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Morgan Stanley-US ETF Weekly Update
November 10, 2014--US ETF Weekly Update
Weekly Flows: $14.9 Billion Net Inflows
High-conviction ETF Recommendations Slide
ETFs Have Generated Net Inflows 34 of 45 Weeks YTD
ETF Assets Stand at $1.9 Trillion, Up 14% YTD
Six ETF Launches Last Week
SEC Issues Notice of Its Intent to Grant Eaton Vance Permission
to Offer Exchange-Traded Managed Funds
VelocityShares to Close Three ETFs
US-Listed ETFs: Estimated Flows by Market Segment
ETFs posted net inflows of $14.9 bln last week; fifth consecutive week of net inflows
Over the last five weeks, ETFs have generated net inflows of $42.1 bln
Last week’s net inflows were led by US Large-Cap ETFs at $10.7 bln; conversely, Leveraged/Inverse ETFs posted net outflows of $1.5 bln, the most of any category we measured
Thirteen of the 15 categories we measured posted net inflows last week; ETFs have generated net inflows 34 of the 45 weeks YTD totaling $154.3 bln, slightly ahead of last year’s pace
ETF assets stand at $1.9 tln, up 14% YTD
13-week flows remain positive among most asset classes; combined $86.9 bln in net inflows
US Large-Cap ETFs generated net inflows of $43.0 bln over the last 13 weeks, accounting for 49% of ETF net inflows, the most of any category
Commodity ETFs continue to struggle and over the last 13 weeks have posted net outflows of $2.4 bln; notably, the SPDR Gold Trust (GLD) is the primary driver of Commodity ETF flows; over the last 13 weeks, GLD has exhibited net outflows of $2.7 bln
US-Listed ETFs: Estimated Largest Flows by Individual ETF
SPDR S&P 500 ETF (SPY) posted net inflows of $7.1 bln last week, the most of any ETF
SPY has generated net inflows 10 of the last 13 weeks totaling $27.1 bln
The WisdomTree Japan Hedged Equity Fund (DXJ) and iShares MSCI Japan ETF (EWJ) had a combined $1.2 bln in net inflows last week as the Bank of Japan and the Japanese Government Pension Investment Fund spurred a rally in Japanese equities
Interestingly, the iShares Short Treasury Bond ETF (SHV) generated net inflows of $1.6 bln last week whereas the iShares 1-3 Year Treasury Bond ETF (SHY) had net outflows of $1.3 bln; both products target the front end of the curve, but SHV's effective duration is 0.5 years whereas SHY's is 1.9 years
Despite posting net inflows of $1.9 bln last week, the PowerShares QQQ (QQQ) has exhibited net outflows of $4.2 bln over the last 13 weeks
US-Listed ETFs: ETF Dollar Volume
ETF monthly $ volume as a % of listed trading volume jumped in October to 30% amid a spike in volatility and trading volumes; October's reading compares to September's 25%; over the last 5 years, ETF monthly $ volume as a % of listed trading volume averaged 28%
Over the last five years, ETF monthly $ volume as a % of listed trading volume peaked in August 2011 at 36%
ETF $ volume declined by $48 bln last week compared to the prior week, and is 4% below its 13-week average
US Sector & Industry ETFs accounted for 16% of ETF $ volume last week compared to their 13-week average of 14% and market capitalization share of 12%
US-Listed ETFs: Short Interest Data Unchanged: Based on data as of 10/15/14
SPDR S&P 500 ETF (SPY) had the largest increase in USD short interest at $6.8 bln
SPY's shares short at 292 mln are at their highest level since 5/31/12
Notably, the SPDR Barclays High Yield Bond ETF (JNK) and the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) exhibited meaningful declines in short interest last period; shares short in JNK are at their second lowest level of 2014 and HYG's shares short are at their lowest level of the year
694 ETFs exhibited short interest increases while 646 experienced short interest declines over the last period
Aggregate ETF USD short interest increased by $12.2 bln over the period ended 10/15/14
The average shares short/shares outstanding for ETFs is currently 3.9%, down from 4.2% last period
For the third consecutive period, the SPDR Retail ETF (XRT) was the most heavily shorted ETF as a % of shares outstanding at 267%
Seven of the 10 most heavily shorted ETFs as a % of shares outstanding are sector/industry based (XRT, SMH, XOP, IYR, XBI, OIH, DRV)
Based on multiple borrowings and the ability to continuously create new shares, shares short as a % of shares outstanding can exceed 100% (only seven ETFs exhibited shares short as a % of shares outstanding greater than 100%)
US-Listed ETFs: Most Successful Recent Launches by Assets
$8.0 bln in total market cap of ETFs less than 1-year old
Active ETFs account for 45% of recently launched ETF market share and 53% of net inflows over the last 13 weeks, the most of any category
International equity ETFs have experienced 63 launches over the last year, accounting for 34% of all recently launched ETFs
172 new ETF listings and 57 closures YTD (additional three announced)
The top 10 most successful launches make up 50% of the market cap of ETFs launched over the past year
Five ETF sponsors and three asset classes (equity, fixed income, and currency) were represented in top 10 most successful launches
The First Trust Enhanced Short Maturity ETF (FTSM) had another big week of net inflows last week at $531 mln; FTSM is a short duration actively managed fixed income portfolio that focuses on investment grade securities
Notably, the iShares Currency Hedged MSCI Japan ETF (HEWJ) also had a big week, generating net inflows of $174 mln, or 79% of HEWJ's current market cap.
