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ALFI annual review-In 2011, Luxembourg funds industry has continued to maintain jobs amid crisis
Stability and reputation of Grand Duchy helps employee numbers to rise and net sales to remain positive
January 19, 2012--ALFI continues to raise concerns over regulations which adversely impact the funds industry and its end users.
The Luxembourg funds industry continued to expand over the last 12 months despite the eurozone crisis and declines in major stock indices.
The number of funds in Luxembourg rose by 4.84%1 to 3,833 and net sales amounted to €16.998bn. While total AUM decreased over the period by €101.453bn, mainly as a result of market depreciation, total assets under management were still a steady €2,059.419bn, second globally only to the US.
The increase in net sales and funds enabled the Luxembourg fund industry to continue to maintain and even create employment in 2011. The Luxembourg financial centre, of which the fund industry is a key part, is a motor of the Luxembourg economy, with over 43,000 employees working directly for Luxembourg financial sector companies and many more working for non-financial companies that provide goods and services to the financial centre.
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Source: ALFI
European Buy-Side Traders Call For Standards Supporting The Quality Of Liquidity Across Lit Venues, TABB Says
Electronic Trading In Europe To Reach 45% Of Average Daily Value Traded By Traditional Asset Managers In 2012, Up From 38% In 2010
January 19, 2012--Although change and uncertainty will continue to hold sway across the lit and dark equities venues in Europe for the foreseeable future, according to new research published today by TABB Group, one certainty stands tall – transparent, actionable metrics supporting the quality of liquidity are lacking.
P>While MiFID II and the implementation of a post-trade consolidated tape are coming, buy-side traders tell TABB they don’t have the time to wait to learn how these changes will impact their markets. In 2012, electronic trading across Europe will rise to 45% of average daily value traded by traditional asset managers, up from 38% in 2010 and up from 25% in 2008.
What the buy-side trader needs, explains Laurie Berke, a TABB principal and author of “European Market Quality: A Metric in Need of a Standard,” is a framework to define and measure the relative quality of liquidity in any given market and determine how that quality metric can drive optimal decision-making.
Over 50% of the buy-side traders interviewed expect MiFID II regulations, when they do arrive, to make it harder for them to source liquidity. Presently, 51% use transaction cost analysis (TCA) to develop a view on dark venues – but they have no means of directly comparing quality of liquidity across lit markets where the majority of price discovery occurs.
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Source: TABB Group
........Fundsmith's Terry Smith fires fresh warnings on ETFs
ETFs appeal to hedge funds and high frequency traders
Popular (Berlin: PP4.BE - news) as shorting instruments
Mis-sold as index tracking funds
January 18, 2012--Exchange traded funds (ETFs) are being widely missold as a low cost form of index tracker when in fact they are highly complex vehicles best suited to hedge funds and proprietary trading desks, a leading investor said.
Speaking to journalists on Wednesday, Terry Smith, head of fund management company Fundsmith warned the unwary investor buying into an ETF could be exposed to highly complex opaque products more suited to high frequency traders and hedge funds.
"If you read the description of the product they use the words synthetic, derivative, swap and counterparty. If you can't figure out what the problem might be here you need to study the history of the last four years more carefully," said Smith, who is also Chief Executive of interdealer broker Tullett Prebon (Munich: A0LET0 - news) .
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Source: Reuters
DB - Equity Research-Weekly & Monthly European ETF Market Monitors : A positive start to the year with good flows and more targeted new launches
January 18, 2012--Following the publication of our 2011 ETF Market Review & 2012 Outlook on January 11 2012, we are attaching our European ETF Monthly report for December 2011 and our Weekly European Market Monitor for the week that ended January 13th 2012. We are including the December 2011 European ETF monthly review for those readers who are interested to have a closer look at December 2011numbers.
Reversing some of the December 2011 outflows
*ETF Investors came out of their shell and gave 2012 a good start, reversing some of the outflows that registered in December 2011. European domiciled ETFs gathered $2.2 billion of inflows in the first two weeks of 2012, as compared to $2.8 billion of outflows over December 2011.
*European equity benchmarked ETFs gathered $1.5 billion in the first two weeks of the year, while fixed income ETFs registered inflows of $108 million. The majority of the equity ETF inflows [$1.0 billion] occurred in the first week of the year, while the majority of the fixed income ETF inflows [$478 million] came over the second week of the year. Commodities also did well, attracting a total of $354 million for the first two weeks of the year.
*Allocations in the first two weeks of the year were across a wide spectrum of equity segments, especially developed markets [DM], emerging markets [EM] and European sectors. US focused ETFs and European sector ETFs collected cash inflows of €433 million and €219 million over the same period. ETFs tracking broad EM benchmarks such as the MSCI EM Index reversed direction by receiving net cash inflows of € 333 million over the first two weeks of 2012. Broad EM ETFs had registered net out flows of € 300 million in 2011.
