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Morgan Stanley-US ETF Weekly Update
February 3, 2014--Weekly Flows: $14.0 Billion Net Outflows
Second Consecutive Week of Net Outflows
ETF Assets Stand at $1.6 Trillion, Down 4% YTD
No ETF Launches Last Week
BlackRock Announces 10 ETF Closures
US-Listed ETFs: Estimated Flows by Market Segment
ETFs posted net outflows of $14.0 bln last week,the second consecutive week of net outflows
Last week's net outflows were led by US Large-Cap ETFs at $8.8 bln; conversely,Fixed Income ETFs posted net inflows of $887 mln,the most of any category we measured
Nine of the 15 categories we measured posted net outflows last week
ETF assets stand at $1.6 tln,down 4% YTD
13-week flows remain mostly positive among asset classes; combined $13.7 bln in net inflows
International- Developed ETFs have generated $21.6 bln in net inflows over the last 13 weeks; the category has 13% market share,up from 10% at the beginning of 2013
Over the last 13 weeks,International- Emerging ETFs have posted net outflows of $14.4 bln,the most of any category we measure,as investors remain cautious about the ability of the space to deliver on needed structural reforms as well as lower expected GDP growth
US-Listed ETFs: Estimated Largest Flows by Individual ETF
Vanguard Total Bond Market ETF (BND) posted net inflows of $1.2 bln this past week,the most of any ETF
Despite fears of rising interest rates,BND has managed to post net inflows 10 of the last 13 weeks,totaling $2.0 bln
The iShares MSCI EAFE ETF (EFA) has generated net inflows of $4.3 bln over the last 13 weeks,the most of any ETF; International - Developed ETFs have attracted meaningful net inflows over the last year
Over the last 13 weeks,the two largest emerging markets ETFs,Vanguard FTSE Emerging Markets ETF (VWO) and iShares MSCI Emerging Markets ETF (EEM),have exhibited a combined $14.1 bln in net outflows
US-Listed ETFs: ETF Dollar Volume
ETF monthly $ volume as a % of listed trading volume declined to 25% in January,which is below the 28% five-year average
Over the last five years,ETF monthly $ volume as a % of listed trading volume peaked in August 2011 at 36%
ETF $ volume was $438 bln last week,up $151 bln from the prior week and more than 56% above its 13-week average
Leveraged/Inverse ETFs accounted for 8% of ETF $ volume last week,but make up only 2% of ETF market share; this is not surprising as daily compounding makes Leveraged/Inverse ETFs more appropriate for active traders
US-Listed ETFs: Short Interest Data Updated: Based on data as of 1/15/14
The iShares MSCI Emerging Markets ETF (EEM) had the largest increase in USD short interest at $2.1 bln
EEM's shares short are at their highest level since 6/14/13 as investors flee emerging market equity and debt
685 ETFs exhibited short interest increases while 559 experienced short interest declines over the last period
Aggregate ETF USD short interest increased by $10.0 bln over the period ended 1/15/14
The average shares short/shares outstanding for ETFs is currently 4.4%,up from 4.2% last period
Six of the 10 most heavily shorted ETFs as a % of shares outstanding are sector/industry related
For the second 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 348%
Based on multiple borrowings and the ability to continuously create new shares,shares short as a % of shares outstanding can exceed 100% (only eight ETFs exhibited shares short as a % of shares outstanding equal to or greater than 100%)
US-Listed ETFs: Most Successful Recent Launches by Assets
$7.7 bln in total market cap of ETFs less than 1-year old
Active ETFs account for 24% of the market capitalization of ETFs launched over the past year,the most of any category
Over the last 13 weeks,International - Developed ETFs have attracted $683 mln in net inflows,the most of any group
2014 ETF issuance=25 ETFs
The top 10 most successful launches make up 46% of the market cap of ETFs launched over the past year
Seven ETF sponsors and two asset classes (equities and fixed income) represented in top 10 most successful launches; we note that the representation of funds with an income orientation is currently five (down from seven at the end of the second quarter)
The Vanguard Total International Bond ETF (BNDX) is the largest ETF to come to market over the last year ($874 mln in market cap); BNDX measures the return of investment-grade bonds issued outside of the US and employs hedging strategies to mitigate foreign currency risk
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Source: Morgan Stanley
BlackRock Takes Aim at Smaller Firms With ETF Starts, Fee Waiver
February 3, 2014--BlackRock Inc. (BLK:US), the world's biggest provider of exchange-traded funds, is putting the heat on smaller competitors.
