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Morgan Stanley US ETF Weekly Update
December 23, 2014--Weekly Flows: $13.0 Billion Net Inflows
Eleventh Consecutive Week of Net Inflows
High-conviction ETF Recommendations Slide
ETF Assets Stand at $2.0 Trillion, Up 17% YTD
Four ETF Launches Last Week
Direxion Announces ETF Closure
US-Listed ETFs: Estimated Flows by Market Segment
ETFs posted net inflows of $13.0 bln last week; 11th consecutive week of net inflows
Over the last 11 weeks, ETFs have generated net inflows of $92.4 bln
Last week's net inflows were led by Fixed Income ETFs at $5.3 bln; conversely, International - Developed ETFs posted net outflows of $1.5 bln, the most of any category we measured
Thirteen of the 15 categories we measured posted net inflows last week; ETFs have generated net inflows of $204.6 bln YTD; notably, the fourth quarter is typically the strongest quarter for ETF flows
ETF assets stand at $2.0 tln, up 17% YTD
13-week flows remain positive among most asset classes; combined $91.4 bln in net inflows
US Large-Cap ETFs generated net inflows of $30.0 bln over the last 13 weeks, the most of any category, and slightly outpaced Fixed Income ETFs, which exhibited $28.1 bln in net inflows over the same time period
International - Emerging ETFs exhibited net outflows of $4.3 bln over the last 13 weeks; flows in the category were driven by the iShares MSCI Emerging Markets ETF (EEM), which posted net outflows of $6.0 bln over this period
US-Listed ETFs: Estimated Largest Flows by Individual ETF
SPDR S&P 500 ETF (SPY) posted net inflows of $3.6 bln last week, the most of any ETF
Notably, the Vanguard Total Bond Market ETF (BND) and the iShares Core US Aggregate Bond ETF (AGG) also had big weeks and had a combined $2.2 bln in net inflows last week; both products track the Barclays US Aggregate Bond Index
The SPDR Retail ETF (XRT) generated net inflows of $569 mln last week, which equates to 34% of its current market cap; XRT's flows were likely driven by a decline in gasoline prices, which should benefit consumers and the places they shop
The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) posted net inflows of $401 mln last week; HYG has struggled the past few months from a performance standpoint given its meaningful allocation to energy issuers
Despite posting a +2.0% market price return last week, the PowerShares QQQ (QQQ) posted another week of net outflows, at $1.9 bln; QQQ has exhibited three consecutive weeks of net outflows totaling $4.5 bln
US-Listed ETFs: ETF Dollar Volume
ETF monthly $ volume as a % of listed trading volume declined in November to 23% and is the lowest reading since June 2014; over the last 5 years, ETF monthly $ volume as a % of listed trading volume averaged 28%
Over the last five years, ETF monthly $ volume as a % of listed trading volume peaked in August 2011 at 36%
ETF $ volume surged by $190 bln last week compared to the prior week and is 55% above its 13-week average
US Large-Cap ETFs accounted for 49% of ETF $ volume last week compared to their 13-week average of 43% and was primarily driven by SPY; this compares to the category's 27% market cap share
US-Listed ETFs: Short Interest Data Unchanged: Based on data as of 11/28/14
SPDR S&P 500 ETF (SPY) had the largest increase in USD short interest at $1.8 bln
Notably, the iShares 20+ Year Treasury Bond ETF (TLT) had a $603 mln decline in short interest compared to the prior period; TLT's shares short are at their lowest level since 10/15/13
661 ETFs exhibited short interest increases while 632 experienced short interest declines over the last period
Aggregate ETF USD short interest increased by $267 mln over the period ended 11/28/14
The average shares short/shares outstanding for ETFs is currently 4.2%, up from 3.9% last period
The CurrencyShares Euro Trust (FXE) is the most heavily shorted ETF as a % of shares outstanding at 333%
Eight of the 10 most heavily shorted ETFs as a % of shares outstanding are sector based (SMH, XOP, DRV, XRT, XBI, IYR, RKH, BRAF)
Based on multiple borrowings and the ability to continuously create new shares, shares short as a % of shares outstanding can exceed 100% (only seven ETFs exhibited shares short as a % of shares outstanding greater than 100%)
US-Listed ETFs: Most Successful Recent Launches by Assets
$8.4 bln in total market cap of ETFs less than 1-year old
Active ETFs account for 33% of recently launched ETF market share, the most of any ETF category
The recently launched International - Developed ETF category was the only ETF group to post net outflows last week, at $27 mln
188 new ETF listings and 65 closures YTD (additional four closures announced)
The top 10 most successful launches make up 48% of the market cap of ETFs launched over the past year
Four ETF sponsors and two asset classes (equity and fixed income) were represented in top 10 most successful launches
The First Trust Dorsey Wright Focus 5 ETF (FV) generated $56 mln in net inflows last week, the ETF's 42nd consecutive week of positive flows; FV comprises five First Trust sector and industry ETFs that are selected based on price momentum
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Source: Morgan Stanley
ISE Gemini Introduces Flat Pricing for Price Improvement Auctions
December 22, 2014--ISE Gemini announced the introduction of a new "flat" pricing structure for price improvement mechanism (PIM) auctions as of January 2, 2015, subject to regulatory clearance.
