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DB - Equity Research- ETF Market Monthly Monitor : A different type of ETF investor continues to emerge in March
April 5, 2012--The pattern: Buy and hold non sovereign fixed income
March brought €1.2 billon of new money into the ETF industry a level that is below the €1.5 billion observed in February 2012 and also below that of the equivalent month last year (March 2011: €2.8 billion). There are a couple of reasons for the solid but yet undeniably slower performance of this month's cash flows.
While market mood has improved in the past three months, cash flow levels are still below those that we observed in the first half of 2011. This is consistent with the more somber general market mood and trading activity levels - as compared to that of Q1-11 - across the market and it is not specific to ETFs.
Beginning in February 2012 and more specific to ETFs, we have also observed a clear trending into European fixed income corporate bond benchmarked ETFs. Fixed income is currently 19.5% of the ETF market, so when fixed income trends materialize they tend to have a lower impact on the overall cash flows.
Even further, the corporate bond benchmarked component is 5.4% of the European ETF market. Most of the fixed income ETF inflows we have experienced this year went into corporate bond benchmarked ETFs, while last year, sovereign bond benchmarked ETFs were the largest cash flow recipients. Sovereign benchmarked ETFs are a far larger component of the market currently at 10.4%.
The advance of the corporate bond fixed income investor is further supported by observing March on-exchange turnover volumes. Corporate bond benchmarked ETF turnover experienced an 11.7% increase in March, registering the strongest percentage as well as absolute (+€164 million) turnover performance to reach €1.6 billion. Conversely, sovereign benchmarked ETFs experienced the largest decline, both in percentage (-10.8%) as well as absolute terms (-€331 million) going down to €2.7 billion. Sovereign benchmarked ETFs experienced outflows of €120 million over the month of March 2012.
Its significance: More active role in asset allocation
With volatility and strong directionality absent in the equity market at the moment, the buy-and-hold investor gains new importance. This has significant implications towards not only trading patterns but it also signals that fixed income – a trade typically associated with a longer investment horizon - is taking a more active role in asset allocation.
With interest rates fairly stagnant across developed markets, the corporate bond trend also points to credit as an increasingly important source of alpha.
ETF month in perspective
This month’s defining trends: Corporate bonds and gold advance
March continued to see investors shifting emphasis on fixed income, with some more defensive allocations - in the form of long gold, materialized in March. Some equity – mainly global – segments saw inflows as well. European broad indices led the outflow activity with investors taking profits after the Euro Stoxx 50 rose by 4.6% in January and 4.0% in February. Euro Stoxx 50 lost 1.3% of its value over March 2012.
Corporate Bonds: Euro investment grade bonds take largest share
Corporate bond benchmarked ETFs gathered €2.3 billion of inflows YTD, €743 million of which came in over the month of March. Inflows into corporate bond benchmarked ETFs have consistently received inflows since the beginning of the year and March was the second highest flow month this year.
Both investment grade (82%)and high yield (18%) benchmarked ETFs attracted flows, with Euro investment grade bonds receiving the lion’s share with €523 million of inflows in March, elevating their YTD inflows to €1.9 billion.
Within high yield benchmarked ETFs, flows totaled €424 million YTD, with ETFs tracking the USD market attracting 57% (€242 million)of the flows, while ETFs tracking the Euro high yield market taking the remaining 43%(€183 million).
The top ten corporate bond benchmarked ETFs took in a total of €1.8 billion of inflows YTD, comprising 78% of the corporate bond inflows for the year so far.
Gold allocations: Driven by Swiss based investors
Gold ETPs gathered €761 million of inflows over 2012, €557 of which came in March 2012. Gold (US$/oz) price registered an increase of 7.4% YTD, while it fell by 1.3% to close at $1,668.35 in March.
Positive cash flow trends typically occur with a rising asset price in the background and that has not been the case for gold flows over March. Looking at the gold flows a bit closer we have observed that they have largely been received by ETFs which are domiciled in Switzerland.
Swiss domiciled ETFs took in €624 million of this year’s gold ETP flows, amounting to 82%of Europe’s 2012 YTD ETP flows. In sharp contrast, Euro area and UK domiciled gold ETPs experienced much lower flow activity. Euro area domiciled ETPs attracted €149 million of inflows, while UK domiciled ETPs experienced outflows of €5 million in the first quarter of 2012.
Given the geographical concentration as well as the fact that they occurred while gold price was falling it is likely that these gold ETP flows are attributable to instrument re-allocations.
Equity: Overall flat equity ETF flows with some positive pockets
March registered an overall negative pressure on equity, with equity ETF cash flows registering at -€26 million. This is well below the €977 million observed in the comparable month (March 2011) last year and also that of the prior month (February 2011: €1.3 billion).
Euro area broad indices (-€370 million), Switzerland (-€246 million), and developed Asia pacific broad indices (-€217 million) experienced the largest outflows. Furthermore, investment into broad emerging market indices, such as MSCI Emerging Markets, came to a halt by registering €146 million of outflows. This follows €1.1 billion of inflows in the first two months of 2012.
