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DB Index Research -- Weekly ETF Reports - Europe
December 10, 2009--Highlights
ETF Volume
Exchange based Equity ETF turnover declined by 8.7% on the previous week. Daily turnover for the previous week was E1.3bn. European fixed income ETF turnover declined by 2.6% to E172.1m.
In exchange based bond ETFs, iShares € Corporate Bond has the highest daily turnover of E13.20m. Among the Equity ETFs, iShares DAX (DE) has the highest daily turnover of E59.96m.
There were 4 new listings last week. Xact Fonder AB issued two new leveraged ETFs on Stockholmborsen. UBS and Source listed one new ETF each on Deutsche Borse. All new listings were primary listings except for the ETF issued by UBS.
European Style ETFs, led by short and leveraged products, kept its position as the leading product area with total turnover of E395m accounting for 31.03% of total ETF turnover, followed by European Regional ETFs with total turnover of E344m with 27.03% of total turnover. The DAX ETFs remain the dominant country products with total average daily volume of E167m across the fourteen listed products and accounting for 13.1% of all equity ETF volume.
DJ Euro STOXX 50 ETFs accounted for 12.7% of turnover trading E162m per day with liquidity split across 16 ETFs and 43 different listings on 9 exchanges.
Market Share
The Deutsche Borse XTF platform has the largest market share with 38.0% of total turnover. The Euronext NextTrack platform has 21.1% market share. The LSE’s combined Italian Exchange and London market share is now 24.7%.
Assets under Management (AUM)
Total European Equity related AUM rose by 5% to E106.7bn during last week. AUM for DJ Euro STOXX 50 ETFs was E21.1bn accounting for 19.8% of total European AUM. Fixed Income ETF AUM remained at about the same level at E33.9bn.
Overall, the largest ETF by AUM was Lyxor ETF DJ Euro STOXX 50, an Equity based ETF, with AUM of E5.1bn. The largest Fixed Income ETF by AUM was the iShares € Corporate Bond with AUM of E3.2bn.
To request a copy of the report
Hedge funds: ideas for new legislation
December 10, 2009--Improving transparency and regulatory control of alternative investment funds, such as private equity and hedge funds, to reduce the risks involved, is the key aim of a report tabled in the Economic and Monetary Affairs Committee on Tuesday.
When comes to regulating alternative investment funds (AIF), "no area of the financial sector can escape our attention", said Parliament's rapporteur Jean-Paul Gauzès (EPP, FR), presenting his proposals to the Economic and Monetary Affairs Committee.
The Gauzès report backs a Commission proposal for a directive to ensure that all AIF managers in the EU are subject to supervision, by establishing a binding authorisation and supervisory regime for all entities that deal with managing AIF.
No exemptions
The Gauzès proposal reduces the exemptions set out in the Commission proposal, removes the investment threshold (the Commission had proposed that only entities managing AIF portfolios with total assets of over €100 million) and replaces it with the proportionality principle, to take account of the size of funds.
All managers of alternative investment funds, including e.g. pension funds, set up and operating in the EU should be subject to a legally-binding authorisation and supervisory regime, which should apply irrespective of the legal domicile of the AIF managed, says the report.
Any AIF manager operating in the EU would also be required to hold and retain a minimum amount of capital which, according to the rapporteur, should correspond to the amounts set by the Undertakings for Collective Investment in Transferable Securities (UCITS) Directive, which aims to ensure that investors receive useful cost and performance disclosures.
Depositories' liability
Depositories' responsibilities must be clearly defined, says the rapporteur, who acknowledges that his proposals here are more stringent than the UCITS Directive, but argues that this is a logical response to the economic and financial crisis.
Leverage, valuators and remuneration policy
Fund managers should describe their leverage policies to the regulator, who should decide whether or not they should be implemented, says Mr Gauzès. He also proposes "more flexible rules" for valuators, adding that further provisions are needed in this context to prevent conflicts of interest.
AIF managers' remuneration should reflect long-term value creation, not excessive risk-taking, says Mr Gauzès.
European passport: don't close the door to non-EU funds
"The EU should not be a fortress" but should remain open to AIF from outside Europe, says Mr Gauzès, who backs the idea of a "European passport" to allow fund managers operating in the EU and funds located in the EU to market funds throughout Europe, provided that EU Member States other than their own are notified of this fact.
To avoid "closing the door" to non-EU funds, Member States should be free to allow them to operate on their territory via their respective national private placement regimes, he adds.
Mr Gauzès would also welcome harmonised rules for private investment, but, accepting that this is currently "not realistic", he proposes transitional periods for introducing such rules.
Further steps
Economic and Monetary Affairs Committee MEPs have until 21 January 2010 to table amendments, which should be debated in committee on 22 February put to a committee vote on 12 April. The plenary vote is scheduled for the July I session.
view Report by Jean-Paul Gauzès
Vanguard launches Global Small-Cap Index Fund
December 10, 2009--Vanguard Investments Europe has launched a new equity index portfolio, the Vanguard Global Small-Cap Index Fund.