*Within fixed income products, sovereigns lost over €155 million while ETFs tracking corporate debt issuances registered inflows of €192 million over the first two weeks of the year. YTD cash flows into fixed income ETFs totaled €88 million as compared to outflows of €412 million in 2011.
*Gold ETP products continued to attract new money and registered net cash inflows of €259 million over the first two weeks of the year. ETPs tracking broad commodity benchmarks also fared well pocketing €112 million over the same period. Overall, cash flows into commodity ETPs showed strength totaling a healthy €440 million YTD.
*The US ETF market followed a similar pattern registering inflows of $12.0 billion over the first two weeks of 2012. US equity ETFs continued to attract good flows in the first two weeks of 2012, totaling $8.7 billion, following the $12.2 billion of equity ETF inflows that came in over December 2011. US fixed income ETFs gathered flows of $3.2 billion over the first two weeks of 2012, following the $6.1 billion of inflows over December 2011.
*Both the European as well as the US ETF markets attracted inflows well above the 2011 weekly average cash flow levels, in the first two weeks that ended on January 13th 2012. Average weekly flows over 2011 for the US market came in at $2.1 billion, while the comparable number for Europe was $426 million.
New ETF launches: Focus on products that can capture returns
*There were eleven new ETFs launched in December 2011 and ten new ETFs launched over the first two weeks of January 2012. While some pure beta indexed ETFs were launched over this period, the over-arching theme for both December and January launches alludes to a more targeted focus towards capturing returns amid tougher market conditions. The European ETF industry has at the moment a robust blue-chip equity beta component, hence a lot of the new launches are aiming towards giving institutional and corporate investors a better handle to navigating choppy markets.
*From an asset allocation perspective, an interesting selection of both credit as well as commodity products were launched in January. From an investment strategy point of view, half of the January launches targeted non beta investment strategies. Given the turbulence that equity markets have experienced over the second half of 2011, demand for non beta, non blue-chip equity indexed ETFs has increased and ETF issuers have responded by adjusting launch calendars accordingly.
*Lyxor launched four ETFs targeting commodity indices, two of which offer short exposure to livestock/agriculture and industrial metals. The other two Lyxor launched ETFs offer long exposure to 3 month forward exposure to livestock/agriculture and industrial metals.
*The flavor for the db x-trackers ETF launches in the first two weeks of January was purely fixed income, with five new ETFs reaching the market. Four of the new ETFs target leveraged and short exposure to iTraxx credit indices. Credit is expected to play a more active role in deriving returns in 2012 and the launch by db x-trackers targets corporate and institutional investors that are trying to elevate fixed income’s return generating capacity closer to that of equity.
*Source launched one ETF targeting the return of the LGIM Commodity Composite index. The LGIM Commodity Composite Index is designed to represent the collective performance of a wide range of commodities by providing an investible benchmark consisting of selected indices from leading global index providers. It is based on the rationale of investing in a composite of selected commodity indices. The product targets pension funds and other institutional investors offering diversified and easily accessible exposure to commodity markets.
European ETF assets: Rise of 3.9% from 2011 year-end levels
*European ETF asset levels rose by 3.9% in the first two weeks of 2012 and reached €216.1 billion. This contributed somewhat towards putting the European domiciled ETF assets in positive territory, following the 4.9% drop of ETF assets over 2011.
*Commodity ETFs experienced the largest percentage asset increase, registering at 7.0% and bringing commodity ETF assets to €24.8 billion. This was consistent with the overall - including ETCs - commodity ETP asset rise, which registered at 6.7% and brought overall commodity ETP assets to €47.6 billion as of January 13th 2012.
*Equity ETF assets experienced a rise of 4.3%, reaching €145.4 billion. Fixed income ETF assets increased by 1.0%, reaching €43.8 billion.
To request a copy of the report
Source: Christos Costandinides, European Head of ETF Research & Strategy, Deutsche Bank
European repo market remains stable despite Eurozone difficulties, ICMA-ERC survey shows
January 18, 2012--The European Repo Council of the International Capital Market Association (ICMA) today released the results of its 22nd semi-annual survey of the European repo market, which took place in December 2011. The survey, which measures the amount of repo business outstanding on 7 December, sets the baseline figure for market size at EUR 6,204 billion.
Analysis of the figures for banks that participated in both the December 2010 and December 2011 surveys shows modest growth in the market of 2.6% year on year, although there was a contraction in market size of 3.3% from the June 2011 survey using a constant sample. The latest survey results reflect continued stability in the repo market despite underlying difficulties for Euro Sovereigns which furnish the majority of the collateral for repo activity.
Heightened risk-aversion among investors was evident in changes in the collateral composition of the market. Overall, the share of government bonds within the pool of EU originated collateral rebounded in this most recent survey to 79.1% of the market from 74.3% in the previous survey. The market share of German collateral continued to fall, touching 20.9% of the total (from 24.9% in December 2010), as risk averse investors became more cautious about lending these safe haven securities. The share of Italian collateral also fell to 7.0% (from 10.3% in the December 2010 survey) possibly reflecting credit concerns.
