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DB-Equity Research-US ETF Market Weekly Review : Market pullback removed $12bn from ETP assets
June 26, 2012--Net Cash Flows Review
Following a two-week relief rally, markets pulled back again during last week. The US (S&P 500) dropped by 0.56%. While, outside the US, the MSCI EAFE (in USD) advanced by 0.36% and the MSCI EM (USD) lost 0.82%. Moving on to other asset classes, the 10Y US Treasury yield rose by 9bps last week; while the DB Liquid Commodity Index was down by 2.29%. Similarly, the WTI Crude Oil, the Gold, and the Silver prices retreated by 5.08%, 3.36% and 6.20%, respectively; while the Agriculture sector (DB Diversified Agriculture Index) rose by 1.90%. Last but not least, Volatility (VIX) dropped by 14.21% and crossed the 20 level downwards during the same period.
The total US ETP flows from all products registered $1.3bn of outflows during last week vs $12.1bn of inflows the previous week, setting the YTD weekly flows average at +$2.9bn (+$72.1bn YTD in total cash flows). Equity, Fixed Income, and Commodity ETPs experienced flows of -$2.5bn, +$0.7bn, and +$0.4bn last week vs. +$9.4bn, +$2.3bn, and +$0.4bn the previous week, respectively.
Within Equity ETPs, emerging markets regional products experienced the largest inflows (+$0.8bn); while large cap and mid cap vehicles experienced the largest outflows (-$3.6bn, -$0.6bn, respectively). Within Fixed Income ETPs, Corporates products recorded the largest inflows (+$0.6bn), followed by broad benchmarked products (+$0.2bn); while Sovereign experienced outflows of $0.3bn. Within Commodity ETPs, Precious Metals products experienced the largest inflows ($0.3bn).
Top 3 ETPs & ETNs by inflows: VWO (+$0.6bn), AMJ (+$0.4bn), VXX (+$0.3bn) Top 3 ETPs & ETNs by outflows: SPY (-$3.8bn), IWR (-$0.5bn), XLI (-$0.4bn)
New Launch Calendar: fixed income, commodity, and active equity ETFs
There were 5 new ETPs listed on the NYSE Arca during the previous week. Two of them offer access to US crossover and emerging market corporate debt, the next one provides a one-stop vehicle to invest in the industrial and precious metal segments, and the last two ETPs offer access to equity strategies employing an active investing approach.
Turnover Review: floor activity dropped by 5%
Total weekly turnover dropped by 5.0% to $300bn vs. $316bn in the previous week. Last week’s turnover level was 20% below last year’s weekly average. Equity ETPs experienced a drop of $19.3bn or 20.4% to $263bn. In the meantime, Fixed Income and Commodity ETP turnover rose by 11.8% (+$1.9bn) and 9.2% (+$1.3bn), respectively.
Assets Under Management (AUM) Review: a small pullback
ETP assets dropped by 1.1% during last week and ended the week at $1.14 trillion. Last week’s $12.1bn drop put the ETP YTD assets growth back to the single digit area with 9.1%. Assets for equity, fixed income and commodity ETPs moved -$9.4bn, +$0.9bn, and -$3.6bn during last week, respectively.
Russell completes annual global index reconstitution process to reflect today's global markets
Notable decline in global market capitalization and correlation
Strong performance for U.S. large-cap stocks, with technology sector leading the way
Emerging Markets decline in capitalization relative to Developed Markets
June 25, 2012--Today marks the first day of the newly reconstituted Russell Global Indexes following the completion of Russell.s annual index reconstitution on June 22nd.
Final membership lists for the Russell Global, Russell 3000®, Russell 1000®, Russell 2000®, Russell Midcap® and Russell Microcap® Indexes, accounting for approximately $3.9 trillion in assets benchmarked, were confirmed after Friday's market close. Final lists of additions and deletions are available on the Russell reconstitution website.
Market Capitalization
Global market capitalization, as reflected in the post-reconstitution Russell Global Index, had a notable decline, decreasing from $52.2 trillion on May 31, 2011 to $44.2 trillion on May 31, 2012. U.S. market cap, as illustrated by the Russell 3000 Index, declined from $16.7 trillion to $15.8 trillion during this same period.
"The strong performance of the global markets in the first quarter of 2012, led by large-cap stocks in the U.S., showed in the all-time high of the Russell 1000 Index on April 2," said Stephen Wood, chief market strategist for North America at Russell Investments. "However, international turmoil over the last few months has contributed to a decline in the global equity market and a resulting drop in market capitalization of the Russell global index family, as shown during the annual rebalancing process."
