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ETF Landscape: European STOXX 600 Sector ETF Net Flows, week ending 11-Jun-10
June 16, 2010--Last week saw US$19.1 Mn net inflows to STOXX 600 sector ETFs. The largest sector ETF inflows last week were in Retail with US$19.0 Mn and Food & Beverage with US$18.6 Mn while Basic Resources experienced net outflows of US$76.9 Mn.
Year-to-date, Media has seen the largest net inflows with US$301.6 Mn net new assets, followed by Industrial Goods & Services with US$86.9 Mn. Basic Resources sector ETFs have had the largest net outflows with US$312.2 Mn YTD. In total, STOXX 600 sector ETFs have seen US$308.2 Mn net outflows YTD.
The assets invested in the ETFs are greater than the open interest in the corresponding futures contract in 17 out of 19 sectors.
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Source: Global ETF Research & Implementation Strategy Team, BlackRock
EDHEC-Risk’s annual European ETF Survey sees room for growth in spite of a maturing market
June 16, 2010--EDHEC-Risk Institute has announced the results of the EDHEC European ETF Survey 2010, which presents the results of a comprehensive survey of 192 institutional investors, asset managers and private wealth managers conducted between January and March 2010.
On the whole, the results of the survey suggest that, as a consequence of strong growth, the industry has entered a phase of increased maturity. As ETFs are now very widely used, investors are embracing more advanced ways of trading and using ETFs, such as OTC trading and securities lending, and the positive impact of ETFs on the market as a whole, including their underlying assets and other related instruments, is being felt by an increasing number of market participants.
Despite this maturity, there is still room for growth. In particular, survey respondents see a need for new products on emerging markets and alternative asset classes. Likewise, ETFs are still used mostly in static strategies and on broad market indices; their potential contribution to dynamic asset allocation and to allocation strategies in precisely defined market segments or styles is not yet fully exploited.
Among the key findings of the 2010 survey:
1. ETFs are widely used and are becoming even more important to investors
Satisfaction rates have reached astonishing highs of about 90% for equity, government bond, and infrastructure ETFs, and above two-thirds for other ETF products. Dissatisfaction with corporate bond, real estate, and hedge fund ETFs, reported after the financial crisis and evident in last year’s survey, is much less in evidence. ETFs are particularly popular in the equity (96%) and commodity (80%) sectors. As the market has matured, the percentage of investors using ETFs is increasing at a much slower rate than in the past, but ETFs account for a fast-growing share of the portfolio assets of those who do use them. Indeed, assets in ETF investment account for at least one-fifth of total investment in each asset class. So, although the percentage of investors who use ETFs may have levelled off, the intensity has not, as shown by the significant growth of the most recent year.
2. New trends in the use of ETFs have emerged First, the number of investors who reported that they trade more than 90% of their ETF investments on OTC markets rose from 6% in 2009 to 12% in 2010. Our 2010 respondents also report an increase in the number of their trading counterparties. In addition to these changes in the ways ETFs are traded, the use of advanced products such as options on ETFs has grown in the last twelve months. In addition, there is a broader consensus on the preferred means of replicating indices when constructing an ETF. Pure replication ETFs are the favourite, but interest in synthetic replication ETFs is growing; statistical replication, on the other hand, is falling out of favour, a trend that, despite the 2008 financial crisis, which led to a slight dip in the popularity of synthetic replication, has been taking shape over the last four years.
3. ETFs provide investors with information and increase market efficiency Investors use ETFs as sources of information on market developments and state that they observe improvements in market efficiency after the introduction of ETFs. These results dovetail with the evidence found by much of the literature; that is, that the introduction of ETFs has improved the price efficiency in the spot and future markets.
4. Future developments in the ETF industry For traditional asset classes, investors would like to have a broader choice of relatively risky products. For example, 52% of investors would like to see the development of emerging market equity ETFs; 37% and 34% would like to see more emerging market bond ETFs and high yield bond ETFs. Although 80% of investors who invest in commodities allocate to commodity ETFs, 39% of respondents would like to see these ETFs developed still further. New products such as currency ETFs and hedge fund ETFs are also on investors’ wish-lists.
5. ETFs are mainly used as static asset allocation vehicles ETFs are used largely for passive holdings of broad market indices. 70% of all ETF users, for example, report that they frequently rely on ETFs to obtain broad market exposure; and for more than 60% of the respondents ETFs are predominantly long-term or buy-and-hold investments. By contrast, fewer than 50% of respondents state that they frequently rely on ETFs for short-term investments or for exposure to specific market sub-segments. And the large majority of investors who take a core-satellite approach to portfolio management report that they rely mainly on broad market indices, especially in the core. But the wide range of ETFs for sub-categories and styles is left partly unused.
