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Morgan Stanley-Weekly ETF
October 31, 2012--US ETF Weekly Update
Weekly Flows: $9.7 Billion Net Outflows
ETF Assets Stand at $1.3 Trillion, up 21% YTD
Six ETF Launches Last Week
QuantShares to Liquidate Three ETFs
AdvisorShares ETF Undergoes Name Change
US-Listed ETFs: Estimated Flows by Market Segment
For only the second time in 13 weeks, ETFs posted net outflows last week
ETFs exhibited net outflows of $9.7 bln last week primarily driven by US Large-Cap Equity ETFs ($10.6 bln in net outflows)
Interestingly, International and Global Equity ETFs generated a combined $1.7 bln in net inflows
ETF assets stand at $1.3 tln (up 21% YTD) and have posted net inflows 33 out of 43 weeks in 2012 ($129.4 bln YTD)
13-week flows were mostly positive among asset classes; combined $47.9 bln net inflows
Fixed Income ETFs have posted net inflows 61 out of the past 63 weeks; including $11.8 bln over the past 13 weeks
Fixed Income ETFs account for 19% of total ETF market cap, up from 14% at the beginning of 2011
US-Listed ETFs: Estimated Largest Flows by Individual ETF
The recently renamed iShares Core S&P 500 ETF (IVV) generated net inflows of $462 mln, most of any ETF
Notably, with certain investors becoming more positive on Chinese equities, the iShares FTSE/Xinhua China 25 Index Fund (FXI),
which currently holds 25 stocks and has 57% allocated to financials, posted net inflows of $253 mln last week
US Equity ETFs accounted for 19 of the 25 ETFs to exhibit the largest net outflows last week and were led by the SPDR S&P 500 ETF (SPY) which had net outflows of $10.2 bln
US-Listed ETFs: Short Interest
Data Updated: Based on data as of 10/15/12
PowerShares QQQ (QQQ) had the largest increase in USD short interest at $486 mln
Despite an increase in short interest last period, QQQ’s shares short remained 33% below their average level over the past year
Aggregate ETF USD short interest decreased by $1.1 bln over the past two weeks ended 10/15/12
The average shares short/shares outstanding for ETFs is currently 4.2%
Smaller ETFs by market cap may skew the results (4 of the top 10 with the highest % of shares short have market caps <$25 mln)
Two currency ETFs (CurrencyShares Euro and Yen Trusts-FXE, FXY) are some of the most heavily shorted ETFs; YTD, the funds
have exhibited no correlation to each other and investors have often talked about them in conflicting terms (euro=risk on, yen=risk off)
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 Smith Barney Research. Data estimated as of 10/26/12 based on daily change in share counts and daily NAVs.
$7.4 billion in total market cap of ETFs less than 1-year old
Newly launched Active ETFs account for 50% of the market cap of ETFs launched over the past year
141 new ETF listings and 73 closures YTD (additional 6 liquidations have been announced)
Over the past year, many of the successful launches have an income orientation
Six different ETF sponsors and two asset classes represented in top 10 most successful launches
Two international high yield bond ETFs had a surge in positive flows, relative to their market caps, last week; the Market
Vectors International High Yield Bond ETF (IHY) and iShares Emerging Markets High Yield Bond Fund (EMHY) posted
combined net inflows of $185 mln
Four iShares minimum volatility ETFs with a total market cap of $1.9 bln surpassed the one year mark and fell off the lists
BNY Mellon- Consultant 360
October 31, 2012--Thought Leadership Highlights
Derivatives Business Developments
Nadine Chakar, global head of BNY Mellon's Derivatives360 business provides insight on the firm's new Global Collateral Services arena along with her reaction to regulations impacting the business.
Prime Custody in The Spot Light
Prime custody is becoming the choice for hedge funds and investors. Marina Lewin, global head of business development discusses these trends. More » Structural shifts continue to drive growth.
A Perspective on UCITS
Alternative UCITS continue to attract healthy inflows of capital. Examine the growth factors behind this trend along with key features new entrants should be aware of when considering enhanced operating features offered by custodians.
Borrower Default Indemnification
Explore how new and proposed regulation is likely to change customary securities lending practices.
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Source: BNY Mellon
S&P Dow Jones Indices Announces Changes To The S&P/TSX Canadian Indices
A Deletion From The S&P/TSX Venture Composite Index
October 30, 2012--S&P Canadian Index Services will make the following changes in the S&P/TSX Canadian Indices:
First Point Minerals Corp. (TSXVN:FPX) will be removed from the S&P/TSX Venture Composite Index after the close of trading on Wednesday, October 31, 2012.
The company will graduate to trade on TSX under the same ticker symbol.
Source: S&P Canadian Index Services
Direxion Funds Goes Live With SunGard's Protegent Social Media Surveillance Solution
October 29, 2012--Direxion Funds, a provider of alternative strategy mutual funds and exchange traded funds, is now using SunGard's Protegent solution to monitor its staff's use of social media.