BlackRock and WisdomTree Investment Inc., the firm where former hedge-fund manager Michael Steinhardt is both non-executive chairman and the largest shareholder, will each open ETFs tomorrow targeting the same hot spot in the market, and at first glance both come with the same price tag. The twist: BlackRock's will be free for a year.
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Source: BusinessWeek
ISE Holdings Reports Business Activity for January 2014
February 3, 2014 -ISE and ISE Gemini (TM) combined represent 18.0% of equity options market share, excluding dividend trades.
ISE and ISE Gemini reported a combined ADV of 3.0 million contracts.
ISE Gemini ADV increased by 25.8% from December 2013 to January 2014.
Dividend trades made up 1.0% of industry volume in January 2014.
The International Securities Exchange Holdings, Inc. (ISE Holdings) today reported a combined average daily volume (ADV) of 3.0 million contracts in January 2014 for its two exchanges, ISE and ISE Gemini. This represents 18.0% of U.S. equity options market share.
Business highlights for the month of January include:
On January 27, ISE Gemini announced that it surpassed 750k contracts for the first time in a single trading day.
Also on January 27, ISE ETF Ventures announced its inaugural year-in-review with a recap of its partnerships and milestones from 2013.
On January 28, ISE ETF Ventures expanded its partnership with BlueStar Indexes to launch the BlueStar Israel Global Technology Index (ticker: BGTH).
Also on January 28, ISE Holdings announced that the SEC approved ISE and ISE Gemini to be the first exchanges to list options on the Nations VolDex.
For the month of January, Implied Order functionality accounted for 6.9% of all non-crossing, multi-legged contract volume executed on ISE.
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Source: ISE.com
Third-party Distribution of Long-term Mutual Fund & ETF Assets Rose 23 Percent to $8.8 Trillion in 2013, According to Broadridge
Independent broker-dealers continued as leading distribution channel in overall fund assets surpassing $2 trillion in AUM
February 3, 2014-- Total third-party long-term mutual fund and exchange traded fund (ETF) assets under management (AUM) increased 23 percent in 2013 to $8.8 trillion, compared to $7.1 trillion in 2012, according to new data released today by Access Data, a Broadridge Financial Solutions, Inc. (NYSE:BR) company.
According to data released today on Broadridge's Fund Distribution Intelligence(TM) tool, the independent channels--independent broker-dealers (IBDs) and registered investment advisers (RIAs)--are the largest distribution channels for long-term mutual funds and ETFs. Specifically, 2013 data shows:
IBDs led in overall third-party distribution of long-term mutual funds
and ETFs with $2.05 trillion AUM, a 23 percent increase over the previous year
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Source: Broadridge
EG Shares Transitions Two ETFs To FTSE
15 ETFs have transitioned to FTSE benchmarks in past 18 months
More than 110 ETFs tracking FTSE benchmarks in North America
EGA move reinforces FTSE’s growing US presence
February 3, 2014--FTSE Group ("FTSE") has been selected by Emerging Global Advisors, the specialist provider of Emerging Market Exchange-Traded Funds (ETFs), as the index benchmark provider for its EGShares Low Volatility Emerging Markets Dividend ETF (HILO) and the EGShares Brazil Infrastructure ETF (BRXX), replacing Indxx.
