contribution to long-term growth. First, it examines current and pre-crisis production levels for sub-sectors, as well as the share of manufacturing in U.S. and global GDP. Second, it documents a number of key structural factors contributing to the profitability of the U.S. manufacturing sector (in particular declining labor and energy costs). Third, it explores whether manufacturing could make a first order contribution to U.S. economic growth in the coming decade—on the back of relative cost advantages and the pull from growing shale oil and gas activity in the U.S.
view the IMF United States: Selected Issues paper
PowerShares DWA SmallCap Technical Leaders Portfolio Passes One-Year Mark
July 26, 2013--LocalShares, Inc. today announced that the Nashville Area ETF (NYSE: NASH), the nation''s first city-based exchange-traded fund (ETF), is anticipated to be listed on the New York Stock Exchange (NYSE-ARCA) beginning at opening bell on Thursday, August 1st.
The Nashville Area ETF will enable investment in a basket of qualifying Nashville area publicly-traded companies. Opening day shares for NASH will initially be priced at $25 per share and available through any securities broker. The Nashville Area ETF will provide an investment security comprised of publicly traded companies, which are part of middle Tennessee's diverse economy.