Global X Canada Preferred ETF (CNPF) Yields 4.00% At First Year Anniversary
June 26, 2012--Global X Funds, the New York based provider of exchange traded funds, today announced the 12-month yield for the Global X Canada Preferred ETF (CNPF), following its first year anniversary.
Concurrently, Canadian banks were ranked among the world's strongest, according to a May 2012 Bloomberg News report. Canada received distinguished honors with 5 spots in the top 20— U.S. banks did not fare so well. Even with a population 9 times larger than Canada, the U.S. held only 3 spots in the top 20. Strict regulations set by the Office of the Superintendent of Financial Institutions of Canada (OSFI) have helped Canada raise the bar beyond global banking standards by requiring more equity as a percentage of capital relative to their foreign counterparts.
Direxion Announces Modifications To Eight Exchange-Traded Funds
June 25, 2012--Direxion, a leader in alternative investment solutions, announces changes to the benchmark indices of eight leveraged and inverse exchange-traded funds (ETFs), along with other adjustments.
The eight ETFs undergoing changes are: Direxion Daily Large Cap Bull 3X Shares (BGU), Direxion Daily Large Cap Bear 3X Shares (BGZ), Direxion Daily Mid Cap Bull 3X Shares (MWJ), Direxion Daily Mid Cap Bear 3X Shares (MWN), Direxion Daily Technology Bull 3X Shares (TYH), Direxion Daily Technology Bear 3X Shares (TYP), Direxion Daily Energy Bull 3X Shares (ERX) and Direxion Daily Energy Bear 3X Shares (ERY).
The modifications will take effect on or about June 29, 2012.
S&P Indices Announces Changes In The S&P/TSX Canadian Indices-Completion Of A Plan Of Arrangement Between Denison Mines Corp. And Energy Fuels Inc.
June 25, 2012--S&P Canadian Index Services will make the following changes in the S&P/TSX Canadian Indices:
The shareholders of Denison Mines Corp. (TSX:DML) and Energy Fuels Inc. (TSX:EFR) have agreed today to complete a Plan of Arrangement whereby Energy Fuels will acquire the US mining interests of Denison Mines.
Denison Mines shareholders will receive 1.106 shares of Energy Fuels for each share held.
After the close of trading on Friday, June 29, 2012, the close price of Denison Mines will be reduced by 1.106 times the close price of Energy Fuels and new divisors will be generated in all indices where Denison Mines is a constituent except the S&P/TSX Composite Equal Weight and Composite High Beta Indices. New divisors will be generated in the S&P/TSX Composite and Capped Composite, the S&P//TSX Equity and Capped Equity, the S&P/TSX Completion and Equity Completion, the S&P/TSX SmallCap and Equity SmallCap and the S&P/TSX Global Mining Indices. The issued shares of Energy Fuels will not be added to any indices.
AdvisorShares files with the SEC
June 25, 2012--AdvisorShares has filed a post-effective amendment no. 47, registration statement with the SEC for the Newfleet Multi-Sector Income ETF
NYSE Arca Ticker: MINC.
view filing
EGA Emerging Global Shares files with the SEC
June 25, 2012--EGA Emerging Global Shares has filed a post-effective amendment no.25, registration statement with the SEC.
view filing
First Trust Files with the SEC
June 25, 2012--First Trust has filed a registration statement with the SEC for the Multi-Asset Diversified Income Index Fund.
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CFTC Approves Notice of Proposed Rulemaking Prohibiting the Aggregation of Orders to Satisfy Minimum Block Sizes or Cap Size Requirements
Proposed Rulemaking also Establishes Eligibility Requirements for Parties to Block Trades
June 25, 2012--The Commodity Futures Trading Commission (CFTC) has approved for publication in the Federal Register a Notice of Proposed Rulemaking that re-proposes adding certain provisions to Part 43 of the Commission's Regulations pertaining to block trades in swap contracts.
The provisions contained in the proposed rulemaking would:
Prohibit the aggregation of orders for different trading accounts in order to satisfy the minimum block size or cap size requirements, except for orders aggregated by certain commodity trading advisors, investment advisers and foreign persons, if such qualifying persons have more than $25,000,000 in total assets under management;
Provide that parties to a block trade must individually qualify as eligible contract participants, except where a designated contract market allows certain commodity trading advisors, investment advisers and foreign persons to transact block trades for customers who are not eligible contract participants, if such qualifying commodity trading advisor, investment adviser or foreign person has more than $25,000,000 in total assets under management; and
Require that persons transacting block trades on behalf of customers must receive prior written instructions or consent from the customer.
