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DB Global Equity Index & ETF Research : European ETF Market Weekly Review : May turns out to be a 'sit and wait'’ game as ETF investors largely stay out of the market
May 26, 2011--Investment Outlook: Cash Outflows in Equity & Fixed Income ETFs
Declining equity markets and cash outflows from equity & fixed income ETFs marked the week that ended on 20/05/11. Most of the European equity benchmarks ended lower than the previous week’s close: DAX, Stoxx 50, and the CAC lost 1.84%, 1.40% and 0.70% respectively.
The only exception was the FTSE 100 which showed resilience and gained 0.38% than the previous weekly close. Overall equity ETFs registered outflows of €933 million for the last week which places its YTD cash flow figures at €10.4 billion.
European developed country ETFs witnessed outflows of close to €1.1 billion in the last week. ETFs tracking major European country benchmarks [such as the DAX, FTSE 100, SMI & CAC] registered outflows thereby bringing down the YTD cash flows to €5.1 billion in this ETF market segment. Non-European developed market ETFs and European sector ETFs received €145 million and €132 million cash inflows respectively over the last week.
Fixed Income ETF cash flows were marked by money market ETFs which registered outflows of €488 million over the last week. Sovereign ETFs collected €166 million in cash inflows for the last week. Overall, fixed income ETFs have registered outflows of €605 million year till date.
Outflows in commodities continued, albeit at a much muted level with net cash outflows of €71 million in the last week. Broad commodity benchmarked ETFs registered outflows of €55 million in the last week. Overall Commodity ETPs have collected over €2 billion in cash flows in 2011 , €1.2 billion of which were received by broad commodity benchmarked ETFs alone.
Assets Under Management (AUM): Assets decrease by €1.8 billion
Total European ETP assets decreased by 0.7% and ended the previous week at €242 billion. Equities alone registered a decline in assets of close to €1.6 billion to end the last week at €156.6 billion. Within equities, ETFs tracking developed country ETFs witnessed the largest asset decline (€ 1.4 billion) from the previous week’s closing numbers. This decline was primarily driven by DAX outflows. ETFs tracking regional Eurozone benchmarks also declined by €297 million week over week.
Fixed Income ETFs also lost €413 million in assets over the last week to close at €41.8 billion. Money market ETF assets declined by over € 500 million to end the week at €5.2 billion which is lower than 2010 year end assets. Commodity assets registered moderate increase by adding €190 million taking its total assets to €40.7 billion as of 20/05/11.
On-Exchange Total Weekly Turnover: Decrease in turnover levels as Commodity trading activity slows
Weekly on exchange European ETP total turnover decreased by 9.4% to end the past week at € 10.7 billion. Commodities played a significant role in this; registering week on week declines of €0.8 billion in total weekly turnover. Equity turnover remained flat with weekly total figures of €8.3 billion. Fixed Income ETF turnover declined by 13.8% to end the week at €832 million.
New ETP Product Launch Calendar: 12 product launches, 3 Cross-Listings Emerging Markets find flavor with Issuers
State Street launched 8 new products in the last week on the European ETP markets. There were 5 ETFs focused on MSCI indices tracking Emerging markets equities and 2 ETFs on broader investable equity securities. A Fixed Income ETF was also introduced which tracks the Barclays Capital EM Bond Index. All these products were listed on the Deutsche Borse.
Comstage introduced 4 Equity ETFs tracking a range of German and Swiss benchmark country indices. These ETFs were listed on the Deutsche Borse.
To request a copy of the report
Source: Christos Costandinides, European Head of ETF Research & Strategy, Deutsche Bank
Mercer study: having up to 5 percent gold in your portfolio considerably reduces the risk of loss
Study on gold as an asset class for institutional investors
May 25, 2011--The Mercer study examines the effect of holding a certain proportion of gold on the performance of a portfolio of large-cap shares and government bonds. To this end, it defines two different scenarios: a normal market environment scenario and a stress scenario. In a nutshell, investment in gold was shown to be a sensible diversification of a portfolio, particularly in times of crisis.
The study also shows that adding gold reduces the risk of loss in achieving any target return or that the expected return for any targeted risk of loss is higher.
"For institutional investors who are not permitted to make direct investments in gold for regulatory reasons, we consider ETPs to be a suitable form of investment for participating as directly as possible in the performance of the gold price," said Dr Heinz Kasten von Mercer. "However, we should take into account whether this ETP is secured by physical gold and its market price is thus directly coupled to the gold price. In addition, investors should ask themselves whether the price of the ETP will perform systematically differently from the gold price over time, for example through a certain fee structure."
"Xetra Gold is the only product on the market that is backed by physical gold and doesn't show a tracking error because the management fees are not taken out of the portfolio," said Martina Gruber, managing director at Deutsche Börse Commodities GmbH. "It is the first choice for institutional investors because it's inexpensive, flexible and very safe."
"Since mid-2010, insurance companies in Germany have also been allowed to purchase Xetra Gold for their restricted assets in the amount of up to 5 percent of their commodities investment," said Steffen Orben, managing director at Deutsche Börse Commodities GmbH. "The Mercer study proves that the risk of loss can be considerably reduced in this way."
Source: Deutsche Börse Commodities
Total end 'unlikely' to bank aid, says Vickers
May 25, 2011--Members of a commission that is proposing a shake-up of the banking industry admitted their reforms might not prevent more failures or free the taxpayer from providing support to the sector.