6. Investor views of ETFs and of other indexing vehicles Although futures rival ETFs, ETFs are seen as clearly superior to traditional index funds on all available quality criteria. For investors, the main advantages of ETFs are the ease with which they can be used and the wide product range. Although there are more than 800 ETFs or ETF-like products offered in Europe (Fuhr and Kelly 2009) and growth in the use of ETFs has stabilised, the ETF industry is still developing. As investors have begun using ETFs in a more sophisticated fashion (OTC trading of ETFs, for example) and embraced innovative products (ETFs on new asset classes, leveraged ETFs, and so on), it is clearly in the interests of the ETF industry to continue making new products available and proposing innovative ways to use them.
This survey was sponsored by Amundi ETF.
view the EDHEC European ETF Survey 2010
Souce: EDHEC
Eurex to Expand its Commodity Index Derivatives Offering
June 16, 2010--The international derivatives exchange Eurex announced today that it will be introducing six additional commodity index futures on 28 June. The new futures are based on the Dow Jones UBS commodity index family's sub-indices: softs, grain, precious metal, ex-energy, petroleum and livestock. They complement the futures listed since March 2009 based on the Dow Jones UBS composite index and the three sub-indices agriculture, energy and metal. The entire range of sub-indices of the Dow Jones UBS family will be covered by futures as from the start of trading.
“We are expanding our commodity index derivatives in response to our customers' increased interest in exchange-traded index products in this asset class,” said Peter Reitz, member of the Eurex Executive Board. “Institutional investors are investing more and more in commodities for better portfolio diversification. Our cash-settled index futures are a safe and easy instrument for such investments.”
All new Eurex futures are based on the excess return version of the indices; they are denominated in US dollars and are settled in cash. They have quarterly expiration dates. Two market makers are responsible for liquidity in the order book and in OTC transactions.
Listed Eurex contracts are a good alternative to OTC swaps due to their low nominal value, high price transparency, easy settlement, and mitigation of counterparty risk. They enable better asset allocation within investment funds and cost-effective set-up of risk positions; they are also an efficient trading tool, for example, for long/short strategies.
Since the start of trading, more than 50,000 contracts have been traded in the four Dow Jones UBS index futures currently listed; open interest currently stands at just under 7,000 contracts.
Source: Eurex
Amundi launches three new products, one of which tracks the S&P 500® index
June 16, 2010--Amundi ETF is pursuing its development by listing three new products tracking the S&P 500®, the NASDAQ-100® and the FTSE MIB® on NYSE Euronext in Paris.
The ETF tracking the S&P 500® offers European investors access in Euros to this index composed of the 500 largest stocks on the US market. With a TER (Total Expense Ratio) of only 0.15% the Amundi ETF tracking this flagship US index is offered at the lowest cost on the market.*
The ETF tracking the NASDAQ-100® Index enables investors to benefit from an exposure, through a single transaction, to the 100 Non-Financial stocks listed on the NASDAQ® including technological, Internet and IT stocks.
The ETF tracking the FTSE MIB® Index offers a diversified exposure to the 40 leading stocks on the Italian market through a single transaction.
These three listings reinforce the equity offering of Amundi ETF which now comprises a total of 82 products. Amundi ETF ranks 4th in Europe in terms of net new money collected since the beginning of the year, reinforcing its development strategy.**
Valérie Baudson, Managing Director of Amundi ETF comments: “The ETF tracking the S&P 500® is a must have investment vehicle for European investors seeking a simple way of accessing the US equity market. Amundi ETF offers this product at the lowest cost on the market.”*
Thierry Ancona, Head of Sales Continental Europe CA Cheuvreux comments: “The launch of these three new ETFs confirms the ambition of the Crédit Agricole group to increase its presence on an ETF market experiencing strong growth. The position of CA Cheuvreux on NYSE Euronext in Paris and alongside international institutional investors are additional assets that contribute to our strategy.”
Scott Ebner, Senior Vice President, Exchange Traded Products at NYSE Euronext declares: “We are very happy to welcome these three new products from the Amundi ETF range on NYSE Euronext in Paris. NYSE Euronext’s offer in terms of ETFs is increasingly diversified with a growing interest from investors.”
Further information about Amundi ETF can be found on the amundietf.com website.
*At the time of launch of the fund. Average AUM weighted TER of European peer group.
** at the end of May 2010 – source Amundi IS and Deutsche Bank report.
Source: NYSE Euronext
HSBC ETFs has listed one new ETF on NYSE Euronext’s Paris market today:
June 16, 2010--NYSE Euronext is pleased to announce that HSBC ETFs has listed one new ETF on NYSE Euronext’s Paris market today:
Listing date:16/06/2010
ETF name:HSBC MSCI JAPAN ETF
ETF ISIN:IE00B5VX7566
ETF Symbol:MJP
NYSE Euronext now has 534 listings of 486 ETFs based on more than 300 indices. So far this year, 37 ETFs have been listed on NYSE Euronext’s European markets.
