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Morgan Stanley Report: Exchange-Traded Funds Fixed Income: Accessing Emerging Markets Debt Through ETFs and CEFs
November 24, 2009--Morgan Stanley Smith Barney's Global Investment Committee (GIC) recently increased their suggested allocation for many investors to emerging markets (EM) debt. Their allocation to EM debt now ranges from 0% to 7% across their various allocation models. In their opinion, EM debt offers attractive yields and should benefit from improving financial market conditions. For details regarding their outlook and asset allocation models, see the November GIC Monthly report.
There are two index-linked exchange-traded funds (ETFs) available that invest in EM debt. These are nonleveraged, passively managed products that invest only in US dollar-denominated EM debt. The most notable difference between the two ETFs is their weighting methodology, with one using a modified market cap approach, while the other is equally weighted.
We also cover three actively managed closed-end funds (CEFs) that focus primarily on EM debt. One CEF invests primarily in local currency denominated EM debt whereas the other two invest primarily in US dollar- denominated EM debt. Among the three funds, there are meaningful differences in the amount of leverage utilized and their currency exposures.
ETFs and CEFs have risks, including the general risks associated with investing in securities. Index-linked ETF risks also include tracking error and the possibility that an index may lag other market segments or active managers. CEFs have risks related to active management, liquidity, widening discounts, and, in many cases, the use of leverage. ETFs and CEFs investing in emerging markets may also have foreign currency and geopolitical risks.
Certain ProShares ETF Funds Submission Deadlines for Investors Announced by Bernstein Liebhard LLP
November 24, 2009--Bernstein Liebhard LLP has filed a case against ProShares Trust ("ProShares") concerning ProShares' DXD (NYSE: DXD) fund. This complaint alleges that ProShares, as well as others, violated the Securities Act of 1933 by failing to disclose the following risks, inter alia, in the Registration Statement, Prospectuses, and Statements of Additional Information issued in connection with shares of the DXD fund:
(1) if shares of the DXD fund were held for a time period longer than one day, the likelihood of catastrophic losses was huge; and (2) the extent to which performance of the DUG fund would inevitably diverge from the performance of its benchmark -- i.e., the overwhelming probability, if not certainty, of spectacular divergence.
The current lead plaintiff deadlines for two of the ProShares funds are as follows:
DXD-11/30/09
DIG-01/04/10
Vanguard broadens bond index ETF offerings
November 23, 2009--Vanguard today introduced seven bond index ETFs featuring expense ratios of 0.15%. The funds will seek to track benchmarks focusing on discrete segments of the bond market, as follows:
ETF (Ticker) |
Benchmark: Barclays Capital Index |
|---|---|
Vanguard Short-Term Government Bond Index ETF (VGSH) |
U.S. 1–3 Year Government Float Adjusted Index |
Vanguard Intermediate-Term Government Bond Index ETF (VGIT) |
U.S. 3–10 Year Government Float Adjusted Index |
Vanguard Long-Term Government Bond Index ETF (VGLT) |
U.S. Long Government Float Adjusted Index |
Vanguard Short-Term Corporate Bond Index ETF (VCSH) |
U.S. 1–5 Year Corporate Index |
Vanguard Intermediate-Term Corporate Bond Index ETF (VCIT) |
U.S. 5–10 Year Corporate Index |
Vanguard Long-Term Corporate Bond Index ETF (VCLT) |
U.S. Long Corporate Index |
Vanguard Mortgage-Backed Securities Index ETF (VMBS) |
U.S. MBS Float Adjusted Index |
"Vanguard's expanded fixed income lineup provides greater choice and more price competition in the market and offers financial advisors and institutions more flexibility to tailor the credit quality and duration of their bond exposure," said Gus Sauter, Vanguard's chief investment officer.
The new bond ETFs will be Vanguard's first to trade on the NASDAQ stock exchange. Vanguard's 39 other ETFs will continue to trade on the NYSE Arca exchange; some products are cross-listed in Australia and Mexico.