The portfolio is the 31st portfolio in the Irish-domiciled Vanguard Investment Series funds.
The fund aims to track the performance of the MSCI World Small Cap Index, which includes companies with a market capitalization between EUR190m and EUR2.1bn across developed markets.
This is the only index fund available in the European marketplace that provides exposure to this broad market within a single fund.
Euro summit falls short on hard cash for climate talks
December 10, 2009--European Union leaders fell short Thursday of a target to pledge six billion euros to help the developing world combat global warming, but talks were set to continue through the night, the EU presidency said.
At a summit in Brussels, the 27 nations closed in on their goal, determined to underline the EU's leadership role in fighting climate change and set the tone for the on-going international climate conference in Copenhagen.
"We are still working on putting together what European countries on a voluntary basis are able to put on the table," Swedish Prime Minister Fredrik Reinfeldt told reporters at a late-night press conference.
German leader concerned as Greek debt balloons
December 10, 2009--Europe's biggest concern as Greece battles a debt crisis is maintaining a stable euro single currency, German Chancellor Angela Merkel said Thursday.
"We are agreed within the Eurogroup (of eurozone finance ministers) that we need to respect the criteria of European stability on budgetary matters," she said as she arrived at the start of a two-day EU summit in Brussels.
"We will discuss with the nations in the greatest difficulty how to maintain a stable euro, that's everyone's concern," she added.
Greece's sovereign debt, worth 442 billion dollars, was downgraded this week by the international ratings agency Fitch, prompting fears of dangerous spillover effects for the 16 countries that use the euro.
ISE Chairman & CEO Mr. Hüseyin Erkan and ATHEX Chairman Mr. Spyros Capralos Officially launch the “GT-30 Index”
December 10, 2009--A ceremony for the official launch of the “Greece-Turkey 30 Index” (GT-30) took place today at the Istanbul Stock Exchange (ISE) with the presence of ISE Chairman & CEO, Mr. Hüseyin Erkan and Athens Exchange (ATHEX) Chairman, Mr. Spyros Capralos. The Chairman of the Capital Markets Board of Turkey, Professor Vedat Akgiray, the STOXX Ltd Director of Business Development, Mrs. Rosa Anna Grimaldi and the General Manager of ISE Settlement and Custody Bank, Mr. Emin Catana also made presentations during the event.
At the event Mr. Achilleas Kontogouris, CEO of NBG Asset Management and Mr. C. Özgür Güneri, CEO of Finans Asset Management, described during their presentations the advantages of the new ETFs on the GT-30 index, which the two institutions are going to issue early next year.
Mr. Hüseyin Erkan pointed out during his speech: “The Athens and Istanbul Stock Exchanges have a long history of close cooperation starting with the South East European Cooperative Initiative (SECI). And today, we are harvesting the fruits of a long term work and cooperation with the Athens Exchange by the GT-30 Index. This index will surely add more visibility to the Greek and Turkish stock markets. Launched at a time when the world markets are gradually recovering from the financial turmoil, we expect the GT-30 Index to draw more attention to both exchanges and to offer an additional investment tool for both individual and institutional investors to gain exposure to the upper and most liquid tier of the Greek and Turkish stock markets at lower costs. I am also happy to announce that we have already received two applications for ETFs based on the GT-30 and I am confident that more will follow.”
For his part, Mr. Spyros Capralos said: “With this new joint index, as well as the products that will be issued on it, we are providing additional choices, new opportunities and alternative options to the investors of the two markets. Furthermore, taking into consideration that the only direction we can follow, towards stronger and larger markets, is the facilitation of the cross border access for investors as well as the improvement of efficiency and reduction of costs, we have a strong faith that the GT30 as well as the ETF created on it, will be helping both Exchanges down that path.”
The event, which was hosted by the Istanbul Stock Exchange, brought together member brokerage houses and banks, portfolio managers as well as representatives of the Greek and Turkish companies included in the GT-30.
About the GT-30 Index The Greece & Turkey 30 Index (GT-30), a STOXX Customized index launched on 28 September 2009 comprising of 30 companies, 15 from each market with the largest market capitalisation among the companies listed in the two exchanges is the first concrete act of the long term collaboration between the two markets.
STOXX calculates the GT-30 Index as price and return indices denominated in TRY and EUR terms. The base date of the Indices is December 31st, 2005, and the base value is 1,000.
Merrill Lynch: Turkish economy to grow by 4.5 percent in 2010
December 10, 2009--Merrill Lynch, a leading global financial management and advisory company, expects the Turkish economy to grow by 4.5 percent in the coming year after an estimated 3.5 percent contraction this year, making a stand-by deal with the International Monetary Fund (IMF) unnecessary.
