Global ETF News Older than One Year
Yet Another Blow to Modern Portfolio Theory
November 19, 2012--Modern Portfolio Theory is predicated on the ability to construct an efficient frontier based on returns, correlations, and volatility.
Each of these parameters needs to be accurate for the efficient frontier to be accurate. Since forecasting is tough, often historical averages are used. Since the next five or ten years is never exactly like the last 50 years, that method has significant problems. Apologists for modern portfolio theory claim that better efficient frontiers can be generated by estimating the inputs. Let’s imagine, for a moment, that this can actually be done with some accuracy.
There’s still a big problem. Volatility bumps up during adverse market conditions, as reported by Research Affiliates. And correlations change during declines—and not in a good way.
From the abstract of a recent paper, Quantifying the Behavior of Stock Correlations Under Market Stress:
view the Quantifying the Behavior of Stock Correlations Under Market Stress
Source: systematicrelativestrength.com/
Regulation by proxy for index providers-Deborah Fuhr
November 19, 2012--For index providers, the devil is in the detail following the unveiling of regulations designed for exchange trade funds and European Ucits funds.
At the start of the process, regulators set out to concentrate their attention on investment and systemic issues relating to ETFs.
Later they realised they needed to look at issues which affected Ucits funds in general, not solely ETFs. In July, the European Securities and Markets Authority published its guidelines. Its decision to broaden the debate further brought into focus a series of concerns about retail investment funds and the type of investments they could hold.
Source: Financial News
ETFs Precious Metals Weekly: Gold ETP Holdings Hit All-Time High on Fiscal Cliff and Greece Debt Fears
November 19, 2012--Global gold ETP holdings hit an all-time high last week.
Concerns the US may not be able to avoid going off the "fiscal cliff" at the end of the year and Greece may have trouble having its next bailout disbursement approved, caused investors to continue to build their gold ETP holdings as a hedge against worst case scenarios. Official data last week confirmed that the Eurozone is back in recession for the first time in three years. Despite the two-year extension given to Greece to meet its fiscal targets, uncertainty remains over how the funding gap resulting from this extension will actually be financed. The Eurogroup meeting this week will be closely watched to gauge the likelihood that Greece has its next disbursement agreed upon by the Troika and necessary national parliaments by the end of the month. Until Greece's disbursement clears these approvals and there are clear signs the US Congress can find a fiscal compromise, markets are likely to remain on edge and demand for perceived safe havens such as gold are likely to remain high.
Fed hints at further quantitative easing. The FOMC minutes from the October meeting revealed that the US Federal Reserve is considering adding to QE3 in the new year and is open to experimenting with new tools. The Fed chairman also cautioned in a speech that the nascent housing market recovery is fragile, with the implication that the market continues to need the Fed's support buying mortgage-backed securities. The Fed's commitment to further easing should help support precious metals as a hedge against potential debasement of the US dollar.
Johnson Matthey expect platinum and palladium to be in deficit this year. Johnson Matthey's much-anticipated interim review estimates the platinum market will move from surplus in 2011 to a deficit in 2012. The on-going disruption to mines in South Africa and low levels of metal recycling are holding back supply, while demand remains firm. The report also highlighted that rising vehicle production growth in Japan and the US and continuing substitution of platinum in both light and heavy duty diesel catalysts are also likely to drive the palladium market into a substantial deficit this year. The palladium price reacted strongly to the news, rising 4% after the release.
Visit www.etfsecurities.com for more info.
Source: ETF Securities
BlackRock shifts iShares' chief strategist to broader company role
November 19, 2012--Russ Koesterich was named chief investment strategist at BlackRock (BLK).
The position is new. Mr. Koesterich "will focus on communicating the firm's investment strategy and perspective on the markets and economy to investors," according to a news release.
Mr. Koesterich will report to Ken Kroner, senior managing director and global head of multiasset strategies, and will continue in his current role as global investment strategist for BlackRock's iShares business.