Vanguard is a pioneer in bond index investing, having introduced the first no-load bond index mutual fund, Vanguard Total Bond Market Index Fund, in 1986. In April 2007, the company launched four bond ETFs: Vanguard Total Bond Market ETF (BND), Vanguard Short-Term Bond ETF (BSV), Vanguard Intermediate-Term Bond ETF (BIV), and Vanguard Long-Term Bond ETF (BLV). Vanguard Extended Duration Treasury ETF (EDV) began trading in December 2007.
Vanguard is among the ETF industry leaders in net cash flow this year, with $21 billion through October 31, 2009, according to Bloomberg data. Vanguard's ETF assets are up nearly 95% in 2009 to $78 billion. In total, Vanguard's U.S.-based mutual funds (including ETFs) experienced cash flows of $85 billion through October. The firm manages $1.3 trillion in U.S. fund assets, including $600 billion in index funds.
The new bond index funds will be managed by the Vanguard Fixed Income Group, which oversees nearly $485 billion in assets, including $114 billion in bond index fund assets and $10.4 billion in bond ETF assets.
SPDR Index Shares Fund files with SEC
November 24, 2009--
485APOS - SPDR INDEX SHARES FUNDS (Formerly streetTRACKS Index Shares Funds) has filed a Post-effective amendment with the SEC.
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Sector SRDR Trust files with SEC
November 24, 2009-- A post effective registration has been filed with the SEC by the Sector SPDR Trust.
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Texas Pension to Invest $200 Million in Asia Funds
November 23, 2009--Teacher Retirement System of Texas, the seventh-largest U.S. public pension fund, will invest $200 million in private equity in Asia, whose economies are leading the world out of a recession.
The Austin, Texas-based fund has assigned $100 million each to Squadron Capital and Morgan Creek Capital Management LLC to help it invest with private-equity firms that focus on emerging Asian economies such as China, spokesman Howard Goldman said in an e-mailed response to questions.
U.S. International Reserve Position
November 23, 2009--The Treasury Department today released U.S. reserve assets data for the latest week. As indicated in this table, U.S. reserve assets totaled $136,107 million as of the end of that week, compared to $136,019 million as of the end of the prior week.
I. Official reserve assets and other foreign currency assets (approximate market value, in US millions)
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November 20, 2009 |
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A. Official reserve assets (in US millions unless otherwise specified) 1 |
Euro |
Yen |
Total |
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(1) Foreign currency reserves (in convertible foreign currencies) |
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136,107 |
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(a) Securities |
10,561 |
14,614 |
25,174 |
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of which: issuer headquartered in reporting country but located abroad |
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0 |
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(b) total currency and deposits with: |
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(i) other national central banks, BIS and IMF |
15,316 |
7,127 |
22,422 |
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ii) banks headquartered in the reporting country |
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0 |
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of which: located abroad |
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0 |
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(iii) banks headquartered outside the reporting country |
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0 |
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of which: located in the reporting country |
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0 |
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(2) IMF reserve position 2 |
13,661 |
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(3) SDRs 2 |
58,414 |
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(4) gold (including gold deposits and, if appropriate, gold swapped) 3 |
11,041 |
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--volume in millions of fine troy ounces |
261.499 |
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(5) other reserve assets (specify) |
5,374 |
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--financial derivatives |
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--loans to nonbank nonresidents |
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--other (foreign currency assets invested through reverse repurchase agreements) |
5,374 |
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B. Other foreign currency assets (specify) |
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--securities not included in official reserve assets |
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--deposits not included in official reserve assets |
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--loans not included in official reserve assets |
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--financial derivatives not included in official reserve assets |
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--gold not included in official reserve assets |
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--other |
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Newedge forms a new ETF Team
November 23, 2009--Newedge has formed a new ETF execution and facilitation team in New York, led by Bill Ahmuty, senior v.p and head of USA ETF sales and trading. Briton Ryan joined as v.p. responsible for fixed income ETFs, as well as ETF creations and redemptions.
