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Exchange-Traded Funds: Strong ETF Net Cash Inflows of $32.6 Billion in the Third Quarter-Morgan Stanley
October 26, 2010--Strong ETF Net Cash
Inflows of $32.6 Billion in the Third Quarter
There were 53 new ETFs listed in the US during the third quarter of 2010. Two additional ETFs have been listed since the end of Q3, bringing total issuance this year to 155. However, 37 ETFs have
been closed, resulting in net new issuance of 118.
As of October 21, 2010, there were 33 issuers with 955 ETFs listed in the US
Inflows into US-listed ETFs were $32.6 billion during the third quarter of 2010. This represents continued strength from the second quarter in which
US-listed ETF net cash inflows totaled $32.1 billion. In addition, the $32.6 billion in net inflows is well
above the average quarterly net cash inflows of $25.6 billion over the past six years.
The largest net cash inflows went into ETFs tracking emerging market equity and fixed income. These asset classes had net cash inflows of $14.4 billion and $9.9 billion, respectively, in the third quarter of 2010. For the first three quarters of the year, emerging market and fixed income ETFs have had net cash inflows of $19.8 billion and $29.9 billion.
US ETF industry assets of $922 billion are 18% higher than their level at the end of 2009. Despite the growth of the ETF market, it remains concentrated with three providers and 20 ETFs accounting for roughly 80% and almost 50% of industry assets, respectively.
BM&FBOVESPA prepares the launch of a market maker program for the stock options segment
October 25, 2010--BM&FBOVESPA is preparing a launch for the coming months of a market maker program for stock options. The Brazilian Exchange obtained global leadership in stock option contracts trading in September, for the second consecutive month, according to data from the World Federation of Exchanges (WFE).
In September there were 72.2 million stock option contracts traded on BM&FBOVESPA. In second and third place respectively came the Chicago Board Options Exchange (CBOE) at 58.4 million contracts and the International Securities Exchange at 53.7 million contracts.
The Exchange’s market maker program for options seeks to raise liquidity in the Bovespa segment’s options market and will come in two phases. The first phase will be for Ibovespa index options. The second phase will be for the ten largest caps, barring Petrobras and Vale which are considered the most liquid shares in the world. According to the current Ibovespa portfolio, for August to December, the ten largest caps in the index are: BM&FBOVESPA (BVMF3), Itauunibanco (ITUB4), OGX Petróleo (OGXP3), Gerdau (GGBR4), Bradesco (BBDC4), Usiminas (USIM5), PDG Realty (PDGR3), Banco do Brasil (BBAS3), Companhia Siderúrgica Nacional (CSNA3) and Itausa (ITSA4). BM&FBOVESPA is still studying the criteria selecting market makers.
DBX ETF Trust had filed with the SEC
October 25, 2010--DBX ETF TRUST
has filed registration statement with the SEC for
DBX MSCI EMERGING MARKETS CURRENCY-HEDGED EQUITY FUND
NYSE Arca, Inc.: XEMG
DBX MSCI EAFE CURRENCY-HEDGED EQUITY FUND
NYSE Arca, Inc.: XEAF
DBX MSCI BRAZIL CURRENCY-HEDGED EQUITY FUND
NYSE Arca, Inc.: XBRZ
DBX MSCI CANADA CURRENCY-HEDGED EQUITY FUND
NYSE Arca, Inc.: XCAN
DBX MSCI JAPAN CURRENCY-HEDGED EQUITY FUND
NYSE Arca, Inc.: XJPN
Emerging Markets Week in Review-10/18/2010 - 10/22/2010
October 25, 2010--The Dow Jones Emerging Markets Sector Titans Composite Index fell 1.22% last week. Technology, Consumer, and Health Care, the three best performing sectors this year, were the only positive groups for the week.
Utilities and Materials were the worst performers, down 3.18% and 2.89% respectively. Since reaching low on May 25, the Dow Jones Emerging Markets Composite index is up over 28%, led by the Consumer sector which as increased over 44% over that time.
DB Global Equity Index & ETF Research: US ETP Market Weekly Review: Equity Market Marches On
October 25, 2010--Cash Flow Review
The US equity market continued its September’s winning streak into the first half of October, with the S&P 500 up by 1.0% last week and 3.1% month to date. Similarly, Gold recorded a 1.91% increment for the last week and 4.6% for the first half of the month. US ETPs flows have been consistent with the rally and have contributed with $6.1 bn and $5.4 bn of fresh money during the last and the previous week, respectively.
