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Poll suggests Industry unprepared for the AIFM Directive
November 2, 2010--The UK asset management industry is unprepared for the implementation of the Alternative Investment Fund Managers (AIFM) directive, with only 2% saying they know how to implement the changes, according to a study conducted by PwC.
Additionally, more than half of respondents were concerned that the directive, which is awaiting final approval at a plenary session of the European Parliament next Thursday, would reduce their profit margin.
Of the 186 asset managers questioned, 41% were also concerned that the new EU regulation would lead to increased management fees.
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Source: IP&E
EU may legislate on corporate social and environmental data
New initiative alongside corporate governance green paper
November 2, 2010--The European Commission says it may legislate not only on corporate governance but also on the transparency of corporate social, environmental and human rights information.
The Commission, the executive arm of the European Union, unveiled a set of 50 proposals last week to improve the bloc’s internal market in a 46-page ‘communication’ Towards a Single Market Act: For a highly competitive social market economy.
Proposal 38 referred to the widely anticipated green paper on corporate governance. But the Commission added that it would also “launch a public consultation on the possible ways to improve the transparency of information provided by businesses on social and environmental matters and respect for human rights”.
view Towards a Single Market Act-For a highly competitive social market economy-
50 proposals for improving our work, business and exchanges with one another
Source: Responsible Investor
November 2010: db x-trackers expands corporate bond offering with targeted financial and non-financial listings.
November 2, 2010-- db x-trackers, Deutsche Bank’s exchange-traded fund (ETF) platform, has expanded its corporate bond offerings with the listing of ETF linked to the performance of global financial and non-financial corporate bonds.
The two new euro-denominated ETFs, listed on Germany’s Deutsche Börse, give exposure to sub-sets of the iBoxx EUR Liquid Corporate 100, which represents the performance of up to 100 euro denominated corporate bonds taking into account rebalancing costs.
The db x-trackers II iBoxx € Liquid Corporate 100 Non-Financials Sub-Index Total Return ETF is linked to the performance of the broader index’s 53 corporate bonds classed as non-financial. The db x-trackers II iBoxx € Liquid Corporate 100 Financials Sub-Index total return ETF is linked to the remaining 47 constituents of the parent index. The highest weighting in the financials index is to UK-domiciled companies, which constitutes 30% of the weighting. This is followed by the Netherlands at 18%, then the United States with 12%. The index lists bonds from a total of 12 countries. The non-financials index has 11 countries in it, with the largest weighting being to the Netherlands at 36%, followed by France (16%) then the UK (12%).
"The listing of these new products gives investors the opportunity to create targeted corporate bond exposures," says Thorsten Michalik, global head of db x-trackers. "db x-trackers is known for giving investors access to liquid exposures traditionally regarded as difficult to access. In the case of the new non-financials listing this is again the case, as bonds in this sector tend not to have a high turnover rate while also generally trading in high denominations."
db x-trackers is the first ETF provider in Europe to offer an ETF linked to the performance of corporate bonds issued by financial entities. The ETFs have an all-in fee of 0.2% per annum.
Source: db x-trackers
Study highlights investors’ understanding of short and leveraged ETFs in Germany
November 2, 2010--Analysis of trade outcomes for short and leveraged exchange-traded funds (ETFs) suggests German investors have a good understanding of the main risks and trading behaviour of the products they are buying, according to a study.
ETF provider db x-trackers commissioned Germany’s Constance University of Applied Sciences to conduct a study on the use of short ETFs – also known as inverse ETFs – and leveraged ETFs in Germany, Europe’s biggest ETF market. The results show that holding periods are relatively short for inverse and leveraged ETFs, while the amounts typically invested in leveraged products are much lower than for their non-leveraged counterparts. This conservative behaviour implies investors understand the path dependent nature of short and leveraged ETF. "The results imply that in the majority of cases the private investors subject to the study seem to be aware of the majority of risks and opportunities connected with the use of short and leveraged ETFs," said Leo Schubert, Professor of Business Administration at Constance University of Applied Sciences, who headed the study. Investment behaviour with regard to holding period and investment volume is adjusted in line with increased risks. The study analysed data from Germany’s major brokerage houses. A total of 26,394 purchase and subsequent sales of short and leveraged ETFs between 1 January 2008 and 1 April 2010 were analysed. During the period, investors traded in 39 different types of short and leveraged ETFs from six ETF providers.
