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DB-Synthetic Equity & Index Strategy-North America-US ETF Weekly Review- Mixed markets fuel $10.5bn ETP outflows
June 11, 2013--Market and Net Cash Flows Review
Equity Markets were mixed during last week. The US (S&P 500) edged higher by 0.78%; While, outside the US, the MSCI EAFE (in USD) and the MSCI EM (USD) dropped by 1.1% and 2.67%, respectively.
Moving on to other asset classes, the 10Y US Treasury Yield rose by 1 bps last week; while the DB Liquid Commodity Index was up by 1.64%. Similarly, the Agriculture sector (DB Diversified Agriculture Index) and the WTI Crude Oil advanced by 1.01% and 4.41%, respectively, while Gold and Silver prices retreated by 0.35% and 2.68%, respectively. Last but not least, Volatility (VIX) dropped by 7.12% during the same period.
The total US ETP flows from all products registered $10.48bn (-0.7% of AUM) of outflows during last week vs. $1.96bn (-0.1%) of outflows the previous week, setting the YTD weekly flows average at +$3.1bn (+$71.76bn YTD in total cash flows).
Equity, Fixed Income, and Commodity ETPs experienced flows of -$3.91bn (-0.35%), -$4.8bn (-1.75%), -$0.33bn (-0.42%) last week vs. -$0.65bn (-0.06%), -$1.22bn (-0.44%), -$0.15bn (-0.19%) in the previous week, respectively.
Among US sectors, Consumer Staples (+$0.27bn, +2.69%) and Utilities (+$0.19bn, + 2%) received the top inflows, while Healthcare (-$0.27bn, -1.52%) and Industrials (-$0.26bn, -3.25%) experienced the largest outflows.
Top 3 ETPs & ETNs by inflows: UWM (+$1.1bn), IWM (+$1bn), EWG (+$0.8bn)
Top 3 ETPs & ETNs by outflows: SPY (-$2.2bn), EEM (-$2bn), IEI (-$1.4bn)
New Launch Calendar: Barron’s 400 and new db x-tracker income alternatives
There were 3 ETFs launched during the previous week. One of the ETFs provides access to a select list of 400 companies chosen based on a fundamental screening process (BFOR). The remaining two ETFs offer two new income product alternatives, UTLT focuses on global regulated utilities; while RVNU offers access to municipal infrastructure revenue bonds.
Turnover Review: Floor activity rose by 30%
Total weekly turnover increased by 51.9% to $431.63bn vs. $284.12bn from the previous week. Last week's turnover level was 60% over last year's weekly average.
Assets under Management (AUM) Review: assets dropped by $17bn
US ETP assets dropped by $0.94bn (-0.6%) totaling $1.472 trillion at the end of the week. As of last Friday, US ETPs have accumulated an asset growth of 10.4% YTD. Assets for Equity, Fixed Income and Commodity ETPs moved -$5.7bn, -$6.2bn, -$0.4bn during last week, respectively.
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Source: Deutsche Bank-Synthetic Equity & Index Strategy - North America
SEC Charges CBOE for Regulatory Failures
June 11, 2013-- The Securities and Exchange Commission today charged the Chicago Board Options Exchange (CBOE) and an affiliate for various systemic breakdowns in their regulatory and compliance functions as a self-regulatory organization, including a failure to enforce or even fully comprehend rules to prevent abusive short selling.
CBOE agreed to pay a $6 million penalty and implement major remedial measures to settle the SEC's charges. The financial penalty is the first assessed against an exchange for violations related to its regulatory oversight. Previous financial penalties against exchanges involved misconduct on the business side of their operations.
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Source: SEC.gov
Harvest Launches U.S. Distribution
Leading Chinese Asset Manager Brings China and Asia-Focused Mutual Funds To U.S. Institutional and Retail Investors through Pioneering Joint Venture
June 11, 2013--June 11, 2013--Harvest Fund Management ("Harvest"), one of China's leading asset management companies, today announced that it has launched Harvest Krane, a pioneering joint venture between its international subsidiary, Harvest Global Investments, and Jonathan A. Krane and his team of industry veterans, which will distribute China and Asia-focused mutual funds to institutional and retail investors in the U.S.
