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First U.S.-Listed Hedge Fund Replication Exchange-Traded Fund Celebrates Three-Year Anniversary
IndexIQ’s QAI launched an asset class when it was listed on NYSE Arca in March of 2009; brought liquid, transparent hedge strategies to the ETF world
Fund has gathered $200 million in AUM and remains a flagship of IndexIQ’s ETF family
March 28, 2012--The IQ Hedge Multi-Strategy Tracker ETF (NYSE Arca: QAI), the first U.S.-listed hedge fund replication Exchange-Traded Fund, celebrated its three-year anniversary on March 25, 2012, the fund’s sponsor, IndexIQ, has announced.
We launched the IQ Hedge Multi-Strategy Tracker ETF in 2009 with the goal of making a whole new asset class available to the average investor,” said Adam Patti, CEO of IndexIQ. “Before the launch of QAI, hedge fund investing was generally limited to institutions and high net worth individuals. QAI changed all of that. While the concept was novel at the time, QAI has performed as we anticipated over the past three years and has attracted more than $200 million in assets.”
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Source: Index IQ
Chile's Santiago Exchange To Launch ETF By Year-End
March 27, 2012--The Santiago Stock Exchange expects to launch an exchange-traded fund by year-end, after it signed Tuesday an agreement with Brazil's Banco Itau's (ITUB, ITUB4.BR) general fund manager to create ETF shares that will track the blue-chip IPSA index, the broader IGPA and the smaller Inter-10 indexes.
An ETF is an increasingly popular and highly liquid security that tracks a stock, a sector, an index, a commodity, a bond, a currency or other asset classes, or even a basket of assets.
Only one ETF offering exposure to Chile is currently in the market--the iShares MSCI Chile Index Fund (ECH).
Itau won the stock exchange's tender to introduce and manage ETFs for the bourse's three main indexes in the local market.
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Source: Wall Street Journal
ISE Enhances Its Trading Platform with Optimise 3.0
March 27, 2012--The International Securities Exchange (ISE) completed Technology Release 3.0, the latest upgrade to its new trading system based on the OptimiseTM trading architecture.
With this release, ISE introduced the technology necessary to enable Legging Orders, a new order type scheduled to go live in early May. With Legging Orders, ISE will significantly enhance the execution of multi-legged strategy orders by enabling greater interaction of the complex order book with the regular order book. The result will be an increased fill rate for multi-legged strategy orders as well as tighter spreads and increased liquidity on the regular order book.
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Source: ISE.com
CFTC's Division of Market Oversight Issues Advisory Addressing Bona Fide Hedge Transactions and Positions
March 27, 2012--The U.S. Commodity Futures Trading Commission's (CFTC) Division of Market Oversight (DMO) today issued an Advisory regarding the treatment of bona fide hedging transactions and positions under Commission Regulations 1.3(z), 1.47, and 1.48 as they existed prior to the adoption of the final rule addressing Position Limits for Futures and Swaps.
The Division issued the Advisory at this time to remind market participants that regulations 1.3(z) and 1.48 will continue to apply to position limits under the Commission’s part 150 regulations until 60 days after the Commission and the Securities and Exchange Commission (SEC) jointly publish a rule or rules in the Federal Register further defining the term “swap.” After the term “swap” is further defined, the bona fide hedging provisions under regulation 151.5 in the final rule for Position Limits for Futures and Swaps will apply to exempt and agricultural commodities and regulation 1.3(z) will apply to excluded commodities.
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Source: CFTC.gov
CFTC's Division of Market Oversight Issues Advisory Highlighting the Commission's Special Call Authorities Relating to Claimed Exemptions from Speculative Position Limits
March 27, 2012--The Division of Market Oversight (the Division) of the U.S. Commodity Futures Trading Commission (CFTC) today issued an Advisory highlighting the Commission's special call authorities relating to claimed exemptions from speculative position limits under 17 CFR parts 150 and 151.
The Division issued the Advisory at this time because: (1) there will be new traders and new commodities subject to position limits (and the related exemption reporting requirements) under the Commission’s new speculative position limit rules in Part 151; and (2) the Division believes that it is important to highlight and clarify, as a general matter, the process and recordkeeping requirements associated with claiming a hedge exemption from the Commission’s position limit rules.
The Advisory reminds those market participants claiming a bona fide hedge exemption from the speculative position limit rules that the Commission and the Division may use the special call authorities to request information related, but not limited, to the following:
positions owned or controlled by the person claiming the exemption;
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Source: CFTC.gov
Shin Corporation Public Company Limited of Thailand Added To Dow Jones Emerging Markets Select Dividend Index
March 27, 2012--Shin Corporation Public Company Limited will be added to the Dow Jones Emerging Markets Select Dividend Index, Dow Jones Indexes announced today.
The addition of Bangkok, Thailand-based Shin Corporation PCL follows the removal of China Molybdenum Co., Ltd., which elected not to pay a dividend for the year ended December 31, 2011.