The results show that the majority of short and leveraged ETFs were held for a limited period of time. After 15 days, around 50% of the ETFs had been sold again. After three months the figure was 85%. Also, 50% of trades were for less than Eur 5,000. In general, far less capital is invested in ETFs with higher leverage than in non-leveraged products, while the investment volume also drops as the holding period increases. Extreme outliers in terms of outcomes were also rarely registered, with returns in 90% of all analysed cases sitting between +20% and -22% after the ETF was sold. "We’ve taken the criticisms of short and leveraged products seriously. This study suggests that users of the short and leveraged ETFs have a good understanding of these products and the main risks inherent to them," says Thorsten Michalik, head of db x-trackers. "When we developed our short and leveraged products we worked with the index providers to ensure investors were presented with transparent benchmarks, making the outcomes the products provide as clear as possible. That commitment to transparency, combined with a focus on investor education, has clearly paid off." Short and leveraged ETFs are path dependent because they reset on a daily basis, which means open positions compound daily performance across days.
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Source: db x-trackers
UK govt seeking “new types of investor” for green infrastructure
November 1, 2010--The UK government says its planned new Green Investment Bank will bring “new types of investor” into green infrastructure.
“We are looking to create an institution which will make a radical new contribution to financing green infrastructure,” ministers said in joint written evidence to a parliamentary committee.
“We expect it to have an explicit mandate to tackle risk that the market currently cannot adequately finance,” Business Secretary Vince Cable, Energy Minister Chris Huhne and Economic Secretary Justine Greening told the Commons Environmental Audit Committee. “It will, thereby, catalyse further private sector investment and facilitate the entrance of new types of investor into green infrastructure.” Among the proposals on the table are ‘green bonds’.
They said the GIB’s impact “will be many times the scale of the public contribution”. The government has pledged £1bn (€1.15bn) to the bank, although critics such as the Aldersgate Group have said the bank will need up to £6bn.
The ministers said they want to “create an enduring institution which can re-invest the proceeds from its investments”. The government plans to complete its design and testing on the GIB proposals by Spring 2011.
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Source: Responsible Investor
Security, liquidity overtake returns as German investors' top priority
November 1, 2010--Security and liquidity have become the chief concerns for German institutional investors, with returns now secondary, says Union Investment.
Additionally, the importance of environmental and reputational risk rose in the wake of the BP oil spill in the Gulf of Mexico, the company said.
As part of its annual risk management survey - which covers more than 80 institutions with EUR360bn in assets under management - Union found that only 7% of respondents saw returns as a priority, down from three years ago when almost four times as many saw returns as one of the driving factors.
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Source: All Business
State Street wins 10-year admin contract from NEST
November 1, 2010--The UK National Employment Savings Trust (NEST) has hired State Street as its fund administrator, awarding the company a 10-year contract.
Additionally, the scheme has announced details of a number of investment mandates it will tender later this week, including a passive global equity fund, as well as exposure to UK gilts.
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Source: IP&E
99.9 Billion Euros Turned over at Deutsche Börse’s Cash Markets in October
N15.6 million trades executed on Xetra/ Total volume of 114.2 billion euros traded on all stock exchanges in Germany
ovember 1, 2010--: In October, 99.9 billion euros were traded on Xetra and on the floor at Börse Frankfurt – a decrease of 14 percent year-on-year (October 2009: 115.6 billion euros). Of the 99.9 billion euros, 93.5 billion euros were traded on Xetra, a decrease of 14 percent year-on-year (October 2009: 108 billion euros). 6.4 billion euros were traded on the floor, a decrease by 15 percent (October 2009: 7.5 billion euros).