He was most recently ETF specialist and finance trader at Macquarie. Kevin Nichols joined as v.p. focusing on trading and ETF strategy. He had previously been a Dow Jones columnist and v.p. in the principal strategies group at Morgan Stanley. Matt Koop joins as v.p. focused on ETF trading from Van der Moolen Capital Markets, where he was director of ETF Trading. The team reports to Mark Viani, senior v.p. and head of equities sales and trading.
Claymore files with the SEC
November 23, 2009-Claymore has filed an amended application for exemptive relief with the SEC.
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iShares files prospectus with the SEC
November 23, 2009--iShares has filed a prospectus with the SEC for
iSHARES FTSE CHINA (HK LISTED) INDEX FUND-Ticker:FCHI
Stock Exchange: NASDAQ
INVESTMENT OBJECTIVE
The Fund seeks investment results that correspond generally to the price and
yield performance, before fees and expenses, of the FTSE China (HK Listed)
Index
Total Annual Fund Operating Expenses: 0.72%
Calls Mount for Treasury Secretary Geithner's Resignation; JPMorgan Chase CEO Jamie Dimon Pushed As Possible Replacement...
November 22, 2009--As support for Treasury Secretary Timothy Geithner wanes on Capitol Hill amid frustration with the Obama administration's handling of the economy, JPMorgan Chase CEO Jamie Dimon is emerging as a potential replacement.
Sources tell The New York Post that a number of policy makers have begun mentioning Dimon as a successor to Geithner, whose standing in Washington has suffered because of the country's high unemployment rate, the weakness of the dollar, the slow pace of the recovery and the government's mounting deficit.
iShares files with the SEC
November 20, 2009--iShares has files a prospecus with the SEC for the
iSHARES MSCI ACWI ex US FINANCIALS INDEX FUND
INVESTMENT OBJECTIVE
The Fund seeks investment results that correspond generally to the price and
yield performance, before fees and expenses, of the MSCI All Country World ex
USA Financials Index
Deutsche Börse Acquires US Financial News Service Need to Know News
Market Data & Analytics segment extends offering in trading relevant, machine readable real-time news for financial markets
November 20, 2009--Deutsche Börse is expanding the offering of its Market Data & Analytics segment by acquiring the US financial news service Need to Know News.
A purchase agreement was signed on 20 November 2009. For a US$ amount in the one digit million range including a performance-related payment, Need to Know News will become a 100 percent subsidiary of Market News International (MNI), a Deutsche Börse Group company
The acquisition of Need to Know News reflects our growth strategy with globally relevant information for algorithmic traders. We see an increasing demand from market participants pursuing automated trading strategies to integrate financial news and other event data into their algorithms, in addition to real-time market data”, said Holger Wohlenberg, Managing Director of Deutsche Börse Market Data & Analytics.
With this transaction, Deutsche Börse acquires a pioneer in the delivery of machine readable news for algorithmic trading. The acquisition allows Deutsche Börse to combine its expertise in the development of ultra high speed data feeds with content provided by Market News International and with the proven market experience of Need to Know News. Together, the businesses aim to assume a leading role in the delivery of real-time data to the growing number of market participants with automated trading applications. At the same time, Deutsche Börse is expanding its client base for its offering of real-time news relevant to financial markets.
Based in Washington D.C., Need to Know News has 25 employees and delivers trading relevant news to market participants in the US and Europe.
Van Eck files with the SEC
November 20, 2009-Van Eck has filed a prospectus for
MARKET VECTORS POLAND ETF
The Fund’s investment objective is to replicate as closely as possible, before fees and expenses, the price and yield performance of the Market Vectors Poland Index (the “Poland Index”).
Ohio sues three ratings agencies
November 20, 2009-The three major credit ratings agencies gave mortgage-backed securities unjustifiably high ratings in return for lucrative fees, losing at least $457 million for five Ohio public employee pension and retirement funds, the state's attorney general alleged in a lawsuit filed Friday.
Ohio is the second state whose public pension funds have pursued credit rating agencies, after the California Public Employees' Retirement System sued the agencies in July alleging they caused it more than $1 billion in losses.