The Dow Jones Emerging Markets Select Dividend Index measures the stock performance of 100 leading dividend-paying emerging markets companies by their dividend yield.
Shin Corporation PCL is a holding company that invests in diversified telecommunications, media and advertising businesses. Shin’s subsidiaries and affiliated companies offer services including satellite transponders, television broadcasting, cellular phone and wireless communication, information technology and internet, low-cost air travel, and consumer financing.
The addition of Shin Corporation PCL in the Dow Jones Emerging Markets Select Dividend Index will be effective before the open of trading on Monday, April 2, 2012.
Source: Dow Jones Indexes
Agencies Propose Revisions to Leveraged Finance Guidance
March 26, 2012--The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and Office of the Comptroller of the Currency (the agencies) are seeking comment on proposed revisions to the interagency leveraged finance guidance issued in 2001.
Transactions that are covered by this guidance are characterized by a borrower with a degree of financial or cash flow leverage that significantly exceeds industry norms as measured by various debt, cash flow, or other ratios.
The agencies observed tremendous growth in the volume of leveraged credit leading up to the crisis and in the participation of non-regulated investors. While there was a pull-back in leveraged lending during the crisis, volumes have since increased while prudent underwriting practices have deteriorated. As the market has grown, debt agreements have frequently included features that provide relatively limited lender protection, including the absence of meaningful maintenance covenants and the inclusion of other features that can affect lenders' recourse in the event of weakened borrower performance. In addition, capital structures and repayment prospects for some transactions, whether originated to hold or to distribute, have been aggressive. Management information systems (MIS) at some institutions have proven less than satisfactory in accurately aggregating exposures on a timely basis, and many institutions have found themselves holding large pipelines of higher-risk commitments at a time when buyer demand for risky assets diminished significantly.
Leveraged finance is an important type of financing for the economy, and banks play an integral role in making credit available and syndicating that credit to investors. It is important that banks help provide financing to creditworthy borrowers in a safe and sound manner.
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Source: FRB
JP Morgan to service Yorkville's high income MLP ETF
March 26, 2012--J.P. Morgan Worldwide Securities Services (WSS) today announced that it has been appointed by Yorkville ETF Advisors, LLC, an asset management firm and a subsidiary of Yorkville ETF Holdings, LLC, to provide custody and exchange traded fund (ETF) transfer agency services to its newly launched Yorkville High Income master limited partnerships (MLPs) ETF.
The ETF (NYSE: YMLP), which began trading on March 13, is the first to deliver exposure to high income, commodity-based MLPs. YMLP was developed to capture the investment opportunity in commodity sector MLPs, which historically have provided higher yields and faster distribution growth than the more popular infrastructure sector, according to Yorkville Capital Management, LLC.
“We are pleased to have launched these funds which will leverage J.P. Morgan’s ETF servicing solutions,” said Darren Schuringa, CFA, Managing Partner at Yorkville ETF Advisors. “We selected J.P. Morgan because of the financial strength of the firm, its advanced technology platforms, and for its reputation for quality and client service.”
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Source: JP Morgan
DB Equity Research Equity Research-North America-ETP assets down by 1.2%, but flows are not really bearish
March 26, 2012--Net Cash Flows Review
Last week, markets cooled down a bit recording the second negative week of the year for the S&P 500. The US (S&P 500) lost 0.50%. Other developed and emerging markets outside the US did worse; the MSCI EAFE (in USD) dropped by 1.48%, while the MSCI EM (in USD) declined by 1.99% during the week.
Moving on to other asset classes, the 10Y Treasury yield retreated by 6bps last week, while the DB Liquid Commodity Index was down by 1.18%. Other sectors were mixed. The Agriculture sector (DB Diversified Agriculture Index), WTI Crude Oil, and Silver prices fell by 0.77%, 0.18%, and 0.95%, respectively; while Gold prices edged slightly higher by 0.11%. Last but not least, Volatility (VIX) advanced by 2.42% during the same period.
The total US ETP flows from all products registered $5.6bn of outflows during last week vs $14.4bn of inflows the previous week, setting the YTD weekly flows average at +$4.0bn (+$47.7bn YTD in total cash flows).
As expected, the outflows for this week were driven by SPY outflows (-$6.4bn), which were most likely linked to the unwinding of positions related to the S&P 500 quarterly rebalancing, therefore flows could be not as bearish as they seem, but rather neutral to positive on risk still. Equity, Fixed Income, and Commodity ETPs experienced flows of -$5.1bn, +$0.5bn, and -$0.7bn last week vs. +$13.2bn, +$1.1bn, and -$0.0bn the previous week, respectively.
Within Equity ETPs, Commodity Themed products experienced the largest inflows (+$0.2bn); while Large Cap vehicles experienced the largest outflows (-$5.0bn), followed by US Sector ETPs (-$0.9bn). Within Fixed Income ETPs Corporates recorded the largest inflows (+$0.2bn), followed by Sovereign products (+$0.1bn). Within Commodity ETPs, Precious Metals experienced a leak of assets of -$0.7bn.