Sir John Vickers, chairman of the Independent Commission on Banking, told parliamentary members that while its recommendations would reduce the implicit state subsidy for banks it was unlikely they would abolish it totally
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Source: FT.com
BlackRock ETF Landscape: European STOXX 600 Sector ETF Net Flows for Week Ending 20-May-2011
May 25, 2011--For the week ending 20 May 2011, there were US$109.7 Mn net inflows into STOXX Europe 600 sector ETFs. The largest sector ETF net inflows last week were in healthcare with US$143.7 Mn followed by food and beverage with US$49.1 Mn net inflows while oil and gas experienced net outflows of US$149.3 Mn.
Year to date, STOXX Europe 600 sector ETFs have seen US$477.6 Mn net inflows. Healthcare has seen the largest net inflows with US$316.4 Mn, followed by banks with US$279.6 Mn net inflows while basic resources experienced the largest net outflows with US$172.7 Mn.
As of 20 May 2011, there is US$10.8 Bn AUM invested in the STOXX sector ETFs which is almost double the US$6.9 Bn open interest in the sector futures. The ETF AUM is greater than the open interest in the corresponding futures contract in 16 out of 19 sectors.
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Source: Global ETF Research & Implementation Strategy Team, BlackRock
Launch of the Swedish derivatives map 2011 – The Swedish categorization standard for structured products.
May 25, 2011--The instruments are divided into categories by risk and function in four main categories: Leverage product, Participation products, Yield enhancement products and Capital protected products. There are several instrument types included in each category and each type is described through a graphical pay out profile, main characteristics and market expectations.
”The map is a very important tool for a dynamic and growing Swedish investment products market. The work for transparency will benefit both end clients as well as market participants. We are glad that more and more market participants supports this.” says Tommy Fransson, head of NDX, Nordic Growth Market.
The Swedish categorization standard follows the guide lines produced by the European Structured Investment Products Association – Eusipa.
“Transparency is one of the cornerstones to further develop a market. The common work for a harmonized European categorization standard is to the benefit for the whole market".” says Reinhard Bellet, President Eusipa.
The Swedish Exchange Traded Investment Products Association – SETIPA, support the Swedish categorization standard.
“The map is an important part of our work to increase transparency and understanding for exchange traded investment products. SETIPA is a part of the European harmonization work for categorization through the categorization committee of Eusipa.” says Conny Myhrberg, President SETIPA.
You find the Swedish derivatives map on www.ndx.se/education and www.setipa.se.
Source: Nordic Growth Market
NYSE Euronext announces new ETF - Lyxor ETF CAC MID 60
May 25, 2011--NYSE Euronext is pleased to announce that Lyxor has listed 1 new ETF on NYSE Euronext's Paris market today:
Name:Lyxor ETF CAC MID 60
Trading name:LYXOR CACM 60
ISIN: FR0011041334
Symbol:CACM
Reuters RIC:CACM.PA
BBG Ticker:CACM FP
Underlying index: CAC Mid 60
TER:0,50%
NYSE Euronext has now 653 listings of 562 ETFs based on more than 360 indices.
Source: NYSE Euronext
Pension funds win reprieve from European derivatives regulation
May 25, 2011--Pension funds have won a reprieve from the derivatives regulation passing through Brussels, at least for a period of three years, with further extension possible.
This follows acceptance of a relevant amendment that cleared through the European Parliament's Economic and Monetary Affairs Committee (Econ) yesterday.
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Source: IP&E
All German banks have passed EU stress tests: report
May 25, 2011--All 13 German banks submitted to European stress tests have passed, the weekly Die Zeit said in its edition to appear on Thursday, citing financial sources.
Hypo Real Estate, which failed tests last year, is in better shape since it transferred toxic assets to an external entity known as a "bad bank," with government help.
Two state-owned regional banks that came close to failing last time, Nord/LB and Helaba, have taken measures to ensure their capital meets criteria set out by the European Banking Authority.
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Source: EUbusiness
Strong demand for EU bail-out bond sale
May 24, 2011--The European Union enjoyed strong demand for its third bond to raise money for the rescues of Portugal and Ireland, in a sign of investors’ confidence that the eurozone can survive the debt crisis.
Despite rising concern over contagion, and the single currency coming under pressure this week, banks, pension funds, insurers and other investors from Europe and Asia, including some big sovereign wealth funds, bought the debt.
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Source: FT.com
EFAMA replies to FSB: The UCITS framework provides high levels of risk mitigation and investor protection for ETFs
May 24, 2011--EFAMA’s reply to the Financial Stability Board’s Note on potential financial stability issues arising from recent trends in Exchange-Traded Funds (ETFs) stresses that a large majority of European ETFs are UCITS, and the UCITS Directive provides a robust regulatory framework for investment funds, with strong risk mitigation provisions.
The UCITS Directive is one of the world’s most respected and widely recognized regulatory regimes for investment funds, and it largely addresses the concerns expressed by the FSB. Asset segregation, risk management, conflict of interest rules, investment limits, collateral rules for OTC derivatives and disclosure requirements are key elements of the UCITS regime, and will be even further strengthened by the UCITS IV Directive from 1 July 2011.
EFAMA fully supports initiatives to increase the understanding of ETFs, but the areas of concern in the Note are not unique to ETFs, and regulators should look at other products as well, especially when focusing on systemic risks.
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