Broad developed market global equity indices (€317 million), Japan (€209 million), LATAM (€124 million) and Russia (€111 million) were net recipients of flows throughout March.
ETF comparatives: Mutual Funds, cash equity turnover
European ETF turnover as a percentage of the region’s cash equities turnover declined to 7.3% (from 7.6%) as of the end of March 2012. The equivalent number for the US market stands at 24.6% for the same period, up by 0.4% from the end of February 2012.
European ETFs comprised 2.9% of the continent’s mutual fund industry as of January 2012. European domiciled ETFs registered inflows of €2.4 billion over January 2012, while UCITS mutual funds registered inflows totaling €18.8 billion. Mutual fund industry data as per the European Fund Management Association (EFAMA).
US ETFs comprised 8.6% of the mutual fund industry as of the end of February 2012, up from 8.4% at the end of January 2012. US domiciled ETFs registered inflows of $9.5 billion in February 2012, while US mutual funds registered inflows of $40.4 billion over the same period. Mutual fund industry data as per the Investment Company Institute (ICI).
To request a copy of the report
Source ETPs rank 2nd in net new assets in Q1
April 5, 2012-- Investors poured over US$7 billion of net new assets into European Exchange Traded Products ("ETPs") in the first quarter of 2012. While equity and commodity products are as popular as ever, interest in volatility and fixed income ETPs has also surged. Source continued to cement its leading position in the European ETP industry, capturing net new assets of over US$1.2 billion and launching innovative products in alternative, fixed income and commodity asset classes.
According to ETF Global Insight and Deutsche Bank Research, at the end of Q1, Source was ranked 2nd in Europe and 6th globally in terms of net new assets year to date.
Dow Jones Indexes To License Four New European Forecasted Dividend Plus Indexes As The Basis For Unicredit Tracker Certificates
Indexes to Measure Performance of Stocks with Highest-Expected-Dividend Yields and Historically Sustainable Dividend Programmes
April 5, 2012--Dow Jones Indexes today announced its four new Dow Jones Forecasted Dividend Plus Indexes have been licensed by UniCredit to serve as the basis for Tracker Certificates, to be issued in Germany and Austria.
Marketed under the brand names "HypoVereinsbank onemarkets" in Germany and "UniCredit onemarkets" in Austria, the certificates will be listed on the Frankfurt and Stuttgart Stock Exchanges.
The launch of the Dow Jones Forecasted Dividend Plus Indexes marks the latest dividend-index family addition for Dow Jones Indexes; the global index provider has been a leader in dividend-indexing since the 2003 launch of its Dow Jones U.S. Select Dividend Index.
Five concerns over Esma's ETF-Ucits consultation
April 5, 2012--Asset managers have set out their concerns surrounding the future of securities lending for Ucits funds, which they say could be jeopardised should the European Securities and Markets Authority's hefty consultation on exchange traded funds and Ucits go ahead as it stands.
The consultation sets out future guidelines on Ucits ETFs and other Ucits-related issues – one of which covers securities lending by a Ucits fund. The proposals will be finalised as guidelines for adoption in the second quarter this year.
Climate data from 1,800 companies available online
April 5, 2012--Climate data from 1,800 companies around the world will be available online free of charge from today as part of the data partnership between the Carbon Disclosure Project (CDP) and Deutsche Börse.
The data can be accessed at www.boerse-frankfurt.com. It enables comparisons between companies in terms of their contributions to climate protection and transparency with regard to their carbon emissions.
The aim of the partnership is to raise market standards and transparency, and to enable investors, analysts and other market participants to gain a comprehensive overview of each company and its sustainability strategy.
STOXX Limited Announces Changes to the Index Universe Definition for Chinese Shares
STOXX Americas 600 Index to be renamed
April 4, 2012--STOXX Limited, the market-moving provider of innovative, tradable and global index concepts, today announced a rule change to its indices in regard to the definition of the index universe for Chinese and Hong Kong share types.
Furthermore, a name change for the STOXX Americas 600 Index and all sub- and sector-indices was announced. All changes will become effective with the Q2 Benchmark Review on June 18, 2012.
The STOXX Americas 600 Index is a sub-set of the STOXX Global 1800 Index, and represents the 600 largest companies in the Americas portion of the global index. As it only covers Canada and the United States, the index will be renamed to STOXX North America 600 Index as of June 18, 2012, for clarity’s sake. The index universe of this index remains unchanged.
The Europe Dow Finished Up 7.07% In 2012's First Quarter, Despite 2.11% Slide In March, According To Dow Jones Indexes
20 Of The Europe Dow's 30 Stocks Closed Q1 In Positive Territory-Daimler AG Topped All Europe Dow Components With 36.73% Quarterly Gain-Tesco PLC's 4.42% Gain In March Is Best Among Europe Dow Stocks
April 4, 2012--The Europe Dow, an equal-weighted index that measures 30 of the region's
leading blue-chip stocks, closed 2012's first quarter with a gain of 7.07% despite dropping 2.11% in March, according to data compiled by Dow Jones Indexes, a leading global index provider.