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Source: International Capital Market Association (ICMA)
EEX to launch OTC Clearing for NBP Gas Futures on 29 February
January 18, 2012--The European Energy Exchange AG (EEX) will expand its product portfolio and offer clearing for bilaterally concluded transactions on the National Balancing Point (NBP) from 29 February 2012.
As of this date, EEX participants can register UK NBP forward transactions conducted off exchange at EEX for clearing and nomination purposes. Clearing of OTC transactions is provided by European Commodity Clearing AG (ECC), which also assumes full settlement of the transactions including physical fulfilment.
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Source: EEX
New Ossiam ETF On The London Stock Exchange
January 18, 2012--Ossiam is listing a new ETF on the London Stock Exchange: Ossiam ETF FTSE 100 Minimum Variance.
The new ETF uses physical replication (no securities lending) to track the performance of the FTSE 100 Minimum Variance TR Index. It will be exclusively listed on the LSE.
Name: OSSIAM ETF FTSE 100 MINIMUM VARIANCE NR
Annual TER : 45 bps
ISIN: LU0705291739 – TIDM : UKMV
Listing date: 18/01/2012
Parity: 1/1
UCITS compliant
Dividend policy: accumulating
Subscription*/redemption in Cash or in kind
SIP and ISA Eligible
INAV : OSSIAM UKMV INAV
Symbol: IUKMV
ISIN : QS0011228788
Reuters RIC: .IUKMV
Bloomberg Ticker: IUKMV
The index is calculated and published b FTSE Group and seeks to deliver the net total return performance of a selection of stocks from the FTSE 100 with the intention of mitigating risk. As for our previously launched ETF on Minimun Variance approach, the methodology is intended to:
Benefit from asymmetric markets (bear and bull markets),
Mitigate drawdowns and volatility (below 1 year performance of previous indices developed with Stoxx and S&P)
The index methodology was developed jointly by FTSE and Ossiam.
Source: Ossiam
Ossiam offers the academic view for low volatility
January 18, 2012--Ossiam has launched a volatility-controlled exchange-traded fund that tracks the FTSE 100 Minimum Variance Index
Exchange-traded funds (ETF) provider Ossiam will list the first FTSE 100 Minimum Variance ETF on the London Stock Exchange (LSE) today, January 18. The ETF is designed to give investors exposure to liquid UK stocks that are weighted to minimise the volatility of the total portfolio.
"The concept of minimum variance is based on risk management techniques," says Isabelle Bourcier, director of development at Ossiam, "and intends to obtain an optimised portfolio that includes a selection of stocks where volatility is among the lowest in the investment universe. It is based on academic research, including works by Haugen et al in 2008, that demonstrates that historically low-volatility stocks had a very attractive performance."
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Source: Risk.net
Euro area annual inflation down to 2.7-EU down to 3.0%-December 2011
January 17, 2011--Euro area1 annual inflation was 2.7% in December 20112, down from 3.0% in November. A year earlier the rate was 2.2%. Monthly inflation was 0.3% in December 2011.
EU3 annual inflation was 3.0% in December 2011, down from 3.4% in November. A year earlier the rate was 2.7%. Monthly inflation was 0.3% in December 2011.
These figures come from Eurostat, the statistical office of the European Union.
Inflation in the EU Member States
In December 2011, the lowest annual rates were observed in Sweden (0.4%), Malta (1.3%) and Bulgaria (2.0%), and the highest in Slovakia (4.6%), Poland (4.5%) and Cyprus (4.2%). Compared with November 2011, annual inflation fell in twenty-one Member States, remained stable in two and rose in two.
The lowest 12-month averages4 up to December 2011 were registered in Sweden (1.4%), Slovenia and the Czech Republic (both 2.1%), and the highest in Romania (5.8%), Estonia (5.1%) and Latvia (4.2%).
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Source: Europe
EU bailout fund bonds see strong demand after downgrade
January 17, 2012--The EU's bailout fund, the EFSF, enjoyed strong demand Tuesday at an auction of six-month debt, Germany's central bank said, only a day after ratings agency Standard and Poor's downgraded it.
The Bundesbank, which organised the auction, said it received 4.6 billion euros' ($5.9 billion) worth of bids for the 1.5 billion euros of six-month bonds on offer, at an average rate paid to buyers of 0.2664 percent.
The bid-cover ratio, closely watched by the markets, was 3.1, meaning the auction of the first such EFSF offer of 6-month debt paper was heavily oversubscribed.
Christophe Frankel, deputy head of the fund, commented: "The success of today's auction confirms investors' confidence in the EFSF as a high quality issuer."
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Source: EUBusiness
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