Global ETF News Older than One Year
DB-Synthetic Equity & Index Strategy-Global-2012 ETF Review & 2013 Outlook-Record inflows drive global ETP assets to near $2 trillion
January 11, 2013--Global ETFs cross $1.7 trillion mark and ETC/Vs reach $157bn in assets
Global ETF assets up by 30% and beyond the $1.7 trillion mark in 2012
Global ETF assets grew to $1.76 trillion during 2012 registering close to 30% YoY growth.
About 18% of it came from new cash flows (+$249bn), while the remaining 11% came from asset price increases. Global growth was led by the US ETF market that saw record inflows of $174bn in 2012. The US, Europe, Asia-Pac, and RoW regional ETF assets closed the year at $1.21 trillion (+29%), $333bn (+24%), $136bn (+50%), and $72bn (+29%), respectively. Global ETP assets grew by 28% to $1.91 trillion in the same period.
ETP Investors ventured back into riskier asset classes during 2012
The main flow trends among long only global ETP flows suggest that investors embarked on a cautious quest for growth and yield last year, in an environment that has been characterized by sluggish growth, low rates, and the threat of market shocks. Among equity products, the US (+$64.9bn), China (+$24.9bn), EM Broad (+$28.0bn), and Dividend (+$14.3bn) were the favorite ones; within the fixed income space Investment Grade (+$42.7bn, mostly Corporates) and High Yield (+$16.6bn) were the chosen ones; while in the commodity space investors sought hard currency alternatives in Precious Metals (+$11.6bn, mostly Gold)
2012 saw a very fluid competitive landscape in all regions
In the US, ETFs continue to take market share away from mutual funds, especially in equities. Since 2006, mutual funds have seen over $400bn outflows while ETFs have seen over $500bn inflows in the equity space. Among ETF providers, fierce competition has ignited a price war and multiple actions are being taken; in some cases with success, but in others not really.
In Europe the securities market regulator published long-awaited updated guidelines for ETF issuers. The regulatory playing field is level between different replication methods, however ongoing investor preference for physical replication, as evidenced by market share, is prompting issuers of synthetic ETFs to convert or issue physically replicated ETFs alongside existing issues.
Asia Pac is a more benign environment for ETF start-ups and new products, evidenced by the fact that inflows into new products in Asia represented about 62% of the cash flows compared to only 5% and 22% in the US and Europe, respectively. We believe that China has the largest growth potential in the ETF space given its opportunities for new providers and products.
We target a 23% growth for Global ETF/P assets in 2013 driven by the US
We project 23% asset growth for the Global ETF industry during 2013. This breaks down into 14% or $260bn growth from new cash flows, and 9% from price appreciation. This growth should put the industry well into the $2 trillion land at about $2.16 trillion by the end of 2013. We expect the US ETF market to be the major contributor with similar asset (23%) growth and inflows in the vicinity of $185bn. We also expect ETPs to experience a similar growth than ETFs and reach about $2.35 trillion by the end of the year.
Source: Deutsche Bank - Synthetic Equity & Index Strategy - Global
IOSCO Consults on Financial Benchmarks
January 11, 2013--The International Organization of Securities Commissions (IOSCO) published today a Consultation Report on Financial Benchmarks, which seeks comments from the public on policy issues arising from the work of its Board Level Task Force on Financial Market Benchmarks.
The Consultation Report discusses concerns regarding the potential inaccuracy or manipulation of Benchmarks and identifies Benchmark-related policy issues across securities and derivatives and other financial sectors including:
The appropriate level of regulatory oversight of the process of Benchmarking;
Standards that should apply to methodologies for Benchmark calculation;
Credible governance structures to address conflict of interests in the Benchmark setting process within the reporting financial institutions as well as in the oversight bodies; and
The appropriate level of transparency and openness in the Benchmarking process.
view the IOSCO-Financial Benchmarks Consultation Report
Source: IOSCO
FIF December 2012 Market Share and Market Dynamics Executive Summary
January 10, 2013--The December 2012 FIF Market Share and Market Dynamics Reports-Executive Summary is now available.
Source: Financial Information Forum (FIF)
Emerging Markets kicks off benchmark transitions
January 10, 2013--In the first of a series of moves designed to lock in high-quality benchmarks at lower costs for shareholders of 22 Vanguard index funds, Vanguard Emerging Markets Stock Index Fund recently began its two-step transition to a new target index, the FTSE Emerging Index.
The fund now tracks a temporary FTSE benchmark, the FTSE Emerging Transition Index, and will complete the transition to its permanent benchmark later this year.
The transition is part of a broader move, announced in October, to change benchmarks for 6 Vanguard international stock index funds to existing FTSE indexes and for 16 U.S. stock and balanced index funds to indexes developed by the University of Chicago's Center for Research in Security Prices (CRSP). The transition from the previous benchmarks for these funds is being staggered over a number of months, with completion expected by mid-2013.