Turnover in German equities on Deutsche Börse’s cash markets amounted to 80.7 billion euros, while foreign equities turnover stood at 3.2 billion euros. Xetra and the floor at Börse Frankfurt accounted for 98 percent of the transaction volume in German equities on all stock exchanges in Germany. 81 percent of foreign equities traded on stock exchanges in Germany were traded on Xetra and on the floor in Frankfurt.
In October, 15.6 million transactions were executed on Xetra, an increase of 5 percent against the same period last year (October 2009: 14.9 million).
According to the Xetra liquidity measure (XLM), Deutsche Telekom AG was the most liquid DAX blue chip in October with 9.74 basis points (bp) for an order volume of 100,000 euros. Deutsche Postbank AG was the most liquid MDAX stock with 4.22 bp. The most liquid ETF was DB X-TR.II-EONIA T.R. 1C with 0.32 bp. The most liquid foreign stock was Royal Dutch Shell with 13.04 bp. XLM measures liquidity in electronic securities trading on the basis of the implicit transaction costs. It is expressed in basis points (1 bp = 0.01 percent); a low XLM denotes high liquidity in a security.
Deutsche Bank AG was the DAX stock with the highest turnover on Xetra in October at 8 billion euros. Lanxess AG was the top MDAX stock at 518.3 million euros, while Balda AG led the SDAX stocks at 205.9 million euros and Aixtron AG headed the TecDAX at 716.9 million euros. At 1.3 billion euros, the iShares DAX was the exchange-traded fund with the highest turnover.
On all stock exchanges in Germany 114.2 billion euros were traded in October according to order book turnover statistics – a decrease of 12 percent compared year-on-year (October 2009: 130.1 billion euros).
Source: Deutsche Börse
Studie der Hochschule Konstanz auf Initiative von db x-trackers widerlegt Vorurteile gegenüber Short/Hebel-ETFs
November 1, 2010--In einer umfangreichen Studie hat die Hochschule Konstanz gezeigt, dass Privatanleger Short- und Hebel-ETFs in Deutschland sehr maßvoll einsetzen. „Die Ergebnisse legen nahe, dass Privatanleger in den überwiegenden Fällen wissen, welche Chancen und Risiken mit dem Einsatz von Short- und Hebel-ETFs verbunden sind“, sagt Leo Schubert, Professor für Betriebswirtschaftslehre in Konstanz, der die Studie geleitet hat. Schubert konnte erstmals Daten über Käufe und Verkäufe von Short- und Hebel-ETFs von der Mehrzahl der führenden Direktbanken in Deutschland auswerten. Zu den Teilnehmern der Studie, die von db x-trackers, dem ETF-Anbieter der Deutschen Bank, initiiert wurde, zählen die Mehrzahl der führenden deutschen Online-Brokerage-Institute. „Wir haben die Kritik ernst genommen, dass Short- und Hebel-ETFs nicht für Privatanleger geeignet seien.
Nun können wir erstmals zeigen, dass diese Produkte sehr wohl verstanden und risikobewusst eingesetzt werden“, sagt Thorsten Michalik, verantwortlich für db x-trackers. Insgesamt wurden 26.394 Käufe und anschließende Verkäufe von Short- und Hebel-ETFs zwischen dem 1.1.2008 und dem 1.4.2010 untersucht. In diesem Zeitraum handelten Privatanleger mit 39 verschiedene Short-und Hebel-ETFs von sechs ETF-Anbietern.
Die wichtigsten Ergebnisse im Einzelnen:
Haltedauer von Short/Hebel-ETFs ist meist kurz: Die im Rahmen der Studien untersuchten Short- und Hebel-ETF wurden überwiegend nur über einen begrenzten Zeitraum gehalten. Nach 15 Tagen waren bereits 50 Prozent, nach spätestens drei Monaten sogar schon 85 Prozent aller Engagements wieder beendet, „Wir haben seit Auflage unserer ersten Short- und Hebel-Produkte stets betont, dass diese sich vor allem zum kurzfristigen Einsatz eignen. Die Ergebnisse zeigen, dass dies auch so von Privatanlegern gesehen wird“, stellt Michalik klar.