Morgan Stanley-US ETF Weekly Update
June 25, 2012--US ETF Weekly Update
Weekly Flows: $1.4 Billion Net Outflows
ETF Assets Stand at $1.1 Trillion, up 9% YTD
Five ETF Launches Last Week
Global X Announces Changes to Canada ETF
US-Listed ETFs: Estimated Flows by Market Segment
ETFs posted net outflows of $1.4 bln last week, giving back a small portion of the prior week’s net inflows
Last week’s flows were primarily driven by US Large-Cap ETFs (specifically SPDR S&P 500 ETF had net outflows of $3.8 bln)
Emerging Market Equity ETFs exhibited net inflows of $1.1 bln last week, the most out of any category
ETF assets stand at $1.1 tln, up 9% YTD; ETFs have posted net inflows 19 out of 25 weeks YTD ($71.5 bln in net inflows)
13-week flows were mixed among asset classes; combined $24.3 bln net inflows
Fixed Income ETFs have consistently generated weekly net inflows (45 straight weeks of net inflows totaling $57.0 bln)
Global ETFs exhibited net inflows of $2.6 bln over the last 13 weeks; this comes as a surprise to us as pure international ETFs
have struggled gaining new money over this time period
US-Listed ETFs: Estimated Largest Flows by Individual ETF
Vanguard MSCI Emerging Markets ETF (VWO) generated net inflows of $583 mln last week, most of any ETF
Despite exhibiting flat returns this year, VWO has produced net inflows of $7.5 bln YTD, also the most of any ETF
Seven out of 10 ETFs to post the largest net outflows last week were US Equity based
US-Listed ETFs: Short Interest
Data Unchanged: Based on data as of 5/31/12
SPDR S&P 500 ETF (SPY) posted the largest increase in USD short interest
For the 2nd consecutive period, SPY’s USD short interest increased and SPY’s shares short are at their highest level since 3/15/12
The SPDR Retail ETF (XRT), the most heavily shorted ETF as a % of shares outstanding, exhibited a $540 mln decline in USD
short interest over the prior period, the most of any ETF
The average shares short/shares outstanding for ETFs is currently 5%
XRT’s shares short as a % of shares outstanding declined to 329% from 376% from the prior period
Based on multiple borrowings and the ability to continuously create new shares, shares short as a % of shares outstanding can exceed 100% (only nine 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 6/22/12 based on daily change in share counts and daily NAVs.
$6.7 billion in total market cap of ETFs less than 1-year old
Over the past 13 weeks, newly launched Active ETFs generated most net inflows at $1.3 bln (specifically the PIMCO Total
Return ETF-BOND)
108 new ETF listings and 17 closures YTD
Over the past year, many of the successful launches have an income/dividend orientation
Five different ETF sponsors and three asset classes represented in top 10 most successful launches
Three recently launched iShares Minimum Volatility Equity ETFs (ACWV, USMV, EEMV) posted combined net inflows of $260 mln last week
Top 10 most successful launches account for 64% of market cap of ETFs launched over the past year
Alps files with the SEC
June 22, 2012--Alps has filed a post-effective amendment, registration statement with the SEC for the NYSE Arca U.S. Equity Synthetic Reverse Convertible Index Fund (RVCT).
view filing
GreenHaven files with the SEC
June 22, 2012--GreenHaven has filed a FORM S-1 with the SEC for the GreenHaven Coal Index Fund.
view filing
Vanguard's Sauter to retire at year-end
Tim Buckley, head of retail investor group, is replacement
Sauter directs groups overseeing $1.6 trillion in assets
Departs after 25 years at the company
June 22, 2012--Gus Sauter, the long-time chief investment officer at Vanguard Group, the largest U.S. mutual fund company, will retire at the end of the year, the company said on Friday.
Sauter, 57, will be replaced by Tim Buckley, 43, a managing director at Vanguard, based in Valley Forge, Pennsylvania. Sauter currently directs Vanguard's global investment management groups, which oversee $1.6 trillion in aggregate assets.
"Vanguard has become a much deeper organization and had grown quite a bit so I do not think his departure will represent the same kind of challenge as it would have 10 years ago," said Russel Kinnel, director of mutual fund research at Morningstar Inc.
Options Trading: Dangers of Rolling Covered Calls
June 22, 2012--Most covered call writers know how to roll a covered call to avoid or defer exercise. But this can create unintended losses or even have serious tax consequences.
In rolling a covered call that's approaching the money or has gone in the money, the strategy is straightforward:
1. Close the current call with a "buy to close" order.
2. Open a new covered call expiring later with a "sell to open order. This will produce additional net income due to the later expiration, thus higher time value.
Ideally, if you can close the current position and open another at a later-expiring higher strike, you have two benefits. First, you escape exercise of the original short position while generating extra income. Second, if you can up the strike, you create more potential profits if that call is eventually exercised.
CFTC.gov Commitments of Traders Reports Update
June 22, 2012--The current reports for the week of June 19, 2012 are now available.
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