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Morgan Stanley-US ETF Weekly Update
March 10, 2014--US ETF Weekly Update
Weekly Flows: $1.9 Billion Net Inflows
Fourth Consecutive Week of Net Inflows Totaling $29.9 Billion
ETF Assets Stand at $1.7 Trillion, Up 2% YTD
Four ETF Launches Last Week
US-Listed ETFs: Estimated Flows by Market Segment
ETFs posted net inflows of $1.9 bln last week, the fourth consecutive week of net inflows - Over the last four weeks, ETFs have generated net inflows of $29.9 bln
Last week's net inflows were led by US Large-Cap ETFs at $3.3 bln; conversely, Fixed Income ETFs posted net outflows of $6.3 bln, the most of any category we measured and the largest Fixed Income weekly net outflow since we began tracking weekly flows
Eleven of the 15 categories we measured posted net inflows last week
ETF assets stand at $1.7 tln, up 2% YTD
13-week flows remain positive among asset classes; combined $23.4 bln in net inflows
International - Developed ETFs have generated $17.4 bln in net inflows over the last 13 weeks; the category has 13% market share, up from 10% at the beginning of 2013; much of the market share gain may have come at the cost of International - Emerging ETFs, which has seen its market share decline from 12% to 7% over this time period
US Sector & Industry ETFs posted net inflows of $9.6 bln over the last 13 weeks, trailing only International - Developed ETFs; notably, Financials, Health Care, and Information Technology sector ETFs were some of the largest new money gatherers
US-Listed ETFs: Estimated Largest Flows by Individual ETF
iShares Core S&P 500 ETF (IVV) posted net inflows of $3.2 bln this past week, the most of any ETF
Nine of the 10 ETFs to generate the largest net inflows last week were US equity based, with the one exception being the iShares TIPS Bond ETF (TIP)
The Vanguard REIT ETF (VNQ) has posted net inflows for nine consecutive weeks totaling $1.9 bln
Notably, the iShares 1-3 Year Treasury Bond ETF (SHY) exhibited net outflows of $3.8 bln last week, the most of any ETF; four of the 10 ETFs to post the largest net outflows last week had US Treasury exposure
Emerging market equity ETFs continue to experience net outflows; specifically, the iShares MSCI Emerging Markets ETF (EEM) exhibited net outflows of $372 mln last week and over the last 13 weeks, posted net outflows of $8.9 bln
US-Listed ETFs: ETF Dollar Volume
ETF monthly $ volume as a % of listed trading volume remained flat in February at 25%, which is below the five-year average of 28%
Over the last five years, ETF monthly $ volume as a % of listed trading volume peaked in August 2011 at 36%
ETF $ volume last week was $393 bln, up from $337 bln the prior week and 23% above its 13-week average
Fixed Income ETFs accounted for 8% of ETF $ volume last week compared to their 13-week average of 6%; we note that the yield on the 10-year US Treasury was up 14 bps last week
US-Listed ETFs: Short Interest Data Unchanged: Based on data as of 2/14/14
The SPDR S&P 500 ETF (SPY) had the largest increase in USD short interest at $3.5 bln
The iShares US Real Estate ETF (IYR) also had a big jump in short interest ($643 mln increase); IYR's shares short are 47% above their 52- week average
672 ETFs exhibited short interest increases while 580 experienced short interest declines over the last period
Aggregate ETF USD short interest increased by $4.1 bln over the period ended 2/14/14
The average shares short/shares outstanding for ETFs is currently 4.1%, down from 4.2% last period
Six of the 10 most heavily shorted ETFs as a % of shares outstanding are sector/industry related
For the fourth consecutive period, the SPDR Oil & Gas Exploration & Production ETF (XOP) was the most heavily shorted ETF with shares short as a % of shares outstanding of 282%
Based on multiple borrowings and the ability to continuously create new shares, shares short as a % of shares outstanding can exceed 100% (only nine 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
Fixed Income ETFs account for 24% of the market capitalization of ETFs launched over the past year, the most of any category; 38 Fixed Income ETFs were brought to market over the last year as ETF issuers expand the breadth of fixed income offerings
Over the last 13 weeks, International - Developed ETFs have attracted $517 mln in net inflows, the most of any group
44 new ETF listings and seven closures YTD (11 additional closures announced)
The top 10 most successful launches make up 45% of the market cap of ETFs launched over the past year
Six ETF sponsors and two asset classes (equities and fixed income) represented in top 10 most successful launches
Over the last year, BlackRock has issued 28 ETFs that have a combined current market capitalization of $1.7 bln; notably, not every new issue gains immediate traction as the median market capitalization of a newly issued BlackRock ETF is only $25 mln
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Source: Morgan Stanley
Investors pull $18bn from biggest US ETF
March 10, 2014--Investors have pulled nearly $18bn out of the biggest and best known S&P 500 exchange traded fund so far this year even as the US stock market has set new highs, raising questions in a bull market that is charging into its sixth year.
The outflows from the Spider S&P 500 ETF (SPY) eclipse the $16bn that poured into the $159bn fund in 2013. While the US market has recovered from a dip earlier this year, investors have continued to pull money from SPY.
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Source: FT.com
Rapid Currency Trades May Kill Arbitrage, N.Y. Fed Paper Says
March 10, 2014--Growth in high-frequency and algorithmic trading may promote efficiency in the spot-trading foreign exchange market, according to a research paper published by the Federal Reserve Bank of New York.
