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Morgan Stanley-US ETF Weekly Update
January 27, 2014--Weekly Flows: $9.3 Billion Net Outflows
ETF Assets Stand at $1.6 Trillion, -2% YTD
Thirteen ETF Launches Last Week
No ETF News Last Week
US-Listed ETFs: Estimated Flows by Market Segment
ETF posted net outflows of $9.3 bln last week
Last week's net outflows were led by US Large-Cap ETFs at $5.9 bln and by Leveraged/Inverse at $4.5 bln; for Leveraged/Inverse in particular, the net out flows were 13.9% of its market cap leading into last week
7 of the 15 categories we measured posted net outflows last week
ETF assets stand at $1.6 tln, down 2% YTD
13-week flows remain mostly positive among asset classes; combined $28.5 bln in net inflows
ETFs have generated net inflows 9 of the last 13 weeks
International - Developed ETFs have taken in ~11% of their current market cap over the last 13 weeks; strong inflows can be attributed to bullish sentiment on Europe and Japan with ETFs investing in broad Europe and in Japan taking in $7.4 and $3.4 bln, respectively, over the last 13 weeks
Over the last 13 weeks, International - Emerging ETFs have posted net outflows of $11.0 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
ProShares Ultra MidCap 400 (MVV) posted net inflows of $912 mln this past week, the most of any ETF
MVV's net inflows this past week nearly doubled its market cap, which is now $1.8 billion
The iShares MSCI EAFE ETF (EFA) and the Vanguard FTSE Developed Markets ETF (VEA) combined for net inflows of $850 mln this past week; EFA and VEA provide broad exposure to international developed markets equities
The SPDR S&P 500 ETF (SPY) posted net outflows of $4.2 bln last week, the most of any ETF; SPY has now posted net outflows for three consecutive weeks totaling $8.8 bln
US-Listed ETFs: ETF Dollar Volume
ETF monthly $ volume as a % of listed trading volume increased to 26% in December, which is in-line with the one- year average
Over the last five years, ETF monthly $ volume as a % of listed trading volume peaked in August 2011 at 36%
With the holiday shortened week, ETF $ volume was $287 bln last week (down from $307 bln the prior week)
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 Unchanged: Based on data as of 12/31/13
The Utilities Select Sector SPDR (XLU) had the largest increase in USD short interest at $527 mln
XLU's shares short are at their highest level ever after increasing to 80.2 mln from 66.3 mln on 12/13/13
628 ETFs exhibited short interest increases while 610 experienced short interest declines over the last period
Aggregate ETF USD short interest decreased by $14.3 bln over the period ended 12/31/13
The average shares short/shares outstanding for ETFs is currently 4.2%, down from 4.3% last period
Two of the 10 most heavily shorted ETFs as a % of shares outstanding are commodity/currency related, which is down from five last period
The SPDR Oil & Gas Exploration & Production ETF (XOP) is the most heavily shorted ETF with a shares short as a % of shares outstanding of 273%
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 greater than 100%)
US-Listed ETFs: Most Successful Recent Launches by Assets
$7.6 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
Over the last 13 weeks, International - Developed ETFs have attracted $804 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 Vident International Equity Fund (VIDI) has posted the highest net inflows over the last 4-weeks at $70 mln and its market cap is currently $568 mln; VIDI owns international equities in countries that exhibit favorable conditions for growth
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Source: Morgan Stanley
ISE ETF Ventures Inaugural Year-in-Review
January 27, 2014--The International Securities Exchange Holdings, Inc. (ISE Holdings) announced the inaugural year-in-review for ISE ETF Ventures, the business unit within ISE Holdings dedicated to bringing new exchange traded products (ETPs) to market through capital commitment, business developmen, and marketing support. During this past year, total assets under management for ETPs tied to ISE ETF Ventures indexes neared $1.3 billion. ISE Holdings remains the only U.S. exchange with a group dedicated to providing start-up funding to enable new ETPs to come to market.
Following the launch of the ISE ETF Ventures brand in January 2013, this group's strengthened focus on ETF and index development resulted in many noteworthy milestones. ISE ETF Ventures significantly grew its footprint in the thriving ETF industry in 2013 through various milestones and partnerships, including:
Announced a partnership agreement with Index IQ to support and promote new ETPs focusing on physical diamonds.