These funds transition today to the FTSE Emerging All Cap ex Taiwan Low Volatility Dividend Index and FTSE Brazil Infrastructure Extended Index, respectively listed on NYSE Arca.
These ETFs, which represent US $138.6 million in assets under management (AUM), are the 14th and 15th to transition to FTSE in the last 18 months and add to FTSE’s significant North American business, with 111 ETFs tracking FTSE benchmarks. Globally, more than US $189 billion of ETF AUM are benchmarked to FTSE indices as of December 2013.
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Source: FTSE
iShares to Launch Industry's First Treasury Floating Rate Bond ETF
Expands iShares short duration product suite to help investors navigate today's bond landscape
February 3, 2014--iShares, the exchange-traded fund (ETF) business of BlackRock, (NYSE: BLK), will launch the industry's first ETF providing exposure to US Treasury Floating Rate Notes (FRN), the first new security from the Treasury in 17 years. The iShares Treasury Floating Rate Bond ETF (TFLO) represents an expansion of iShares short duration ETF product suite to help investors reduce interest rate and credit risk within their fixed income portfolio.
Treasury FRNs are a new type of Treasury debt with an interest payment that changes over time. The coupon rate on these securities will reset daily using the most recent 13-week Treasury bill auction rate plus a spread. The first auction of $15 billion took place on January 29th with strong demand from investors.
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Source: BlackRock
IMF Canada: Selected Issues
February 3, 2014--Summary: The unconventional energy boom has had significant positive effects on Canada's economic activity and has the potential to contribute even more in the future with the appropriate extension of infrastructure capacity. Our findings suggest that while limited exports capacity would result in output losses over the medium term, the potential output gains from a full market access of Canada's energy products could reach about 2 percent of GDP over a ten year horizon.
Actions can be taken on a number of fronts to resolve transportation constraints and address domestic market segmentation. These include diversifying international export markets for Canadian energy products, which would require building pipeline and export infrastructure to facilitate access to non-U.S. markets. Energy integration between Canada's western and eastern provinces can be strengthened further, and recent initiatives in this direction are welcome. More generally, there appears to be an important scope to increase inter-industry linkages across Canada that would lead to wider sharing of benefits from the energy sector.
view the IMF report- Canada: Selected Issues
Source: IMF
IMF-Canada: Financial Sector Stability Assessment
February 3, 2014--Canada's financial system successfully navigated the global financial crisis, and stress tests suggest that
major financial institutions would continue to be resilient to credit, liquidity, and contagion risks arising
from a severe stress scenario.
Elevated house prices and high household debt remain an area of concern
(despite the substantial level of government-guaranteed mortgage insurance), though targeted prudential
and macroprudential measures are proving to be effective. The regulatory and supervisory framework is
strong, and is complemented by a credible federal system of safety nets, although there is no single body
with an explicit mandate to take a comprehensive view of systemic risks or to undertake crisis preparedness.
Improving cooperation between federal and provincial authorities would further reinforce system wide
oversight arrangements.
view the IMF-Canada: Financial Sector Stability Assessment report
Source: IMF
Multi-asset ETFs set to burst into UK market
ETF Securities is in negotiations with fund managers to launch novel new products.
February 2, 2014--Two of the fastest-growing areas in investing- exchange-traded funds (ETFs) and multi-asset investment-look set to join forces as an innovative new product type comes to market.
ETF Securities has said it is in discussions with a number of as-yet-unnamed fund managers with a view to launching white-labelled multi-asset ETFs, under the company's 'Canvas' project for building funds.
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Source: ETF Securities
Regulators train a close eye on alternatives
SEC and Finra pledge increased attention to alts and complex products
February 2, 2014--Through broker-dealer examinations and issuing alerts of investment advisers' due diligence, the Securities and Exchange Commission is continuing its focus on how advisers sell or advise clients on alternative investments.
The SEC's spotlight on alternatives ranges from nontraded real estate investment trusts to hedge funds, according to industry executives, SEC officials and statements from the commission.
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Source: Investment News