Our figures suggest that investors are recovering interest in the equity market in an attempt to leverage their returns. Equity ETPs received $5.1 bn in new money vs $5.6 bn in the previous week.
As the risk/reward profiles of developed and emerging markets have moved closer, both Large Cap and Emerging Markets ETFs have become the two main drivers of the equity inflows surge, last week they recorded new flows of $2.2 bn and $1.8 bn, respectively.
With Fixed Income returns being squeezed by historical low rates and further concerns regarding the implications of a possible second round of quantitative easing, investors keep shifting positions towards sources of higher return. Fixed Income ETPs recorded $135 m outflows, mainly driven by an exodus from Sovereign ETFs (-$235 m). Nevertheless, other sectors such as Corporate ($83 m) and Sub-Sovereign ($110 m) ETFs still appeal to investors and have received positive flows consistently during the previous weeks.
Commodities received healthy inflows of $897 m last week, with Gold receiving inflows of $655 m vs $511m outflows during the previous week.
New Launch Calendar
There was one new listing in the first half of October. Van Eck Funds listed a China A-Shares focused ETF in the NYSE Arca. This fund (PEK) is the first of its kind in the US and, unlike other ETFs which track the China H-Shares market (Hong Kong listed), PEK will offer access to a broader Chinese market investing in stocks listed in mainland China exchanges.
On October 6th, Old Mutual Global Shares Trust liquidated all of their five US listed ETFs alluding that due to the US market condition, it was unlikely that their products would gain sufficient market share. The tickers of the funds were: GSW, GSR, GSZ, GSO and GSD. At the time of liquidation the combined AUM of these funds were almost $100 m.
Turnover
Overall, Avg. Daily Turnover increased by 4.1% and totaled $64 bn at the end of the week. Within the asset class level, Equity ETPs recorded an increased of $2.2 bn or 3.9%, while Commodity and Currency ETPs recorded a relatively significant weekly increase of 8.5% and 11.6%, respectively.
Assets Under Management (AUM)
US ETPs AUM rose by 1.8% reaching its higher level YTD, totaling $929 bn at the end of last week. This growth has been fueled by a rally in the equity and gold markets, accompanied by strong inflows - especially into the equity emerging markets.
To request a copy of the report
TD Ameritrade Survey: ETFs Might Be Just What Investors are Looking for, Despite Current Lack of Understanding
While many investors seek the potential flexibility ETFs offer, the learning curve is holding them back
October 25, 2010--Nearly 20 years after they were first introduced, Exchange Traded Funds (ETFs) can still be considered unfamiliar territory for many investors, according to a new survey released by TD Ameritrade Holding Corporation. Just 34 percent of investors surveyed have heard of ETFs, fewer (25 percent) have a basic understanding of the product, and only 15 percent own ETFs in their portfolios.
But despite the lack of awareness, some ETFs may fit what these investors are looking for, according to the study. When asked about their most important requirements when choosing an investment product, the ability to reduce risk through diversification was ranked the number one feature among the nearly 40 percent of investors who said they are undecided about investing in ETFs. These investors also included lower expenses and fees and ability to trade commission-free in their top-five requirements.
While some investors may just be starting to dip their toes in the ETF pool, the results of educating self-directed investors about ETFs are clear. According to a similar survey among TD Ameritrade clients, 76 percent have heard of or owned ETFs and half (49 percent) have a better understanding of ETFs today compared to one year ago. Additionally, the survey reports that ETFs are being used more frequently in retirement accounts among TD Ameritrade clients, and usage has increased steadily by nearly 60 percent since early 2007.
This understanding was the impetus for TD Ameritrade's recent unveiling of a new ETF Market Center, which includes a list of over 100 commission-free ETFs -- from a variety of well-known providers-- that have been evaluated and selected by independent experts at Morningstar Associates, LLC, a registered investment advisor and unit of Morningstar, as well as easy-to-use tools and information to help long-term investors build better-diversified portfolios more cost-effectively.
"ETFs may fulfill many of the stated needs that investors have told us are important to them," said Mike McGrath, director of ETFs, TD Ameritrade. "It's a matter of awareness, education and simplifying the selection process. We are committed to helping investors create cost-effective, diversified long-term portfolios, and the more investors know and understand what options are available to them, the more confident they'll be in their decision-making. ETFs are still a relatively new asset class, and as awareness continues to increase, we believe the popularity of ETFs will increase as well."
For investors looking for more information on ETFs or other investments, TD Ameritrade has also made public a free series of online resources including an in-depth ETF Webinar aimed at helping investors explore the basics of ETFs and the potential they may have in their own portfolios.