Signed a licensing agreement with KSM, the largest ETF issuer in Israel, to license the ISE Water Index (ticker: HHO) for the KSM Water fund (KSMDJWA:IT). The ISE Water Index was named one of the top investment ideas of 2013 by Morgan Stanley Smith Barney’s Global Investment Committee.
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Source: ISE (International Securities Exchange)
NYSE Liffe to Launch Futures on MSCI Factor Indices: Smart Beta Indices
January 27, 2014-IntercontinentalExchange Group (NYSE: ICE), the leading global network of exchanges and clearing houses, today announced that NYSE Liffe will expand its index derivatives franchise with the launch of futures based on MSCI Factor Indices.
NYSE Liffe expects to introduce the industry's first futures contracts on MSCI Equal Weighted Indices and MSCI Minimum Volatility Indices, on February 3, 2014 via Bclear, the Exchange's wholesale facility.
The following new contracts will be available:
MSCI Emerging Market Minimum Volatility and Equal Weighted Futures
MSCI Europe Minimum Volatility and Equal Weighted Futures
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Source: IntercontinentalExchange
DB-Synthetic Equity & Index Strategy-North America-US ETF Market Weekly Review-Market sell-off removes $35.0bn from ETP assets
January 27, 2014--Data in this report is as of Friday, Jan 24th
Market and Net Cash Flows Review
Global equities fell sharply last week. The US (S&P 500) retreated 2.63%; While, outside the US, the MSCI EAFE (in USD) and the MSCI EM (USD) dropped by 1.99% and 2.29%, respectively. In the meantime, performance was negative across all US sectors; the Materials (-4.51%) and Industrials (-3.92%) sectors experienced the largest weekly losses.
The DB Liquid Commodity Index rose by 0.50%; similarly, the Agriculture sector (DB Diversified Agriculture Index), the WTI Crude Oil and Gold prices rose by 0.19%, 2.41% and 1.28%, respectively; while Silver prices fell by 2.03%. Meanwhile on the FX side the USD strengthened against all major currencies. The Euro, the British Pound, the Swiss Franc and the Japanese Yen depreciated 1.01%, 0.35%, 1.71% and 1.93%, respectively. Last but not least, Volatility (VIX) rose by 45.82% during the same period.
The total US ETP flows from all products registered $4.4bn (-0.3% of AUM) of outflows during last week vs. $2.8bn (+0.2%) of inflows the previous week, setting the YTD weekly flows average at -$0.3bn (-$1.2bn YTD in total cash flows). Equity, Fixed Income and Commodity ETPs experienced flows of -$2.7bn (-0.2%), -$1.0bn (-0.4%) and -$0.7bn (-1.1%) last week vs. +$2.3bn (+0.2%), +$0.6bn (+0.2%) and -$0.1bn (-0.2%) in the previous week, respectively. Among US sectors, Financials (+$0.7bn, +1.1%) and Healthcare (+$0.3bn, +1.1%) received the top inflows, while Consumer Discretionary (-$0.3bn, -2.1%) and Consumer Staples (-$0.1bn, -0.7%) experienced the largest outflows.
Top 3 ETPs & ETNs by inflows: EFA (+$0.6bn), IYR (+$0.5bn), VEA (+$0.3bn)
Top 3 ETPs & ETNs by outflows: SPY (-$4.2bn), QQQ (-$1.2bn), EEM (-$1.0bn)
New Launch Calendar: Active, smart beta, currency-hedge and leveraged
There were thirteen new ETFs listed during the previous week. The new products offer exposure to US, Global ex US and EM equities with focus on fundamentals and Dividend, currency-hedged exposure to South Korea, Mexico and Global ex US companies, leveraged (+3/-3) exposure to Europe and actively managed fixed income portfolios with focus in short and medium duration.
Turnover Review: Floor activity decreased by 6.4%
Total weekly turnover decreased by 6.4% to $278.3bn vs. $297.2bn from the previous week. Last week's turnover level was 2.8% below last year's weekly average. Commodity ETPs turnover increased by $0.1bn (+1.4%); while Equity and Fixed Income ETPs turnover decreased by $18.3bn (-6.8%) and $0.9bn (-4.9%), respectively.
Assets under Management (AUM) Review: assets decreased by $35.0bn
US ETP assets dropped by $35.0bn (-2.1%) totaling $1.645 trillion at the end of the week. As of last Friday, US ETPs assets had declined by 2.0% YTD. Assets for Equity, Fixed Income and Commodity ETPs moved -$34.1bn, -$1.0bn and +$0.1bn during last week, respectively.