The first offering in the U.S. is the Harvest Funds Intermediate Bond Fund (HXIIX) (the “Fund”) advised by Harvest Global Investments. The Fund’s investment objective seeks long-term total return through a combination of capital appreciation and current income by primarily investing in investment grade and high-yield, high-quality China bonds. The Fund marks the first time that an investment product actively managed by a Chinese asset manager is available in the U.S. Harvest Global Investments and Harvest Krane are working together on additional fund launches designed to bring a broad range of professionally managed Chinese and Asian investment opportunities to help investors in the U.S diversify their portfolios.
“We are extremely excited and proud to enter the United States market. We have created a unique, first-of-its-kind platform that allows U.S. investors to diversify into the compelling long-term growth trends in the Chinese and Asian economies through funds managed by Harvest professionals based in China,” said Henry Zhao, Chief Executive Officer of Harvest Fund Management. “We will deliver to U.S. institutional and retail investors an invaluable perspective and insight into Asia and China, the world’s fastest growing major economy, through our leading portfolio managers on the ground, while at the same time introducing the U.S. investment community to our international subsidiary Harvest Global Investments.”
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Source: Harvest Fund Management
ISE ETF Ventures Joined PureFunds in Ringing NYSE Bell
June 11, 2013--The International Securities Exchange (ISE) today joined PureFunds to ring the Opening Bell(R) at the New York Stock Exchange, celebrating PureFunds' three exchange traded funds (ETFs): PureFunds(TM) ISE Diamond/Gemstone ETF (NYSEArca: GEMS); PureFunds ISE Mining Service ETF (NYSEArca: MSXX); and PureFunds(TM) ISE Junior Silver ETF (NYSEArca: SILJ).
All three ETFs track proprietary indexes developed by ISE.
“PureFunds was one of ISE ETF Ventures’ first partners, and joining them in opening the financial markets is a gratifying experience for ISE,” said Kris Monaco, Head of ISE ETF Ventures. “This partnership represents ISE’s commitment of providing our expertise, our network, and our capital to continue bringing new and diverse products to market.”
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Source: International Securities Exchange (ISE)
BNY MELLON DR INDICES Monthly Performance Update May 2013
June 11, 2013--The BNY Mellon ADR Index Monthly Performance-May 2013 Update has been published and is now available for review.
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Source: BNY Mellon
CBO Federal Debt and the Statutory Limit, June 2013
June 11, 2013--The Congress has traditionally placed a limit on the total amount of debt that the Department of the Treasury can issue to the public and to other federal agencies.
Lawmakers have enacted numerous increases to the debt limit-commonly known as the debt ceiling-some of which have been temporary and many of which have been permanent. The Treasury is currently at its limit on borrowing.
What Is the Current Debt Limit?
The current statutory limit on total debt issued by the Treasury is just under $16.7 trillion. The No Budget, No Pay Act of 2013 (Public Law 113-3) suspended the debt ceiling from February 4, 2013, through May 18, 2013. The act also specified that the amount of borrowing that occurred during that period should be added to the previous debt limit of $16.394 trillion. On May 19, the limit was reset to reflect the cumulative borrowing through May 18 and now stands at $16.699 trillion.
view the Federal Debt and the Statutory Limit,
June 2013
Source: Congressional Budget Office (CBO)
FINRA Issues New Investor Alert: Alternative Funds Are Not Your Typical Mutual Funds
June 11, 2013--The Financial Industry Regulatory Authority issued a new Investor Alert called Alternative Funds Are Not Your Typical Mutual Funds to inform investors considering investing in alternative funds to be aware of the unique characteristics and risks of these investments.
Alternative or "alt" mutual funds are publicly offered, SEC-registered funds that hold more non-traditional investments and employ more complex trading strategies than traditional mutual funds.
Alt funds might invest in assets such as global real estate, commodities, leveraged loans, start-up companies and unlisted securities that offer exposure beyond traditional stocks, bonds and cash. These funds also may employ complex strategies, including hedging and leveraging through derivatives and short selling. Some alt funds are structured as a fund containing numerous alternative funds. Although the strategies and investments of alt funds may bring to mind those of hedge funds, alt funds are regulated under the Investment Company Act of 1940, which limits their operations in ways that do not apply to unregistered hedge funds.