AdvisorShares Set to Launch the Cambria Global Tactical ETF
GTAA Takes a Quantitative Approach to Global Tactical Asset Allocation
October 25, 2010--AdvisorShares Investments, LLC, an innovator of actively managed Exchange Traded Funds (ETFs), today announced that it will begin trading in the Cambria Global Tactical ETF tomorrow, October 26th. GTAA is sub-advised by Cambria Investment Management, Inc., a Los Angeles, California-based investment manager.
Cambria will invest in underlying ETFs spanning all the major world asset classes including equities, bonds, real estate, commodities, and currencies. The Fund will utilize a quantitative approach with strict risk management controls to actively manage GTAA's portfolio in an attempt to control downside losses and protect capital. GTAA will do this by following a trend-based model utilizing multiple asset classes and will either be invested or will get defensive by going into cash for a particular asset class. The wide diversification coupled with prudent portfolio management may allow for the Fund to perform well across a full business cycle.
Noah Hamman, CEO and Founder of AdvisorShares, said, "Cambria has done an outstanding job developing research and education related to a GTAA strategy via their popular white paper, 'A Quantitative Approach to Tactical Asset Allocation,' and their recent book, 'The Ivy Portfolio.' We are very excited to be able to offer this risk-managing strategy to investors in an actively managed ETF."
Mebane Faber, Chief Investment Officer of Cambria Investment Management, said, "We are very excited to launch GTAA as we believe that investors need to be more proactive in managing their risk. Investors will appreciate the fact that we make no effort to forecast future market trends or direction, but rather attempt to capture profits in these trends when and where they develop."
Russell Launches Equal Weight Index Family
Enhanced methodology addresses concerns on sector risk
October 25, 2010--Russell Investments today launched the first five equity benchmarks in an innovative series of equal weight equity indexes that reflect key U.S. and global market segments. The new Russell Equal Weight Indexes set a new standard in equal weight indexes as they also manage for sector risk—and they can be replicated easily to serve as the basis of investable products.
“These ground-breaking investment tools offer a practical, unique solution for investors who are interested in alternative weighting methods, such as equal weighting,” said Rolf Agather, managing director of index research & innovation at Russell Investments. “Russell’s research shows that the additional step of equal weighting sectors provides greater diversification benefits than a traditional approach which simply equal weights all constituents.”
Agather added that Russell’s enhanced approach to the construction of equal weight indexes is designed to address or eliminate issues such as inherent sector biases, potential capacity constraints and liquidity concerns as well as high turnover and rebalancing issues. To address the concern of sector risk posed by constituent equal weight indexes, for example, Russell first applies its equal weight methodology within each of the nine Russell Global Sectors: Consumer Discretionary, Consumer Staples, Energy, Financial Services, Health Care, Materials & Processing, Producer Durables, Technology and Utilities.
The new indexes will be rigorously maintained with daily corporate actions and monthly share adjustments as well as re-weighted quarterly. They also will be fully rebalanced each June when Russell reconstitutes its global family of market capitalization weighted indexes.
“This new family of indexes leverages Russell’s expertise in creating transparent, rules-based and rigorously maintained indexes,” added Ken O’Keeffe, regional director/ ETF specialist for Russell Indexes at Russell Investments. “Also, from a performance standpoint, our analysis shows that sector equal weight indexes have provided for a better absolute return with lower volatility than conventional equal weight indexes. When used as the underlying index for investable products, investors can manage their exposure to market risk factors while gaining meaningful exposure to every sector.”
Initially, the new family of indexes will feature the U.S. large cap Russell 1000® Equal Weight Index, U.S. small cap Russell 2000® Equal Weight Index, Russell Midcap® Equal Weight Index, Russell BRIC (Brazil, Russia, India, China) Equal Weight Index, and the Russell Greater China Large Cap Equal Weight Index.
The Russell Equal Weight Index series, available in a similar format to existing Russell Indexes, extends Russell’s global line-up beyond market capitalization weighted index construction. “The market cap approach remains the most popular and we believe it is the best way to truly reflect market segments,” Agather said. “However, we also recognize increasing interest in alternative weighting products that offer unique beta exposure.”
Agather added that the leading ETF provider of equal weight strategies for the U.S. market, Rydex|SGI, already plans to launch the first exchange-traded products based on the Russell Equal Weight Indexes.