For the first quarter of 2012, 20 of The Europe Dow’s 30 component stocks closed in positive
territory, while 21 of the index’s stocks finished March with a monthly decline. The Europe Dow advanced
6.04% in February 2012, and finished up 5.96% in 2011’s first quarter.
ETF Global Insight - - Findings for ETFs/ETPs listed in Europe for Q1 2012
April 4, 2012--SUMMARY
At the end of Q1 2012, the European ETF industry had 1,281 ETFs, with 4,527 listings, assets of US$301.0 Bn, from 36 providers on 21 exchanges.
In March 2012, 11 new ETFs listed. YTD to Q1 2012, 59 new ETFs have listed, while 9 ETFs have delisted.
In March 2012, ETFs saw net inflows of US$1.7 Bn.
iShares gathered the largest net inflows in March with US$1.5 Bn, followed by Source Markets with US$0.6 Bn and UBS Global Asset Management with US$0.6 Bn net inflows.
iShares gathered the largest net inflows YTD with US$4.1 Bn, followed by Source Markets with US$1.2 Bn and UBS Global Asset Management with US$1.0 Bn net inflows.
db x-trackers experienced the largest net outflows in March with US$0.8 Bn.
Commerzbank experienced the largest net outflows YTD with US$0.7 Bn, followed by EasyETF with US$0.5 Bn and Credit Suisse Asset Management with US$0.2 Bn net outflows.
STOXX has the largest amount of ETF assets tracking its benchmarks, with US$87.1 Bn, followed by MSCI with US$68.8 Bn, and FTSE with US$21.7 Bn.
Including other Exchange Traded Products (ETPs), at the end of Q1 2012, the European ETF/ETP industry had 1,880 ETFs/ETPs, with 5,754 listings, assets of US$336.9 Bn, from 43 providers on 22 exchanges.
In March 2012, 35 new ETFs/ETPs listed. YTD to Q1 2012, 90 new ETFs/ETP have listed, while 9 ETFs/ETPs have delisted.
In March 2012, ETFs/ETPs saw net inflows of US$2.0 Bn.
iShares gathered the largest net inflows in March with US$1.5 Bn, followed by Source Markets with US$0.8 Bn and UBS Global Asset Management with US$0.6 Bn net inflows.
iShares experienced the largest net inflows YTD with US$4.1 Bn, followed by Source Markets with US$1.2 Bn and UBS Global Asset Management with US$1.0 Bn net inflows.
db x-trackers experienced the largest net outflows in March with US$0.8 Bn.
Commerzbank experienced the largest net outflows YTD with US$0.7 Bn, followed by EasyETF with US$0.5 Bn and Credit Suisse Asset Management with US$0.2 Bn net outflows.
STOXX has the largest amount of ETF/ETP assets tracking its benchmarks, with US$87.7 Bn, followed by MSCI with US$68.9 Bn, and S&P with US$21.9 Bn.
ALFI's response to the Consultation concerning ESMA guidelines on ETFs and other UCITS issues (ESMA/2012/44)
April 3, 2012--On 30 March ALFI responded to Consultation concerning ESMA guidelines on ETFs and other UCITS issues.
ALFI welcomes ESMA's decision to broaden the scope of these proposed guidelines in such a manner as to target not only UCITS ETFs but all UCITS alike that engage in the relevant activities (e.g. securities lending) or pursue the same type of investment policy (e.g. tracking an index).
Furthermore, ALFI supports ESMA’s move towards greater transparency as it will further enhance investor’s understanding and confidence in UCITS products. The proposed guidelines reflect industry best practice in terms of transparency and disclosure. Transparency requirements should however be proportionate and bring real-added value in particular to retail investors allowing them to take well-informed investment decisions. For instance, we believe that the transparency requirements should be proportional to the extent that certain techniques are being used and should not apply to immaterial techniques and instruments.
When considering investor protection and disclosure requirements, we strongly encourage ESMA to take a horizontal approach to funds and non-fund products alike, in the spirit of MiFID and of the PRIPs initiative. Any consideration regarding the marketing of UCITS ETFs cannot be dissociated from a review of other products which are also subject to MiFID, therefore any action should be taken within the MiFID Review, maintaining a level playing field vis-à-vis other financial instruments. In this context, we very much support ESMA’s statements that “further consideration should be given to the development of harmonized definitions at European level of all exchange-traded products” and that “products with broadly similar characteristics should be subject to the same level of regulatory requirements and that investors in such products should be able to rely on an equivalent level of regulatory protection” (Consultation Paper, p. 11, paragraph 20).
Eurozone in recession until spring 2012: official forecast
April 3, 2012--- The eurozone, which entered a short recession in late 2011, will return to modest growth in the spring of 2012, official institutes from France, Germany and Italy forecast on Tuesday.
The three statistics agencies, which offer a joint assessment of the eurozone economy every quarter, confirmed an earlier outlook of a 0.2 percent contraction in the first quarter of 2012 after a 0.3 percent contraction in the final quarter of 2011.