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Source: Deutsche Bank-Synthetic Equity & Index Strategy-North America
IMF Working paper-Mapping the Shadow Banking System Through a Global Flow of Funds Analysis
January 24, 2014-- Summary: This paper presents an approach to understanding the shadow banking system in the United States using a new Global Flow of Funds (GFF) conceptual framework developed by the IMF's Statistics Department (STA). The GFF uses external stock and flow matrices to map claims between sector-location pairs.
Our findings highlight the large positions and gross flows of the U.S. banking sector (ODCs) and its interconnectedness with the banking sectors in the Euro area and the United Kingdom. European counterparties are large holders of U.S. other financial corporations (OFCs) debt securities. We explore the relationship between credit to domestic entities and the growth of non-core liabilities. We find that external debt liabilities of the financial sector are procyclical and are closely aligned with domestic credit growth.
view the IMF Working paper-Mapping the Shadow Banking System Through a Global Flow of Funds Analysis
Source: IMF
iShares Announces Changes to U.S. Fund Lineup
January 24, 2014-Shares Exchange Traded Funds (ETFs) business, the world's largest manager of ETFs, plans to close and liquidate ten funds that make up the iShares All Country World Index (ACWI) ex-U.S. sector suite.
The following funds will be closed and liquidated based on ongoing reviews, client feedback and limited interest in ex-U.S. sector strategies:
| Ticker | Name | ||
| AXDI | iShares MSCI ACWI ex U.S. Consumer Discretionary ETF | ||
| AXSL | iShares MSCI ACWI ex U.S. Consumer Staples ETF | ||
| AXEN | iShares MSCI ACWI ex U.S. Energy ETF | ||
| AXFN | iShares MSCI ACWI ex U.S. Financials ETF | ||
| AXHE | iShares MSCI ACWI ex U.S. Healthcare ETF |
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Source:BlackRock
Euronext launches Multicurrency Trading Service for ETFs
The first U.S. or European exchange to launch the CNY and the HKD
20 currencies available
January 24, 2014--Euronext, a wholly owned subsidiary of IntercontinentalExchange Group (NYSE: ICE), today announced the launch of a multicurrency trading service for Exchange Traded Funds (ETFs), including for the first time on a U.S. or European exchange, the Chinese Yuan Renminbi (CNY) and the Hong Kong Dollar (HKD), subject to approval of relevant clearing authorities.
The new service will allow international investors to trade any Euronext listed ETFs in 20 different currencies1 . Euronext plans to make it available from Monday 17th February 2014.
By offering investors the possibility of buying an ETF in multiple currencies, Euronext is considerably simplifying access to the international markets, reducing currency exchange risk and foreign exchange costs, and providing investors broader investment opportunities.
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Source: NYSE Euronext
S&P Dow Jones Indices And CBOE Announce Successful Conclusion Of ISE Index Litigation
January 24, 2014--S&P Dow Jones Indices LLC (SPDJI) and Chicago Board Options Exchange, Incorporated (CBOE(R)) reported today that the International Securities Exchange (ISE) has not appealed a federal court decision that rejected ISE's attempt in the New York courts to challenge SPDJI's rights to control the use of the S&P 500(R) and the Dow Jones Industrial Average(TM) as the basis of index options.
CBOE holds an exclusive license to list options on the S&P 500(R) index, the Dow Jones Industrial Average, and select other indices calculated and published by SPDJI.
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Source: CBOE
CFTC.gov Commitments of Traders Reports Update
January 24, 2014--The current reports for the week of January 21, 2014 are now available.
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Source: CFTC.gov
Floating Rate Note Auction Marks Introduction of First New Treasury Security in 17 Years
January 23, 2014--The U.S. Department of the Treasury's Bureau of the Fiscal Service today announced details of the first Floating Rate Note (FRN) auction, a new type of marketable security with a floating interest rate that resets each day and makes coupon payments each quarter.
Today's announcement marks the first new security Treasury has offered since Treasury Inflation Protected Securities (TIPS) were first auctioned in 1997.
"Floating Rate Notes bring additional diversity to Treasury's current portfolio and help support our goal of saving taxpayer dollars by financing the government’s borrowing needs at the lowest cost over time," said Under Secretary for Domestic Finance Mary J. Miller. "Over the past three years, Treasury has worked closely with market participants to design the FRN program and we appreciate their continued feedback."
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Source: US Department of the Treasury