Obama Administration Releases October Housing Scorecard
October 25, 2010--The U.S. Department of Housing and Urban Development (HUD) and the U.S. Department of the Treasury today released the October edition of the Obama Administration's Housing Scorecard (www.hud.gov/scorecard). The latest housing figures show continued signs of stabilization in house prices and high home affordability due in part to record low interest rates. The housing scorecard is a comprehensive report on the nation's housing market.
"Over the last 21 months, the Obama Administration's swift action in the housing market has kept millions of families in their homes and provided responsible borrowers with incentives to refinance or to become a homeowner," said HUD Assistant Secretary Raphael Bostic. "But, with many unavoidable foreclosures still in the pipeline, it's clear that we have a hard road ahead. That's why we're focused on successfully implementing the programs we've put in place – such as additional assistance on refinancing and helping unemployed homeowners stay in their homes – and ensuring that help is available to homeowners as soon as possible."
"HAMP is not only an important part of the Administration's efforts to stabilize the housing market, it has also redefined the loan modification standard for the mortgage industry overall. That has led to more than 3.5 million modification arrangements directly benefitting families in communities across the country still healing from the crisis," said acting Assistant Secretary for Financial Stability Tim Massad. "Early data shows that well beyond the trial phase, the majority of homeowners are maintaining their HAMP modifications, reflecting the rigorous standards the program uses to provide assistance to responsible homeowners."
view the October 2010 Scorecard
ETF Securities Launches Precious Metals Basket
October 22, 2010--The fund, trading under the CUSIP GLTR, for glitter, on NYSE Arca, “was developed in response to demand from a diverse client base looking for a single-ticker solution that provides cost-effective precious metals exposure in a physically backed fund,” said Fred Jheon, head of product and business development at ETF Securities.
GLTR complements the existing four individual precious metals products ETF Securities offers to U.S. investors—SIVR, SGOL, PPLT and PALL—and allows our clients to either hold each product individually or customize according to their investment outlook. We believe that the introduction of this unique product will fill a need in the marketplace and position ETF Securities for further growth in the U.S,” Jheon added.
The new fund charges an annual fee of 60 basis points. ETF Securities manages $22 billion in assets under management.
J.P. Morgan files with the SEC
October 22, 2010--J.P. Morgan has filed a Form S-1 Registration statement with the SEC for
J.P. Morgan Physical Copper Trust. J.P. Morgan Commodity ETF Services LLC is the sponsor of the Trust.
view filing
Van Eck files with the SEC
October 22, 2010--Van Eck has filed a post effective amendment, registration statement with the SEC for
Rare Earth/Strategic Metals ETF (NYSE Arca, Inc.: REMX.
view filing
SEC, FINRA Announce 2011 National Seminar for Broker-Dealer CCOs
October 22, 2010--The Securities and Exchange Commission and Financial Industry Regulatory Authority (FINRA) today announced that the annual CCOutreach BD National Seminar will be held on Feb. 8, 2011, at the SEC's Washington, D.C., headquarters.
The seminar helps provide a forum for discussion on effective compliance practices and timely compliance issues in ever-changing markets. It will help broker-dealer chief compliance officers (CCOs) effectively communicate compliance risks, maintain compliance controls, and foster robust compliance programs within their firms — all for the benefit of investors.
"The CCOutreach BD program has proven invaluable in helping the SEC understand the needs and concerns of compliance officers," said Carlo di Florio, Director of the SEC's Office of Compliance Inspections and Examinations (OCIE). "In this time of regulatory changes, it is more important than ever to maintain effective communication between regulators and the industry and to reinforce our commitment to prevent securities laws violations and better serve investors."
CFTC.gov Commitments of Traders Reports Update
October 22, 2010--The CFTC.gov Commitments of Traders Reports has been updated for the week of October 22, 2010and are now available.
view updates
CFTC Staff to Host Public Roundtable to Discuss Individual Customer Collateral Protection
October 21, 2010-- Staff of the Commodity Futures Trading Commission (CFTC) will hold a public roundtable on October 22, 2010, from 1:00 p.m. to 4:00 p.m., to discuss issues related to individual customer collateral protection. The roundtable will assist the CFTC in the rulemaking process to implement the Dodd-Frank Wall Street Reform and Consumer Protection Act.
The roundtable will be held in the Lobby Level Hearing Room at the CFTC’s Headquarters, Three Lafayette Centre, 1155 21st Street, NW, Washington, D.C. The discussion will be open to the public with seating on a first-come, first-served basis. Members of the public may also listen by telephone and should be prepared to provide their first name, last name and affiliation.