The company unveiled its forecasts for 2010 at a press conference in Ýstanbul yesterday which was attended by Portfolio Strategist of Merrill Lynch Wealth Management for Europe, the Middle East and Africa (EMEA) Bill O’Neill, Wealth Management EMEA Director Jean-Marie Deluermoz and Wealth Management EMEA economist Türker Hamzaoðlu.
Nomura Launches Innovative Global Emerging Market Risk Index
December 10, 2009--Nomura today announces the launch of its flagship Global Emerging Market Risk Index, GEMaRI, an early warning system for emerging market currency and balance-of-payments crises.
GEMaRI calculates the risk of currency crises occurring in 35 emerging market economies over the following 12 months and assigns a score to each country.
The index incorporates 16 specially selected and weighted indicators which are integral to accurately measuring the risk of a currency crisis in an emerging market economy.
Please follow the attached link to the full initiation report including information detailing how the index is constructed: http://www.nomura.com/research/getpub.aspx?pid=351579
FSA consults on strengthening firms' capital standards
November 10, 2009--The Financial Services Authority (FSA) has today issued proposals aimed at ensuring the financial soundness of firms by strengthening the prudential regime. The consultation paper sets out the FSA’s proposals for implementing changes that are required following amendments to the EU Capital Requirements Directive.
The wide range of changes address some of the lessons learned from the financial crisis and follows up on aspects of the Turner Review.
The proposals include:
Improving the quality of firms’ capital by establishing clear EU-wide criteria for assessing the eligibility of hybrid capital to be counted as part of a firm’s overall capital. The proposals specify the features that hybrid capital must have regarding permanence, flexibility of payments and loss absorbency to be eligible as tier one capital;
Strengthening the capital requirements for the trading book to ensure that a firm’s assessment of the risks connected with its trading book better reflects the potential losses from adverse market movements in stressed conditions;
Enhancing the management of large exposures by restricting a firm’s lending beyond a certain limit to any one party; Improving the risk management of securitisation, including a requirement to ensure that a firm does not invest in a securitisation unless the originator retains an economic interest; so called ‘skin in the game’;
Imposing higher capital requirements for re-securitisations to make sure that firms take proper account of the risks of investing in such complex financial products; and
Upgrading disclosure standards to increase market confidence.
The consultation period closes on 10 March 2010. The FSA plans to issue feedback to this consultation together with a policy statement confirming the final rules later on in 2010.
The rules must come into effect on 1 January 2011.
view the consultation paper-CP09/29: Strengthening Capital Standards 3
Deutsche Börse Launches Trading with Exchange Traded Notes on Xetra
Extended offering provides access to equity market volatility/ iPath ETNs tradable in Europe for the first time
December 10, 2009--Deutsche Börse is expanding its product range on Xetra, giving investors the opportunity, since Thursday, to invest in exchange traded notes (ETNs). ETNs are debt securities based on the performance of underlying reference indices. Unlike exchange traded commodities (ETCs), which have been tradable with Deutsche Börse since 2006, ETNs are based on indices outside the commodities sector.
The first two ETNs were issued by Barclays Capital under the brand name iPath. They track the volatility indices S&P 500 VIX Short Term Futures Index TR and S&P 500 VIX Mid-Term Futures Index TR and enable investors to participate in the development of the implied volatility of the S&P 500 Index. The S&P 500 Index comprises the 500 largest companies in the US, which are weighted in the index according to their market capitalization. The launch of iPath ETNs on Xetra is also the first time they have been tradable in Europe.
ETN name: iPath S&P 500 VIX Short-Term Futures Index ETN
ISIN: DE000BC1C7Q6
Management fee: 0,89 percent
Distribution policy: accumulating
Benchmark: S&P 500 VIX Short-Term Futures Index TR
ETN name: iPath S&P 500 VIX Mid-Term Futures Index ETN
ISIN: DE000BC1C7R4
Management fee: 0,89 percent
Distribution policy: accumulating
Benchmark: S&P 500 VIX Mid-Term Futures Index TR
“We are happy to be able to offer investors another product innovation in cooperation with Barclays Capital,” said Rainer Riess, Managing Director of Xetra Market Development at Deutsche Börse. “The new iPath ETNs enable investors to make cost-efficient investments in a new asset class as well as further diversify their portfolios.”
Uwe Becker, Head of Investor Solutions Europe at Barclays Capital, said: “The iPath VIX products demonstrate the characteristics which are vital for the success of any benchmark instrument. They are straightforward to understand, transparent and through our ETN platform, are easy to access for a broad range of investors to trade. They have removed the need for investors to trade volatility through variance swaps or futures.”
Parallel to the start of ETN trading on Xetra, Deutsche Börse is combining the ETC and ETN asset classes into the new product class exchange traded products (ETPs). Deutsche Börse’s ETF and ETP product range currently comprises 543 ETFs, 141 ETCs and 2 ETNs.
