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Morgan Stanley-US ETF Weekly Update
March 18, 2013--US ETF Weekly Update
Weekly Flows: $5.2 Billion Net Inflows
ETF Assets Stand at $1.4 Trillion, up 8% YTD
One ETF Launch
US-Listed ETFs: Estimated Flows by Market Segment
ETFs posted net inflows of $5.2 bln last week, the third consecutive week of net inflows
Last week's net inflows were led by Fixed Income ETFs ($1.8 bln); interestingly, despite accounting for only 3% of the ETF market, US Dividend Income ETFs posted the next highest net inflows at $1.5 bln
ETF assets stand at $1.4 tln, up 8% YTD; $45.8 bln net inflows YTD
13-week flows were mostly positive among asset classes; combined $65.9 bln in net inflows
International- Developed Equity ETFs have posted material flows over the last 13 weeks ($16.6 bln), 34% of which can be attributed to two Japan ETFs (DXJ, EWJ)
Commodity ETFs have posted net outflows of $5.8 bln over the last 13 weeks; in particular, one ETF, the SPDR Gold Trust (GLD), has exhibited net outflows of $6.1 bln over this period (GLD accounts for 61% of Commodity market cap)
US-Listed ETFs: Estimated Largest Flows by Individual ETF
US-Listed ETFs: Short Interest
Data Updated: Based on data as of 2/28/13
SPDR S&P 500 ETF (SPY) had the largest increases in USD short interest at $4.1 bln
US-Listed ETFs: Most Successful Recent Launches by Assets
$6.5 bln in total market cap of ETFs less than 1-year old
The top 10 most successful launches make up 62% of the market cap of ETFs launched over the past year
request report Canada promotes exchange-traded fund penetration view more CFTC's Division of Clearing and Risk Issues Limited No-Action Relief from Required Clearing for Swaps Resulting from Multilateral Compression Exercises view more CFTC's Division of Market Oversight and Office of Data and Technology Issue Advisory Reminding All Swap Counterparties of April 10 Deadline to Obtain a CICI Identifier view more Treasury International Capital Data for January
Foreign residents increased their holdings of long-term U.S. securities in January – net purchases were $48.2 billion. Net purchases by private foreign investors were negative $14.8 billion, and net purchases by foreign official institutions were $63.0 billion. view more SEC Issues Guidance Update on Social Media Filings by Investment Companies view the IM Guidance Update: Filing Requirements for Certain Electronic Communications Direxion Announces Reverse and Forward Share Splits of 16 ETFs view more AdvisorShares files with the SEC view filing Fidelity's ETF Fee Spurs a Backlash . But the Boston money manager is tacking on an additional fee of $7.95 a trade to investors who sell the ETFs within 30 days and to financial advisers who sell within 60 days.
view more DB-Synthetic Equity & Index Strategy-North America-US ETF Handbook Series-Positioning for a stronger USD with ETFs
International equity portfolios can suffer from Dollar strength
ETPs have made currency investing and FX hedging easy
The iShares MSCI Emerging Markets Index Fund (EEM) has exhibited net outflows for three consecutive weeks totaling $2.5 bln; prior to the last three weeks, EEM had only posted net outflows in one of the previous 25 weeks
Over the last 13 weeks the WisdomTree Japan Hedged Equity Fund (DXJ) posted net inflows of $3.9 bln, the most of any ETF; DXJ focuses on Japanese exporters and hedges its yen risk
SPY’s shares short have increased for four consecutive periods and are at their highest level since 5/31/12
Aggregate ETF USD short interest increased by $4.4 bln over the period ended 2/28/13 and has now increased $11.4 bln the last three periods; despite the increase in short interest, financial markets have remained resilient
The average shares short/shares outstanding for ETFs is currently 4.3%
Interestingly, the top 10 ETFs most heavily shorted as a % of shares outstanding does not change much; certain areas of the market
such as retail, currency, and real estate seem to consistently make the list
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%)
Source: Bloomberg, Morgan Stanley Smith Barney Research.
Data estimated as of 3/15/13 based on daily change in share counts and daily NAVs.
Newly launched Fixed Income ETFs accounted for 42% of the market cap of ETFs launched over the past year, the most of any category, including $1.2 bln in net inflows over the last 13 weeks
Issuance is off to a slow start in 2013; 16 new ETF listings and 26 closures YTD
Six different ETF sponsors and two asset classes represented in top 10 most successful launches
Seven out of the 10 most successful launches over the past year have an income orientation
The ALPS Sector Dividend Dogs ETF (SDOG) cracked the top 10 most successful launches last week; SDOG has a market cap of $157 mln and provides high dividend exposure across US sectors by selecting the five highest-yielding securities in each of the
10 GICS sectors and equally weighting them
Source: Morgan Stanley
March 18, 2013--It is commonly believed that the SPDR S&P 500, which was launched in the US in January 1993, was the first exchange-traded fund.