Top 3 ETPs & ETNs by inflows: QQQ (+$0.8bn), KBE (+$0.4bn), GDX (+$0.2bn)
Top 3 ETPs & ETNs by outflows: SPY (-$6.4bn), XLE (-$0.6bn), GLD (-$0.6bn)
New Launch Calendar: 3 new equity products
There were two new ETFs and one new ETN listed on NYSE Arca during the previous week. The new products provide exposure to small cap Indonesian companies, international REITs, and the equally-weighted NASDAQ 100 version.
Turnover Review: floor activity still trapped in low levels
Total weekly turnover declined by 11.1% to $282bn vs. $318bn in the previous week. The largest decrease was on Equity ETP turnover, which fell by $23.2bn or 8.6% to $247bn. Commodity and Fixed Income ETP turnover followed with decreases of 30.2% (-$7.0bn) and 21.6% (-$4.6bn), respectively.
Assets Under Management (AUM) Review: 1.2% down on markets and flows
Negative equity markets and outflows contributed to a pull-back in ETP assets pushing down the AUM by 1.2% to $1.19 trillion; total ETP assets lost $14.1bn from the previous week’s AUM level. YTD growth remains strong at 13.3%, however. Assets for equity, fixed income and commodity ETPs moved -$13.4bn, +$0.6bn, and -$0.9bn during last week, respectively.
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Source: Deutsche Bank-Equity Research-North America
Morgan Stanley-US ETF Weekly Update
March 26, 2012--Weekly Flows: $5.6 Billion Net Outflows
ETFs Have Generated $47.2 Billion In Net Inflows YTD
ETF Assets Stand at $1.2 Trillion, up 13% YTD
Two ETF Launches Last Week
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US-Listed ETFs: Estimated Flows by Market Segment
ETFs posted net outflows for only the second week this year ($5.6 bln net outflows last week)
Last week’s net outflows were the most since the week of 9/19/11 and follow a week of $14.4 bln in net inflows
Net outflows were primarily driven by US Large-Cap ETFs last week ($4.8 bln); specifically, the SPDR S&P 500 ETF (SPY)
posted net outflows of $6.4 bln
ETF assets stand at $1.2 tln, up 13% YTD; ETFs have generated $47.2 bln in net inflows YTD
13-week flows were mostly positive among asset classes; combined $48.6 bln net inflows
Fixed Income ETFs have consistently generated weekly net inflows (32 straight weeks of net inflows)
Over the past 13 weeks, US Custom ETFs have posted net inflows of $2.0 bln, which equates to 22% of its market cap
US-Listed ETFs: Estimated Largest Flows by Individual ETF
PowerShares QQQ (QQQ) posted net inflows of $818 mln last week, the most of any ETF
SPDR S&P 500 ETF (SPY) exhibited the largest net outflows last week at $6.4 bln; as noted in our previous US ETF Weekly
Update, we anticipated SPY to exhibit net outflows last week as portfolio managers unwind the quarterly rebalancing trade from the prior week (index rebalancing took place the 3rd Friday of March)
Over the past 13 weeks the Vanguard MSCI Emerging Markets ETF (VWO) has exhibited net inflows of $6.2 bln, the most of any ETF
US-Listed ETFs: Short Interest
Data Unchanged: Based on data as of 2/29/12
SPDR S&P 500 ETF (SPY) posted the largest increase in USD short interest for the 2nd consecutive period
Despite SPY’s increase in shares short, SPY’s shares short are still well below their all-time high reached on 9/15/11
ProShares Ultra Silver (AGQ) posted the largest drop in USD short interest since last updated; AGQ’s decline is noteworthy because it only has a market cap of $915 million (typically larger funds account for the biggest changes in this exhibit)
Financials-focused ETFs make up 3 of the 10 most heavily shorted ETFs (shares short/shares outstanding)
The average shares short/shares outstanding for ETFs is currently 5%
Based on multiple borrowings and the ability to continuously create new shares, short interest as a % of market cap can exceed 100%
US-Listed ETFs: Most Successful Recent Launches by Assets
Source: Bloomberg, Morgan Stanley Smith Barney Research.
Data estimated as of 3/23/12 based on daily change in share counts and daily NAVs.
$8.7 billion in total market cap of ETFs less than 1-year old
Over the past 13 weeks, newly launched US Custom ETFs generated most net inflows at $873 mln
71 new ETF listings and 16 closures YTD; at this point last year, only 45 ETFs had come to market
Over the past year, many of the successful launches have an income/dividend orientation
6 different ETF sponsors and 2 asset classes represented in top 10 most successful launches
The heavily anticipated PIMCO Total Return ETF (TRXT), an actively managed bond fund managed by PIMCO launched on 3/1/12, has exhibited strong growth with a market cap of $256 mln (flows in table do not include seed money)
Top 10 most successful launches account for 59% of market cap of ETFs launched over the past year
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Source: Morgan Stanley