Privatanleger schätzen Risiko realistisch ein: Auch die eingesetzte Summe bei Short oder Hebel-ETFs ist übersichtlich. 50 Prozent der privaten Investoren legten weniger als 5000 Euro an. Ein weiteres wichtiges Ergebnis der Studie ist, dass bei ETFs mit einem höheren Hebel deutlich weniger Kapital eingesetzt wird als bei nicht gehebelten Produkten. „Zudem nimmt das investierte Volumen auch mit zunehmender Haltedauer stetig ab“, fasst Professor Schubert zusammen. Alle Punkte sprechen für eine realistische Bewertung der eingegangenen Risiken durch die Anleger.
Extremwerte bei Renditen treten nur selten auf: Die Analyse der erzielten Renditen während der Haltedauer der Short- und Hebel-ETFs bestätigt den verantwortungsvollen Umgang von Privatanlegern mit diesen Produkten. In 90 Prozent aller untersuchten Fälle lagen die Renditen zwischen plus 20 und minus 22 Prozent nach Veräußerung des ETFs. Bemerkenswert ist, dass die Renditen bei ETFs mit Hebel weniger stark streuen als beim Short-ETF ohne Hebel. „Dieses Resultat ist überraschend, da die Hebelfunktion genau das Gegenteil erwarten ließ. Die deutlich verkürzten Haltedauern bei ETFs mit höherem Hebel scheinen hier ursächlich zu sein“, bemerkt Schubert. Zudem sprechen die Auswertungen dafür, dass Short-ETFs gezielt gekauft wurden, um Aktiengewinne abzusichern. Diese positiven Ergebnisse würden in diesem Fall Verluste mit Short-ETFs sogar noch ausgleichen.
Konzentration auf marktführende Produkte: Mehr als zwei Drittel der untersuchten Aktivitäten bezogen sich auf den Lyxor ETF LevDax, einen gehebelten ETF auf den Aktienindex Dax, sowie den db x-trackers ShortDax daily ETF, der die Wertentwicklung des DAX auf täglicher Basis invers abbildet. Diese ETFs sind mit einem Volumen von 213 Millionen beziehungsweise 586 Millionen Euro die größten Produkte in der jeweiligen Kategorie Hebel- und Short-ETFs (Stand 8. Oktober).
Die Ergebnisse der Studie belegen, dass der Markt für Short- und Hebel-ETFs für Privatanleger in Deutschland nicht mit dem entsprechenden Angebot in den USA verglichen werden kann. In den USA werden auch ETFs mit einem Hebel von bis zu vier angeboten, die auf ohnehin schon sehr volatilen Indizes basieren. Solche Produkte haben aufgrund ihrer hohen Preisausschläge viel Kritik auf sich gezogen. Die vorliegende Studie zeigt erwartungsgemäß, dass sich der Markt in Deutschland substantiell unterscheidet und von Anlegern auch realistisch eingeschätzt wird.
Source: db x-trackers
DB Global Equity Index & ETF Research : European Weekly ETP Review: Signs of better days ahead
October 29, 2010--Investment Outlook
As far as market rallies go, the week just passed continued to show positive signs of one materializing. At the very least, this is the case from a cash flow perspective, though asset prices seem to be following suit, at a slower pace. Though delicate it might be, ETF market indicators are pointing to a return of investors in the equity market, a move that is accompanied by shifting value themes within the asset class.
Four key indicators are causing us to conclude so:
Solid inflows consistently surpassing the indicative €1 billion mark for the third week in a row, a level that is commensurate with a bull ETF market.
Equity inflows, totaling over €4 billion in the last three weeks, characterized by solid directionality, reveal clear allocations in both a regional as well as a strategic themes.
Return of domestic European equity benchmarked allocations (Euro Stoxx 50, Stoxx 600 etc), following four months of drought, with over €2 billion since the beginning of September 2010.
Continued stalling gold inflows following the end of Q3’10, amounting to roughly €200 million for October 2010, compared to €500 million for September and €600 million in August.
The general market mood also continued to improve, with most of the major European equity indices gaining ground. The Euro Stoxx 50 index rose by 1.2%, the CAC 40 Index: was up by 1.1%, the DAX: index rose by 1.8% and the FTSE 100: was up by 0.7%. The Euro lost ground against the US dollar and fell by 0.16%, and gold (USD) saw a sizeable price drop of 2.9%. The demand in gold benchmarked ETFs is likely to be lagging due to shifting value themes in the equity market.