Arbitrage opportunities, or market price differences, occurred in about 1 in every 20 seconds between the euro-dollar, dollar-yen and euro-yen currency pairs during the active part of the trading day during early 2000s, Ernst Schaumburg, a research officer at the New York Fed wrote in a report published today, citing EBS data.
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Source: Bloomberg
SEC Said to Probe Whether Forex Rigging Distorted Options
March 10, 2014--The U.S. Securities and Exchange Commission is investigating whether currency traders at the world's biggest banks distorted prices for options and exchange-traded funds by rigging benchmark foreign-exchange rates,
according to two people with knowledge of the matter.
NYSE, Nasdaq Join to Push for Trading Rule view more
DB-Synthetic Equity & Index Strategy- North America-US ETF Market Monthly Review-ETP assets reach $1.7 trillion amid massive FI inflows and market rally
Despite the weak long-only equity ETP flows (-$0.2bn) and the record-breaking inflows into fixed income ETPs (+$17bn), flow trend patterns suggest a different picture than flows magnitude. Fixed Income flows seemed to have been inflated by an isolated event without which flow trend pattern would have remained somewhat weak. On the opposite side, equity ETFs seemed to have experienced a short term drag without which the trend would have remained strong. Overall, we believe that the underlying asset allocation trend still favors equity over fixed income. Equity international regional developed markets ETPs kept capturing most of the attention, gathering $4.1bn in fresh new cash; while single country DM allocations favored, once again, Japan with inflows of $0.4bn. Meanwhile, in the fixed income space, Corporates (+$4.5bn) exhibited strong magnitude and flow pattern. Last but not least, commodity (+$0.7bn) ETPs gathered their first monthly inflows since December of 2012; Gold (+$0.6bn) ETP flows bounced back in February suggesting an improvement in the investment demand of the yellow metal.
New Launch Calendar: New FRNs made its debut into the ETF market
There were fifteen new ETFs listed during the previous month. Fourteen of them were listed in the NYSE Arca, while the remaining one was listed in NASDAQ. The new products offer exposure to currency-hedged, thematic and international small and large caps equities, Municipals, Floating Rate Notes (FRNs), short term TIPS and exposure to Gold utilizing a variety of currencies other than the USD.
Turnover Review: Floor activity decreased by 2.9% in February
ETP trading made up 25.4% of all US cash equity trading in February, down from last year's peak of 32.0% in June, and still below its 3-year monthly average of 27.9%.
view more Incredible Shrinking Management Fee view more CFTC.gov Commitments of Traders Reports Update SEC exam director warns advisers about use of alternative mutual funds view more
CFTC.gov Swaps Report Update
Source: Bloomberg
March 10, 2014--Longtime rivals Nasdaq OMX Group Inc. and NYSE Euronext are joining forces in a bid to reclaim trading volumes from smaller competitors, according to people familiar with the matter.
The two firms are pushing for a controversial rule to be added to a pilot program under consideration by the Securities and Exchange Commission to widen tick sizes, or the increments between price quotes, for certain companies.
Source: Wall Street Journal
March 7, 2014--Data in this report is as of Friday, February 28th, 2014
US ETP assets increased by $82.8bn
ETP assets in the US rose by $82.8bn to $1.703 trillion (YTD +1.5%) last month. Global ETP industry assets closed at $2.309 trillion (YTD 2.0%)
Flows Review: Risk off? Don't be deceived by fixed income ETF flows
US ETPs experienced inflows of $18.9bn during February (+1.2% of last month's AUM).
Within long-only ETPs, total flows were +$17.9bn in February vs. -$16.1bn in January. Equity, Fixed Income, and Commodity long-only ETPs experienced flows of -$0.2bn, +$17.0bn and +$0.7bn, respectively.
ETP turnover totaled $1.375 trillion last month, 2.9% (-$41.2bn) lower than the previous month figure of $1.416 trillion, however, 10.8% above last year's monthly average of $1.240 trillion. Fixed Income and Commodity ETPs turnover increased by $3.7bn (+4.5%) and $4.4bn (+10.8%), respectively; while Equity ETPs turnover decreased by $47.7bn (-3.7%) during February.
Source: Deutsche Bank- Synthetic Equity & Index Strategy- North America
Professional portfolio management has long cost too much. If a new company has its way, it could be free.
March 7, 2014--This past week, WiseBanyan, an online-only investment adviser, publicly launched a service that builds and manages diversified portfolios of exchange-traded funds for nothing.
There is no minimum account size; nor is there any fee to sign up, to buy the funds or to hold them (other than the underlying expenses of the funds, averaging less than 0.14% annually).
Source: Wall Street Journal
March 7, 2014--The current reports for the week of March 4, 2014 are now available.
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Source: CFTC.gov
Noting surge in inflows, Bowden calls the funds 'bright, shiny objects' with sharp edges
March 6, 2014--The head of the Securities and Exchange Commission's examination program warned investment advisers on Thursday to be careful when putting their clients in alternative mutual funds.
The SEC has noticed increased use of nontraditional investments and complex trading strategies in mutual funds, said Andrew Bowden, director of the Office of Compliance Inspections and Examinations.
Source: Investment News
March 5, 2014--CFTC's Weekly Swaps Report has been updated, and is now available.
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Source: CFTC.gov