Source: Pensions & Investments
Index Industry Association appoints executive director
November 19, 2012--The Index Industry Association (IIA) has appointed Rick H. Redding as its first executive director.
The IIA also announced that Russell Index Group, Russell Investments has joined the association, following in the footsteps of Barclays and Nasdaq OMX Global index Group who both joined in June.
Rick Redding has spent most of his career in senior leadership roles with The CME Group, a leading provider of benchmark futures and options products and an innovator in futures trading. Rick held the post of managing director, products and services at CME. In this role he led global sales, product development, and strategic global growth initiatives. He played an integral part in the transition of CME’s ownership stake in Dow Jones Indexes to the S&P Dow Jones Indices joint venture. He also held senior positions in CME’s index products division.
Source: FTSE Global Markets
Are Hedge Fund ETFs all they Seem?
November 19, 2012--Hedge fund exchange-traded funds at first glance appear to be a contradiction in terms.
ETFs have built their reputation on low fees, transparency and liquidity. Hedge funds, by contrast, find themselves under increasing pressure for offering exactly the opposite. But a combination of the two could be a winner – the appeal of hedge fund exposure in an environment of shrinking returns wrapped in the safety and security of an ETF.
Source: Albourne Village
EU, Japan Warn Against New US Swaps Rules
October 18, 2012--In a show of unity, finance authorities from the European Union, the U.K., France and Japan pressured a key U.S. counterpart to avoid rushing through proposals on the trading of swaps between U.S. and foreign trading firms.
The finance chiefs of the four markets warned that the U.S. Commodity Futures Trading Commission's proposals, if handled wrongly, risk weakening the global trade of derivatives.
Source: Wall Street Journal
World Bank Online: New Report Examines Risks of 4 Degree Hotter World by End of Century
Highlights:
New World Bank-commissioned report warns the world is on track to a "4°C world" marked by extreme heat-waves and life-threatening sea level rise.
Adverse effects of global warming are "tilted against many of the world's poorest regions" and likely to undermine development efforts and goals.
Bank eyes increased support for adaptation, mitigation, inclusive green growth and climate-smart development.
November 18, 2012--Like summer's satellite image of the melting Greenland ice sheet, a new report suggests time may be running out to temper the rising risks of climate change.
"Turn Down the Heat: Why a 4°C Warmer World Must be Avoided," (pdf) (eBook version) warns we’re on track for a 4°C warmer world marked by extreme heat-waves, declining global food stocks, loss of ecosystems and biodiversity, and life-threatening sea level rise.
Moreover, adverse effects of a warming climate are “tilted against many of the world's poorest regions” and likely to undermine development efforts and global development goals, says the study by the Potsdam Institute for Climate Impact Research and Climate Analytics, on behalf of the World Bank. The report, urges "further mitigation action as the best insurance against an uncertain future."
view the World Bank report-Turn Down the Heat: Why a 4°C Warmer World Must be Avoided
Source: World Bank
Strategic alliances change face of industry
November 17, 2012--Index providers and stock exchange operators are forging new alliances as the fortunes of these two sectors become more intertwined and the influence of index-linked instruments and investment vehicles grows.
Exchange traded funds accounted for almost one-fifth of US equity trading last year, illustrating the vital role that index-linked investment vehicles now play in the activities of exchange operators.
Source: FT.com
FTSE Deal Prompts LSE Management Reshuffle
October 17, 2012--The London Stock Exchange (LSE.LN) has announced two senior management changes as part of its integration of FTSE, the global index provider it acquired in full in December.
David Lester, an 11-year LSE veteran and group director of information services, will take on the newly created role of group director of corporate strategy, the LSE said this morning.
He will continue in his other roles as chairman of both FTSE and Turquoise, the exchange's pan-European trading platform, as well as chairman of Proquote, its market data provider.
Mark Makepeace, chief executive of FTSE, will move into Lester's role to become group director of information services, incorporating both FTSE and the LSE Group's information services businesses. Makepeace, who will retain his role of FTSE chief, will report directly to Xavier Rolet, LSE chief executive.
Source: Wall Street Journal