Last year, Vanguard struck long-term agreements with CRSP and FTSE providing cost certainty in an environment of escalating licensing fees. It negotiated licensing agreements for these benchmarks that it expects will deliver significant value to its index fund shareholders and lower expense ratios over time.
Source: Vanguard
OECD-Strengthening Euro Area banks
January 10, 2013--Big changes are needed to strengthen the capital positions of euro area banks
European banks remain at the heart of the euro area crisis. Despite actions to strengthen banks and build a banking union, confidence in the euro area banking system remains weak, and is likely to remain so until underlying concerns over low capitalisation of some banks are addressed.
Low bank capitalisation persists in many countries despite an EU requirement that banks reach in 2012 a ratio of a minimum 9% of the best quality “Core Tier-1” capital to risk-weighted assets, in excess of the current international requirements.
Source: OECD
Investors flock to ETPs in droves in 2012
January 10, 2013--BlackRock's iShares business led the global industry in 2012 by capturing US$85.3 billion in new flows of the record-breaking $262.7 billion global exchange traded products (ETP) market flows.
All regions contributed to iShares growth. The iShares US product line led the way with a record $61 billion of new assets in 2012, surpassing the previous record for US iShares ETPs of $59.1 billion in 2007. In Europe, the business captured 56% of all new money entering European ETPs, recording $18.3 billion in net new flows. The iShares Canada business also had a strong year, with its assets under management (AUM) increasing to $42 billion, as the broader Canadian market posted the second highest rate of growth in ETF assets of any region for 2012.
iShares global AUM reached $758.6 billion as of December 31, 2012.
Source: Asia Asset Management
Investor compass rotating towards EM Funds
January 10, 2013--Janaury 18, 2013--Emerging Markets Equity and Bond Funds maintained their strong start to the New Year during the second week of January, absorbing another $7.2 billion between them and taking their combined inflows for the first 16 days of 2013 over the $18 billion mark.
During the same period last year they had taken in just over $4 billion.
The flows in Emerging Markets Equity Funds helped all EPFR Global-tracked Equity Funds outgain their Bond Fund counterparts for the fifth straight week. The margin was, however, much slimmer than the previous week’s $15.6 billion gap in favor of Equity Funds. Those funds took in a net $7.19 billion during the week ending Jan. 16, with roughly 20% of those flows going to Dividend Equity Funds versus 8% the previous week, while Bond Funds attracted a 10 week high of $6.95 billion.
Equity Funds did attract retail money for the second week running, the first time that has happened since the second half of April, 2011.
Visit http://www.epfr.com for more info
Source: EPFR
Credit Suisse agrees to sell ETF business to BlackRock
In a strategic move, Credit Suisse announces the sale of its ETF business
January 10, 2013--Credit Suisse today announced that it has signed an agreement to sell its exchange traded funds (ETF) business to BlackRock, Inc. (BlackRock).
This is an important strategic step in an industry that requires significant scale, and allows Credit Suisse to realize value in a business successfully built over many years.
The sale is part of Credit Suisse’s strategic divestment plans that were announced on July 18, 2012. It comprises Credit Suisse’s ETF business with assets under management of CHF 16.0 billion as of November 30, 2012. The transaction is subject to customary closing conditions, including regulatory approvals and is expected to complete by the end of the second quarter of 2013. The terms of the deal are not being disclosed.
Source: Credit Suisse AG
IMF Working paper-A Modern History of Fiscal Prudence and Profligacy
January 9, 2013--Summary: We draw on a newly collected historical dataset of fiscal variables for a large panel of countries-to our knowledge, the most comprehensive database currently available-to gauge the degree of fiscal prudence or profligacy for each country over the past several decades.
Specifically, our dataset consists of fiscal revenues, primary expenditures, the interest bill (and thus both the primary and the overall fiscal deficit), the government debt, and gross domestic product, for 55 countries for up to two hundred years. For the first time, a large cross country historical data set covers both fiscal stocks and flows. Using Bohn’s (1998) approach and other tests for fiscal sustainability, we document how the degree of prudence or profligacy varies significantly over time within individual countries. We find that such variation is driven in part by unexpected changes in potential economic growth and sovereign borrowing costs.
view the IMF Working paper-A Modern History of Fiscal Prudence and Profligacy
Source: IMF
The Eurozone Debt Crisis: 2013 Could Be A Watershed Year
January 9, 2013--After more than three years of economic, financial, and budgetary stress in the European Economic and Monetary Union (eurozone), especially on its so-called "periphery"' some signs of stabilization emerged in the latter half of 2012.
Is this a sign that the financial and economic troubles leading to the rating downgrades of 12 of the 17 eurozone member states since the onset of the crisis may have run their course? We believe that 2013 could be a watershed year for the eurozone debt crisis. It could mark the start of the region sustainably overcoming the market volatility and fragmentation that has affected it over the past few years. It could also see the return of some so-called "program countries"--member states that have borrowed from the European Stability Mechanism (ESM) or the European Financial Stability Facility multilateral loan programs--such as Ireland and Portugal, to more substantial primary issuance in the capital markets.
Source: Standard & Poor's