Direxion Funds is using Protegent to help monitor and moderate its employees' activity on platforms such as Facebook, LinkedIn and Twitter as well as their own websites. The firm will also use the solution to check for policy and Lexicon violations.
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Source: Compliance Week
Treasury Announces Marketable Borrowing Estimates
October 29, 2012-- The U.S. Department of the Treasury today announced its current estimates of net marketable borrowing for the October-December 2012 and January-March 2013 quarters:
During the October-December 2012 quarter, Treasury expects to issue $288 billion in net marketable debt, assuming an end-of-December cash balance of $60 billion.
This borrowing estimate is $29 billion lower than announced in July 2012. The decrease in borrowing relates to lower outlays, higher receipts, and changes in the cash balance assumptions.
During the January – March 2013 quarter, Treasury expects to issue $342 billion in net marketable debt, assuming an end-of-March cash balance of $30 billion.
During the July – September 2012 quarter, Treasury issued $264 billion in net marketable debt, and ended the quarter with a cash balance of $85 billion. In July 2012, Treasury estimated $276 billion in net marketable borrowing and assumed an end-of-September cash balance of $60 billion. The decrease in borrowing was driven by higher-than-projected receipts—primarily due to Treasury's sale of American International Group common stock—and lower-than-projected outlays, partially offset by changes in the cash balance assumptions.1
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Source: US Department of the Treasury
Mutual Fund Leaders Aim to End Jam Over Rules
October 26, 2012--Worried about a regulatory crackdown, mutual fund executives are pushing for limited restrictions on a controversial type of fund in an effort to end a bitter dispute between the government and the financial industry.
Representatives from BlackRock, Fidelity, Vanguard and other large asset managers met on Friday with the head of the Securities and Exchange Commission and other regulators to present a plan intended to ward off runs on money market funds, low-risk investment vehicles that faced crippling withdrawals by investors during the financial crisis.
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Source: New York Times
New technology helps ETF traders go it alone
October 26, 2012--Having recently joined the markets desk on the FT, I have pondered the usefulness of the market reports that appear daily on the back page of the paper. Do people still want to read such accounts when they can get market updates delivered to their mobile phones throughout the trading day?
Apparently they do – according to an unscientific straw poll of one, anyway. A former colleague now in the public relations business tells me he uses the reports to make decisions on whether to buy or sell an exchange traded fund tracking the FTSE 250 index. This strategy has returned double digits this year, he reports. So he votes to leave the FT’s back page alone.
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Source: FT.com
U.S. Regulator Said Set to Appeal Court Ruling on Trading Limits
October 26, 2012--The main U.S. regulator of derivatives is set to appeal a court ruling that overturned a rule that imposed trading limits on oil, natural gas and other commodities, according to a person with knowledge of the matter.
The five-member Commodity Futures Trading Commission is in the process of voting in private on a recommendation from the agency’s general counsel’s office to appeal the ruling. The commission’s three Democrats, Gary Gensler, Bart Chilton and Mark Wetjen support the appeal, according to the person. It is unclear how soon the agency could file the appeal.
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Source: Bloomberg Business Week
There Is Life Beyond Brazil For ETF Investors
Peru, Colombia and Chile appear as interesting contenders for diversifying exposure in Latin America
October 26, 2012--Generally speaking, when an ETF investor pays attention to Latin America he usually focuses on Brazil. And this is no surprise; not only is it the largest economy in the region, but also half of the ETFs that follow investments in the region invest a large part of their resources in the Latin American giant.
However, moving beyond Brazil, the Andean region offers interesting possibilities for ETF investors. In particular the economies of Peru, Colombia and Chile.
These countries have solid growth which, on occasions, exceeds that of Brazil. By the same token, they have more moderate levels of inflation and a more stable political situation than in previous years. Without forgetting that these are countries that are rich in commodities. All of which represent advantages that offer stability and the opportunity to obtain attractive returns given the revaluation of commodities.
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Source: FundsAmerica
FTSE Establishes Exchange Traded Products (ETP) Service Unit
October 26, 2012--FTSE Group ("FTSE") announced today the establishment of a new Exchange Traded Products (ETP) service unit to expand FTSE's product and service offering and build on its strong local support for ETP and exchange-traded fund (ETF) clients globally.
FTSE, the world’s third-largest equity ETF index provider, has seen its ETF-related assets under management (AUM) grow fivefold over the past three years, driven by the success of products such as iShares’ FTSE China A50 Fund ETFs, Vanguard’s All-World ex US Fund, and global real-estate ETFs based on the FTSE EPRA/NAREIT Index.
Earlier this month, Vanguard announced that it will switch six international equity ETFs to FTSE benchmarks, replacing MSCI. The switch includes Vanguard’s Emerging Markets Stock Index Fund and its associated ETF (Ticker: VWO), the world’s largest emerging markets ETF. With the transition, some $124bn in ETF assets are now indexed to FTSE benchmarks.
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Source: FTSE