"Investors should fully understand the strategies and risks of any alternative mutual fund they are considering. FINRA is warning investors to carefully consider not only how an alt fund works, but how it might fit into their overall portfolio before investing," said Gerri Walsh, FINRA's Senior Vice President for Investor Education.
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Source: FINRA
Morgan Stanley-Exchange-Traded Funds
June 10, 2013--US ETF Weekly Update
Weekly Flows: $9.3 Billion Net Outflows
ETF Assets Stand at $1.5 Trillion, up 10% YTD
Five ETF Launches Last Week
Two Vanguard Funds Transition to New Indexes
US-Listed ETFs: Estimated Flows by Market Segment
ETFs posted net outflows of $9.3 bln last week, the largest week of net outflows YTD
Following a period of strong net inflows to start the year ($83 bln through 5/17/13), ETFs have exhibited net outflows for three
consecutive weeks ($11.5 bln in aggregate)
US Small- & Micro Cap ETFs have generated net inflows of $2.9 bln over past three weeks, including $1.1 bln last week
Last week’s net outflows were widespread across the majority of market segments; in particular, Fixed Income ETFs
experienced $4.2 bln in net outflows with concentration in broad investment grade and high yield, and intermediate duration
Treasury ETFs
ETF assets stand at $1.5 tln, up 10% YTD; $71.4 bln net inflows YTD
13-week flows remain mostly positive among asset classes; combined $27.8 bln in net inflows
International-Developed ETFs have generated $11.0 bln in net inflows over the last 13 weeks, the most of any measured
category; despite recent performance weakness, Japan ETFs have still driven net inflows for the category over this period
Commodity and International- Emerging ETFs continue to bleed assets; specifically, the two largest gold and two largest broad
emerging market ETFs have exhibited combined net outflows of $12.1 bln and $11.5 bln, respectively, over the last 13 weeks
US-Listed ETFs: Estimated Largest Flows by Individual ETF
The iShares Russell 2000 Index Fund (IWM) continued its recent streak of strong net inflows last week
IWM has generated aggregate net inflows of $2.3 bln over the last three weeks; moreover, ProShares Ultra Russell 2000 (UWM),
which targets 200% the daily total return of the Russell 2000 Index, led all ETFs this past week with $1.1 bln in net inflows
Unsurprisingly, given the recent focus on ‘tapering’ and increased volatility in the Treasury market, fixed income-focused ETFs
occupied six of the top 10 net outflow spots
Interestingly, the three fixed income ETFs appearing in the top 10 net inflows were all focused on short duration bonds; Morgan
Stanley Wealth Management’s strategists have been recommending investors lower portfolio duration and believe investment
US-Listed ETFs: Short Interest Data Unchanged: Based on data as of 5/15/13
SPDR S&P 500 ETF (SPY) had the largest increases in USD short interest at $1.1 bln
Despite the increase in short interest, SPY’s 240.2 mln shares short are only 6% above their 52-week average
Aggregate ETF USD short interest increased by $2.6 bln over the period ended 5/15/13
The average shares short/shares outstanding for ETFs is currently 4.5%
The CurrencyShares Japanese Yen Trust (FXY) had one of the highest % of shares short relative to shares outstanding at 187% for
the period ended 5/15/13; FXY has consistently been one of the most heavily shorted ETFs since we began tracking the data and
the trade has recently paid off as FXY is down more than 14% YTD on a market price basis
Based on multiple borrowings and the ability to continuously create new shares, shares short as a % of shares outstanding can
exceed 100% (only six ETFs exhibited shares short as a % of shares outstanding greater than 100%)
grade credit offers a better risk/reward profile than high yield while they see long-term value in floating-rate loans
US-Listed ETFs: Estimated Largest Flows by Individual ETF
The iShares Russell 2000 Index Fund (IWM) continued its recent streak of strong net inflows last week
IWM has generated aggregate net inflows of $2.3 bln over the last three weeks; moreover, ProShares Ultra Russell 2000 (UWM),
which targets 200% the daily total return of the Russell 2000 Index, led all ETFs this past week with $1.1 bln in net inflows
Unsurprisingly, given the recent focus on ‘tapering’ and increased volatility in the Treasury market, fixed income-focused ETFs