Source: NYSE Euronext
OECD Economic Survey of the Netherlands 2010
June 16, 2010--Chapter 1. Securing fiscal sustainability and boosting potential growth after the crisis
The economy contracted sharply during the crisis but began to recover slowly from mid 2009. Unemployment rose by less than might have been expected, partly as the labour market was more overheated prior to the crisis than realised at the time. Strict employment protection legislation and the government’s continued focus on active labour market policies also played a role.
In this context, the most pressing challenge for the near future is to prevent the cyclical increase in unemployment from becoming structural. As in other OECD countries, the upturn is still supported by exceptional fiscal and monetary stimulus. The fiscal policy response was generally well designed, but as a result the deficit widened significantly and fiscal sustainability deteriorated. As economic growth strengthens, the government coming in after the June 2010 elections will be confronted with the task of consolidating public finances without putting the recovery at risk. The most crucial longer-term challenges are to secure fiscal sustainability and raise potential growth.
Chapter 2. Making the pension system less vulnerable to financial crises
The Dutch occupational pension system has been successful in securing high asset accumulation to fund generous pension promises. However, for the second time in this decade the pension system has been affected by a financial crisis and many pension funds’ assets fell below levels needed to meet regulatory requirements. Insufficient funding raises solvency issues, which could eventually lead to large fiscal costs in case of bail-outs. In response to the crisis, most funds were required by the regulator to draw up recovery plans to restore their funding over five years. This has raised concerns that the adjustment required by the regulator is unnecessarily sharp, with possibly adverse macroeconomic implications. On the other hand, OECD simulations indicate that under current policies, it is unlikely that funding rates will be secured that enable the funds over the long term to fulfil their promises of a replacement rate of up to 80% of average wages. This raises the challenge of implementing parametric changes that secure pension benefits without large detrimental effects on intergenerational equity and growth. Occupational pensions are transferable, which enhances labour market mobility. But it is often very difficult for workers to assess how one pension scheme compares to another, posing practical barriers to mobility that should be eased.
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Source: OECD
NYSE Arca Europe Expands Service Offering Into Eastern Europe
June 16, 2010--NYSE Arca Europe, NYSE Euronext’s European Multilateral Trading Facility (MTF), today announced its expansion into trading the leading blue chip securities listed on Prague Stock Exchange and Budapest Stock Exchange.
From today, NYSE Arca Europe will expand its product range to include constituents of the following Eastern European indices:
BUX Index (Budapest Stock Exchange)
PX Index (Prague Stock Exchange)
Trades in these securities will be cleared by EuroCCP.
NYSE Arca Europe is NYSE Euronext's pan-European Multilateral Trading Facility (MTF), providing customers with low-cost, high-speed access to the most liquid European stocks from 13 countries via its ultra-low latency Universal Trading Platform. Today’s announcement follows the recent expansion of NYSE Arca Europe’s securities coverage to include access to the 100 most liquid U.S. equities featuring 86 NYSE listed companies and 14 other listings, creating the first truly transatlantic trading platform.
Virginie Saade, Head of NYSE Arca Europe, said:
“The expansion of our service offering into the PX Prague Stock Index and the BUX Index reflects the growing interest from our customers to access this new market segment. The addition of these markets will help enable our customers to maximize their trading opportunities.”
Source: NYSE Euronext
Osborne abolishes FSA and boosts Bank
June 16, 2010--George Osborne moved to redress what he described as the spectacular regulatory failure of the City, announcing the abolition of the Financial Services Authority and a sweeping increase in the Bank of England’s powers.
Mervyn King, the Bank’s governor, will become one of the most powerful central bankers in the world, with a new remit to prevent the build-up of risk in the financial system in addition to his monetary policy role.
Mr King told a City audience at Mansion House on Wednesday night that his new role in enforcing financial stability was to “turn down the music when the dancing gets a little too wild”.
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Source: FT.com
Spain to reveal bank ‘stress tests’ results
June 16, 2010--Spain’s central bank has thrown down the gauntlet to bank regulators elsewhere in Europe, saying it plans to publish the results of “stress tests” on the country’s financial institutions in the near future to clear up doubts about Spain’s banking system.
Spanish officials and bankers believe that international investors and speculators are harbouring exaggerated fears about the potential problems of Spanish banks, when the banks of other countries are often weaker than Spanish lenders or have already been bailed out with massive injections of government money.
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Source: FT.com
ECB tells ABS industry to reform
June 16, 2010--A senior European Central Bank official on Wednesday expressed his frustration at the asset-backed securitisation industry’s slowness in implementing meaningful reform
Speaking at an industry conference in London, José Manuel González-Páramo, a member of the central bank’s executive board, reiterated that the 20 largest euro area banking groups have about €800bn of long-term debt outstanding that will need to be refinanced between May 2010 and the end of 2012.
“Against this background, securitisation can potentially play a vital role, and thereby strongly support the financing of the economy,” Mr González-Páramo said.
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Source: FT.com
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