Following the Summer’s slow flow months, the ETF market is entering the last stretch of the year set to deliver strong growth. This is primarily driven by returning domestic equity investors as well as absence of significant outflows from one of the year’s biggest earners, gold ETFs.
Cash flow review
This week’s ETF cash flows totaled €1,232 million, slightly below those of last week’s. (€1,372 million). Asset class allocations favored equity, while fixed income experienced a moderate week and commodities experienced outflows, the first since the end of July 2010. Equity: inflows totaled €1,023 million (vs. €992 million inflow last week), fixed income received inflows of €342 million (vs. €344 million outflow last week) and commodities saw outflows of €121 million (vs. €17 million inflow in the previous week).
The overarching theme in the equity market is the return of investors to ETFs that track domestic European equity indices. Slightly over 50% of the week’s flows (€513 million) were allocated to European equity benchmarked ETFs for the week that ended on October 15 2010. This is the third consecutive week with significant European equity allocations. At the same time, cash flow allocations to emerging market (EM) benchmarked ETFs continued, albeit at a slightly slower pace than the preceding three weeks. Developed market (DM) investing is regaining its ground.
The big puzzle in the European market remains fixed income. While the European continent is traditionally a fixed income investor’s market, we have yet to see powerful and sophisticated investment themes – with the exception of €3.9 billion sovereign benchmarked ETF inflows during May and June – that compare to similar patterns in the US. Corporate bond benchmarked ETFs have received flows or just over €2 billion year to date.
While the ETF providers have been busy over the past year beefing up their fixed income product ranges with a number of more sophisticated products (such as short government, credit, sector) the vast majority of these products have not yet gathered assets that indicate that the market is embracing the asset class. The two notable exceptions have been sovereign and money market benchmarked ETFs.
Many theorize that market conditions have not been conducive for an uptick in fixed income ETF investing and should market conditions continue to improve, it will be interesting to see how investor adoption rates for fixed income ETFs might change. Gold products, which came to the European market long after fixed income, received €6.0 billion of inflows for 2010, while fixed income, excluding sovereign benchmarked ETFs, received a mere €2.4 billion for the same period.
The week that finished on October 15 2010 saw inflows of €342 million of fixed income inflows, with the largest beneficiary being money market ETFs (€146 million). Corporate bond benchmarked ETFs registered inflows of €92 million and sovereign benchmarked ETFs saw inflows of just €85 million.
New Product Launch and Listings Calendar
No new ETFs and ETCs were launched in Europe this week. However the continent’s cross-listing calendar experienced a very busy week with 59 new cross listings.
Switzerland benefited by most of the cross listing activity and it registered 49 newly cross listed ETFs. Deutsche Bank led the Swiss cross listing activity, by listing a broad spectrum of 24 sovereign, sector and credit benchmarked fixed income ETFs on the Swiss Stock Exchange. Amundi cross listed 24 of its ETFs on the same exchange, ranging from equity emerging market benchmarked ETFs as well as a variety of fixed income ETFs.
Lyxor cross listed 10 equity sector ETFs in France.
Rolling 30 day average turnover review
Total ETP turnover for the week rose by 0.9%, to €1.89 billion. Equity ETF turnover increased by 1.4% to €1.41 billion. Fixed Income ETF turnover: fell by 3.1`%, to €185 million. Commodity turnover rose by 2.2%, to €286 million.
Assets Under Management (AUM) roundup
The European ETP industry assets rose by 0.5% and finished the week at €212 billion. Equity market advances as well as healthy equity flows contributed to 0.8% increase of the European ETP AUM. However, the falling price of gold and lagging gold flows contributed a 0.4% fall. Fixed income with its marginal gains contributed 0.1% growth. Year to date, the European ETP AUM are up by a very healthy 24.6%, a growth that has primarily been trumpeted by strong inflows.
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Source: DB Global Equity Index & ETF Research
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