However, the first ETF-type product was issued in Canada on Toronto Stock Exchange three years earlier.
Launched in March 1990, the Toronto 35 Index Participation Units enabled investors to invest in the TSE 35 Composite Index without having to buy shares in each company.
Source: Financial News
March 18, 2013--The Commission's Division of Clearing and Risk (Division) today issued a no-action letter that provides relief from required clearing for a limited set of swaps that are generated as part of a multilateral portfolio compression exercise.
The Division will not recommend that the Commission take enforcement action against any person for failing to clear (1) swaps that are amended in order to reduce notional value as part of a multilateral portfolio compression exercise and (2) new swaps that are entered into to replace the original swaps as a result of a multilateral portfolio compression exercise in order to reduce notional exposures or aggregate outstanding gross notional exposure, provided that the original swaps were executed prior to the date on which the counterparties must begin complying with the clearing requirement (and therefore, not required to be cleared). Both the multilateral portfolio compression exercise and the resulting amended or replacement swaps must meet certain conditions specified in the letter.
Source: CFTC.gov
March 15, 2013--The Division of Market Oversight (DMO) and Office of Data and Technology (ODT) of the Commodity Futures Trading Commission (CFTC) today issued an Advisory reminding all swap counterparties of the imminent April 10, 2013, deadline for each counterparty to obtain a legal entity identifier (LEI)m currently known as a CFTC Interim Compliant Identifier or "CICI".
The source for obtaining a CICI is the CICI Utility designated by CFTC, available at www.ciciutility.org. Part 45 of the Commission’s regulations requires use of CICIs in all swap recordkeeping and swap data reporting.
Source: CFTC.gov
March 15, 2013--The U.S. Department of the Treasury today released Treasury International Capital (TIC) data for January 2013. The next release, which will report on data for February 2013, is scheduled for April 15, 2013.
The sum total in January of all net foreign acquisitions of long-term securities, short-term U.S. securities, and banking flows was a monthly net TIC inflow of $110.9 billion. Of this, net foreign private inflows were $63.5 billion, and net foreign official inflows were $47.4 billion.
Source: US DEpartment of the Treasury
March 15, 2013--The Securities and Exchange Commission today published a guidance update from its staff to clarify the obligations of mutual funds and other investment companies to seek review of materials posted on their social media sites
The guidance from the Division of Investment Management is the first in its “IM Guidance Update” series, which will offer the staff’s views on emerging legal issues. The goal of the guidance is to increase transparency and enhance compliance with federal securities laws and regulations.
Source: SEC.gov
March 15, 2013 – Direxion, a leader in alternative investment solutions, has announced it will execute reverse share splits for eight of its leveraged exchange-traded funds ("ETFs"), as well as forward share splits for another eight leveraged ETFs.
The total market value of the shares outstanding will not be affected as a result of these splits, except with respect to the redemption of fractional shares, as outlined below.
Source: Direxion
March 15, 2013--This Post-Effective Amendment No. 64 relates to the AdvisorShares Recon Capital Alternative Income ETF.
Source: SEC.gov
March 14, 2013-- Some financial advisers said they would stop using Fidelity Investments' trading platform to buy certain exchange-traded funds because of high fees that kick in when investors sell.
Fidelity on Wednesday announced it would begin offering 65 ETFs from BlackRock Inc.'s BLK +0.27%iShares unit without charging customers a trading commission. The deal expands a previous agreement involving 30 commission-free ETFs.
Source: The Wall Street Journal
March 14, 2013--Dollar investing and Dollar-Hedging made easy
A guide to invest in the USD up-trend and hedge international equity portfolios
The Dollar is Back
In a recent note, our Head of FX research indicated that almost all currencies appeared to have peaked against the dollar, and that the more recent rise in USD/JPY suggests the broad dollar is embarking on a multi-year uptrend.
In addition, he pointed out that superior US growth, Central Bank easing activity outside the US, and China rebalancing away from an investment driven economy towards a more consumer driven one should all help to strengthen the dollar.
A USD-denominated portfolio of foreign non-USD securities lags the local market returns during Dollar up-trend cycles. Investors that desire clean exposure to the underlying local market returns can hedge their FX risk with a currency overlay in an attempt to neutralize such risk.
If we are indeed in the early stages of a new 6-10 year up-trend cycle for the Dollar as our FX strategist expects, investors would do well in reevaluating their portfolio allocations and repositioning themselves accordingly. ETPs can offer an easy and efficient way to implement this new trend across major currencies and non-USD denominated equity portfolios.