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Source: Morgan Stanley
Fewer active managers beat market than at any time in decade
November 9, 2014--Fewer fund managers are beating the market this year than at any time in over a decade, piling further misery on a profession that faces increasing investor scepticism.
Fewer than one in five active managers outperformed the stock market in the year to the end of October, according to figures compiled by Bank of America.
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Source: FT.com
Oct. 15 bond swing draws attention from regulators, traders
November 9, 2014--The day's trading was just hitting its stride in New York on the morning of Oct. 15 when bond investors, traders and strategists were stunned by an unusual move in the $12 trillion U.S. Treasury market playing out on their computer screens.
The yield on the 10-year Treasury note took a sharp dive below 2% within minutes, and few could understand exactly why. Some dealers immediately pulled the plug on automated trading systems that provided price quotes to customers.
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Source: Wall Street Journal
CFTC.gov Commitments of Traders Reports Update
November 7, 2014--The current reports for the week of November 04, 2014 are now available.
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Source: CFTC.gov
Regulators Consider Easing Volcker Trading Rules
November 7, 2014--U.S. regulators are considering changes to the Dodd-Frank law that could ease requirements on the Volcker Rule's trading restrictions.
Scott Alvarez, the Federal Reserve's general counsel, said the central bank is reviewing whether to extend a deadline for implementing the Volcker Rule and changing "metrics" used in the regulation.
He said a rule requiring banks to separate their derivatives trading from units that benefit from federal backstops should be revisited.
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Source: Bloomberg
J.P. Morgan Asset Management Launches New ETF: JPMorgan Diversified Return International Equity ETF (JPIN)
November 7, 2014--J.P. Morgan Asset Management announced that the JPMorgan Diversified Return International Equity ETF (JPIN) officially launched for trading today, expanding J.P. Morgan's strategic beta ETF suite.
JPIN, like its predecessor JPGE, is designed to provide investors the opportunity to seek enhanced risk-adjusted returns through an ETF, and to help financial advisors keep clients invested in equities over the long term.
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Source: J.P. Morgan Funds
SEC Plans To Approve Eaton Vance's New ETF Structure
November 7, 2014--The Securities and Exchange Commission yesterday said it intends to allow Eaton Vance to offer non-transparent, actively managed exchange-traded funds that won't require daily disclosure of portfolio holdings.
In March 2013, Eaton Vance first filed with the SEC for exemptive relief from certain provisions of the Investment Company Act of 1940 to bring its exchange-traded managed funds (ETMFs) structure to market. It subsequently made three amended filings for permission to roll out the ETMF format, which employs net asset value (NAV)-based trading where fund shares would be purchased and sold on an exchange throughout the trading day at market-determined spreads to the fund's ending NAV on that day.
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Source: FA Magazine
Nasdaq to List PowerShares DB Optimum Yield Diversified Commodity Strategy Portfolio
New Broad-Based Commodity Strategy Expands Smart Beta Suite
October 7, 2014--Nasdaq today announced that Invesco PowerShares will list a new exchange-traded fund, PowerShares DB Optimum Yield Diversified Commodity Strategy Portfolio (Symbol:PDBC), on The Nasdaq Stock Market. PDBC will begin trading today, November 7th, 2014.
"Invesco PowerShares has enjoyed a long and successful relationship with Nasdaq," said Dan Draper, Head of Invesco PowerShares. "We're pleased to once again work with Nasdaq for today's listing of our newest smart beta ETF."
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Source: Nasdaq.com
FINRA Investor Survey Reveals Strong Support for Additional Regulatory Protections
November 6, 2014--The Financial Industry Regulatory Authority (FINRA) released a survey of U.S. investors designed to measure perceptions of fairness and to gauge demand for additional regulatory protections. FINRA's survey of 1,000 adults revealed that 92 percent of investors agreed (62 percent strongly agreed and 30 percent somewhat agreed) that it is important to have a regulatory "cop on the beat" to protect investors and police the markets.
In addition, 70 percent of investors surveyed strongly agreed and 24 percent of investors somewhat agreed that it is important that regulators use the latest tools and technology to protect investors.
Overall, investors surveyed by FINRA strongly agreed that regulation and investor protections are important. Highlights include:
88 percent of investors believe it's moderately or very important for regulators to detect when unsuitable securities are being sold to investors.
90 percent believe it's moderately or very important for regulators to detect when brokers are making trades that benefit themselves and not the investor.
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Source: FINRA
U.S. Securities and Exchange Commission Issues Notice of Intent to Grant Exemptive Relief to Permit the Offering of Exchange-Traded Managed Funds
NextShares(TM) Announced as Branding of Exchange-Traded Managed Funds
November 6, 2014--Eaton Vance Management (Eaton Vance), a subsidiary of Eaton Vance Corp. (EV), announced that the U.S. Securities and Exchange Commission (SEC) has today issued notice of its intent to grant Eaton Vance and related parties an exemption from certain provisions of the Investment Company Act of 1940,
as amended, to permit the offering of exchange-traded managed funds. Consistent with customary SEC practice, interested persons may request a hearing on this matter by contacting the SEC on or before December 1, 2014.
An order granting the requested relief (Order) will be issued unless the SEC orders a hearing.
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Source: Eaton Vance Corp.