occupied six of the top 10 net outflow spots
Interestingly, the three fixed income ETFs appearing in the top 10 net inflows were all focused on short duration bonds; Morgan
Stanley Wealth Management’s strategists have been recommending investors lower portfolio duration and believe investment
grade credit offers a better risk/reward profile than high yield while they see long-term value in floating-rate loans
US-Listed ETFs: Short Interest Data Unchanged: Based on data as of 5/15/13
SPDR S&P 500 ETF (SPY) had the largest increases in USD short interest at $1.1 bln
Despite the increase in short interest, SPY’s 240.2 mln shares short are only 6% above their 52-week average
Aggregate ETF USD short interest increased by $2.6 bln over the period ended 5/15/13
The average shares short/shares outstanding for ETFs is currently 4.5%
The CurrencyShares Japanese Yen Trust (FXY) had one of the highest % of shares short relative to shares outstanding at 187% for
the period ended 5/15/13; FXY has consistently been one of the most heavily shorted ETFs since we began tracking the data and
the trade has recently paid off as FXY is down more than 14% YTD on a market price basis
Based on multiple borrowings and the ability to continuously create new shares, shares short as a % of shares outstanding can
exceed 100% (only six ETFs exhibited shares short as a % of shares outstanding greater than 100%)
US-Listed ETFs: Most Successful Recent Launches by Assets Source: Bloomberg, Morgan Stanley Wealth Management ETF Research. Data estimated as of 6/7/13 based on daily change in share counts and daily NAVs.
$7.2 bln in total market cap of ETFs less than 1-year old
Newly launched International Equity ETFs account for 40% of the market cap of ETFs launched over the past year; 78% of the
assets are tied to two ETFs tracking investable market versions of the MSCI developed market and emerging market indices;
MSCI investable market indices target 99% of the available market cap versus 85% their more traditional indices
Issuance has been light in 2013 relative to the past three years; 53 new ETF listings and 28 closures/delistings YTD
The top 10 most successful launches make up 66% of the market cap of ETFs launched over the past year
Six ETF sponsors and two asset classes represented in top 10 most successful launches; seven have an income orientation
First Trust NASDAQ Technology Dividend Index Fund (TDIV) cracked the top 10 most successful launches over the past year;
TDIV invests in a modified dividend value weighted basket of technology (80%) and telecommunications companies (20%)
First Trust ETFs now occupy three of the top 10 spots and all have an income focus
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Source: Morgan Stanley
Defined contribution plans keep distance from ETF options
No fee advantages seen vs. more established investment tools, and no one is really asking for ETFs
June 10, 2013--Despite significant overall growth in exchange-traded funds, ETFs barely register in 401(k) plans.
Consultants, researchers and ETF providers say executives at plans larger than $100 million have shown little interest, primarily because the fees they pay for investment options such as institutional shares of index funds, collective trusts and separate accounts are as cheap or cheaper than those of ETFs.
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Source: Pensions & Investments
NYSE Arca Unveils Exchange Traded Products Incentive Program
Supporting the overall growth of the ETP marketplace
June 10, 2013- NYSE Euronext (NYX) announced that it has received approval from the U.S. Securities and Exchange Commission (SEC) to launch the NYSE Arca Exchange Traded Product Incentive Program (IP).
This new 12 month pilot program offers an alternative for incentivizing lead market makers (LMM) to be the primary market maker in certain exchange traded products (ETPs) selected by issuers.
NYSE Arca is the only Exchange in the U.S. to offer this optional IP, which provides greater certainty to ETP issuers that the LMM will receive the economic incentive tailored to their specific ETP. In return, the LMM is required to meet industry-leading quoting obligations and requirements aimed at improving market quality. The IP pilot program will launch in the second half of 2013.
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Source: NYSE Euronext
