Global ETF News Older than One Year
IMF-How Illiquid Open-End Funds Can Amplify Shocks and Destabilize Asset Prices
October 4, 2022--Mutual funds holding hard-to-sell assets but offering daily redemptions can spark volatility and magnify the impact of shocks, especially in periods of market stress
utual funds that allow investors to buy or sell their shares daily are an important component of the financial system, offering investment opportunities to investors and providing financing to companies and governments.
Open-end investment funds, as they are known, have grown significantly in the past two decades, with $41 trillion in assets globally this year. That represents about one-fifth of the nonbank financial sector's holdings.
These funds may invest in relatively liquid assets such as stocks and government bonds, or in less-frequently-traded securities like corporate bonds. Those with less-liquid holdings, however, have a major potential vulnerability. Investors can sell shares daily at a price set at the end of each trading session, but it may take fund managers several days to sell assets to meet these redemptions, especially when financial markets are volatile.
Source: IMF.org
Crypto inflows defy crash in fund values
October 3, 2022--Investor interest in bitcoin and other alternatives remains strong despite a torrid market performance.
In the eyes of many, cryptocurrencies defy convention merely by existing, backed as they are by nothing more substantive than lines of computer code.
But, despite a crash in their value in recent months, the digital tokens have continued to attract investment via exchange traded products.
Typically, humans, being herd animals, will often show a tendency to pile into financial assets that are rising in value, and to run for the hills when valuations are falling - ignoring the logic of arguments to buy in at low prices.
Source: ft.com
Thematic funds pause for breath after market setbacks
October 3, 2022--Product launches are becoming more esoteric but inflows have slowed for many special categories
By supporting investment in areas such as healthcare, technology and clean energy, a growing number of exchange traded funds promote themselves as delivering rewards to both society and investors.
But the chequered recent performance of many thematic funds has provoked a reappraisal of investor commitment to this expanding investment space.
Source: FT.com
Russia crisis challenges ETF sector's 'cockroach' status
October 3, 2022--ETFs have built a reputation for being able to operate through any emergency-until now
Just days after Russia launched a full-scale invasion of Ukraine on February 24, stock exchanges around the world called time on the trading of Russia-focused exchange traded funds.
As Vladimir Putin's missiles hit and his ground troops advanced, one by one the major exchanges halted dealing activity. First came the bourses in Europe, quickly followed by the US. By March 3, the market for Russia ETFs was effectively closed.
Source: FT.com
ETFGI reports ESG ETFs listed globally gathered net inflows of 2.74 billion US dollars during August 2022
September 29, 2022--ETFGI, a leading independent research and consultancy firm covering trends in the global ETFs/ETPs ecosystem, reported today that Environmental, Social, and Governance (ESG) ETFs listed globally gathered net inflows of US$2.74 billion during August, bringing year-to-date net inflows for 2022 to US$54.15 billion which is much lower than the US$99.84 billion in year-to-date net inflows gathered in 2021.
During the month, total assets invested in ESG ETFs and ETPs decreased by 3.1% from US$478.89 billion at the end of July 2022 to US$463.95 billion, according to ETFGI's August 2022 ETF and ETP ESG industry landscape insights report, the monthly report which is part of an annual paid-for research subscription service. (All dollar values in USD unless otherwise noted.)
Highlights
ESG ETFs listed globally gathered net inflows of $2.74 Bn during August 2022.
YTD net inflows of $54.15 Bn in 2022 are the 3rd highest on record, after YTD net inflows of
$99.84 Bn in 2021 and YTD net inflows of $66.05 Bn in 2020.
3rd month of consecutive net inflows.
Assets of $464 Bn invested in ESG ETFs and ETPs industry at the end of August 2022.
Source: ETFGI
World Economic Forum-Chief Economists Outlook: September 2022
September 28, 2022--The September 2022 edition of the Chief Economists Outlook launches at a time of significant economic danger. Inflation has surged to levels not seen in a generation and expectations for growth have been pared back in all regions.
Real wages and consumer confidence are in freefall, adding further headwinds to growth and even raising the prospect of social unrest. Domestically and globally, we are in uncharted waters. As our latest survey of Chief Economists makes clear, there are painful months ahead, as well as pressing challenges to bolster the medium- and long-term resilience of economies and societies.
Source: World Economic Forum
IMF Fintech Note-Regulating the Crypto Ecosystem: The Case of Stablecoins and Arrangements
September 26, 2022--Summary:
Stablecoins have experienced periods of rapid growth, accelerated links with traditional finance. Without proper regulation, contagion risks to wider financial sector will increase. Global regulation for stablecoins should be comprehensive, consistent, risk-based, flexible, and focus on their structural features and use.
Requirements on stablecoins should cover the entire ecosystem and all its key functions, and there should be additional oversight for systemic stablecoin arrangements. In markets where risks are growing quickly, authorities should take immediate action by using all the tools at their disposal. This note provides key elements that should feature in any regulatory arrangement. For effective implementation, domestic and international collaboration are key.
Source: imf.org
IMF Fintech Note-Regulating the Crypto Ecosystem: The Case of Unbacked Crypto Assets
September 26, 2022--Summary:
Unbacked crypto assets are the oldest and most popular type of crypto assets, relying not on any backing asset for value but instead on supply and demand. They were originally developed to democratize payments but are mostly used for speculation.
Crypto assets were designed to disintermediate financial services, but centralized entities, such as exchanges and wallet providers, offer key functions to users and sustain the necessity of trust in one or several entities.
At present, many of these entities are not covered by existing conduct, prudential, or payment regulations and can generate risks to market integrity, market conduct, and potential financial stability. We recommend that global bodies work to develop common taxonomies that can inform global and cross-sectoral standards while improving data insights. Standards should be risk-based, with greater requirements on entities and activities that generate more risk. Crypto asset service providers that deliver core functions and generate key risks should be licensed, registered, or authorized.
Source: IMF.org
IMF Working Paper-OPEC and the Oil Market
September 16, 2022-Summary:
This paper studies the historical importance of OPEC for oil price fluctuations. An event-study approach is used to identify the effects of OPEC announcements on oil price fluctuations. Results show that price volatility is higher than typical around OPEC meetings. Also, members' compliance, a proxy for credibility, has strongly fluctuated over time.
An ordered multinomial logit framework identifies the main factors that explain OPEC's decisions to cut, maintain, or boost members' oil production and is able to successfully predict OPEC meeting outcomes 66 percent of the time, between 1989 and 2019. Cyclical oil price fluctuations (as opposed to persistent shifts in levels) drive OPEC's decisions, suggesting that OPEC's objective is to stabilize the oil price rather than countering fundamental shifts in demand and supply. Low OPEC's market share reduces the probability of a production cut. Finally, the transparency of OPEC's statements has modestly improved between 2002 and 2019.
Source: imf.org
IMF-Stress Testing the Global Economy to Climate Change-Related Shocks in Large and Interconnected Economies
September 16, 2022--Summary:
We stress test the global economy to extreme climate change-related shocks on large and interconnected economies.
Our analysis (i) identifies large and interconnected economies vulnerable to climate change-related shocks; (ii) estimates these economies' external financing needs-at-risk due to these shocks, and (iii) quantifies the spillovers to the global economy using a global network model. We show that large and interconnected economies vulnerable to climate change could trigger a drain of $1.8 trillion in international reserves (2 percent of 2019's global GDP). Domestic and multilateral macroeconomic policies can help reduce these global lossess to about $0.8 trillion. The scenario highlights the importance of considering global spillovers when assessing the impact of climate change-related shocks.
Source: IMF.org