With this new model, both PIM auction initiators and responders will pay the same fee of $0.05 per contract.
Priority Customers on the originating side of a PIM order will continue to be free. The new structure will create additional transparency and a more level playing field in auction pricing. It also has the potential to deliver a higher level of price improvement to the end customer by increasing competition among auction responders at a fee level substantially lower than competing auction mechanisms.
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Source: ISE (International Securities Exchange)
Sprott Gold Miners ETF Surpasses $100 Million in Assets
December 22, 2014--ALPS, a DST Company focused on asset management and asset servicing, today announced that the Sprott Gold Miners ETF (SGDM) has raised more than $100 million in assets.
SGDM was created in partnership with ALPS Advisors Inc.,who serves as the investment adviser to the Fund and Zacks Index Services.
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Source:Sprott Asset Management
Fed's 2015 bank stress tests will account for rate hike
December 22, 2014--Federal Reserve policymakers have been spare in their guidance on when near-zero interest rates will rise next year, but its 2015 bank stress test will account for the possibility of an increase in short-term interest rates.
The stress test includes a "hypothetical adverse scenario" that could force an increase in bank funding costs, said Janet Yellen, head of the central bank
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Source: SmartBrief
CFTC Orders Deutsche Bank Securities Inc. to Pay $3 Million to Settle Charges of Improper Investment of Customer Segregated Funds, Reporting and Recordkeeping Violations, and Supervision Failures
December 22, 2014--The U.S. Commodity Futures Trading Commission (CFTC) today issued an order filing and simultaneously settling charges against Deutsche Bank Securities Inc. (DBSI), a registered Futures Commission Merchant (FCM) based in New York, N.Y., for failing to properly invest customer segregated funds, failing to prepare and file accurate financial reports, failing to maintain required books and records, and for related supervisory failures.
None of the violations resulted in any customer losses, according to the CFTC's Order. The Order requires DBSI to pay a $3 million civil monetary penalty and to cease and desist from violating the CFTC Regulations, as charged. DBSI is an indirect, wholly-owned subsidiary of the parent company, Deutsche Bank AG.
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Source: CFTC.gov
US regulator probes ETF pricing structures
December 21, 2014--Extreme movements in the prices of bonds, commodities and other assets have prompted regulators at the Federal Reserve Bank of New York to take a closer look at the inner workings of exchange traded funds.
Wall Street's top regulator has been talking to the firms responsible for ensuring the smooth functioning of such ETFs as it seeks to gauge the resilience of the structures to sharp fluctuations in the underlying market they track.
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Source: FT.com
Bloomberg and State Street Global Advisors Introduce the First Fixed Income ETF Creation and Redemption Service To Enhance Transparency Of Fixed Income ETFs.
State Street Global Advisors is the first ETF Provider to Use the Bloomberg Fixed Income ETF Basket Tool
December 19, 2014--Bloomberg today introduced the Bloomberg Fixed Income ETF Basket Tool in order to further automate the workflow and construction of fixed income exchange traded funds (ETFs).
The new offering provides the first comprehensive solution for clients of State Street Global Advisors (SSGA) to automate the process of creating and redeeming baskets of fixed income ETFs.
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Source: Bloomberg
A Humbled Janus Capital Is Betting on Bill Gross for Its Turnaround
December 19, 2014--When Bill Gross quit bond giant Pacific Investment Management Co. three months ago, almost as stunning as his departure was his choice of employer: Janus Capital Group Inc.
(JNS), a struggling stock fund manager whose assets had shrunk by half from a peak 14 years earlier.
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Source: Bloomberg
Commodity Funds CFD and CTF Propose Plan to Convert to ETF Structure
Funds to seek shareholder approval for structure change that seeks a closer alignment between market price and net asset value
December 19, 2014--Nuveen Investments, a leading global provider of investment services to institutions as well as individual investors, today announced that Nuveen Commodities Asset Management ("NCAM"), the manager for the Nuveen Diversified Commodity Fund (NYSE MKT: CFD) and the Nuveen Long/Short Commodity Total Return Fund (NYSE MKT: CTF), has approved a plan to convert the Funds into open-end exchange-traded funds ("ETFs").
The purpose of the conversion plan is to seek a closer alignment between the funds’ share price and net asset value (“NAV”).
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Source: Nuveen
Commodity Funds CFD and CTF Propose Plan to Convert to ETF Structure
Funds to seek shareholder approval for structure change that seeks a closer alignment between market price and net asset value
December 19, 2014--Nuveen Investments, a leading global provider of investment services to institutions as well as individual investors, today announced that Nuveen Commodities Asset Management ("NCAM"), the manager for the Nuveen Diversified Commodity Fund (NYSE MKT: CFD) and the Nuveen Long/Short Commodity Total Return Fund (NYSE MKT: CTF), has approved a plan to convert the Funds into open-end exchange-traded funds ("ETFs").
The purpose of the conversion plan is to seek a closer alignment between the funds' share price and net asset value ("NAV").
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Source: Nuveen Investments
