All posts by MarketsMuse Staff Reporter

ETF News, People Profiles

ETF Market’s “Dame Deborah” Fuhr Launches Independent Research Firm

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Debbie Fuhr, the undisputed “Dame” of the exchange-traded-funds industry, and most recently BlackRock’s Managing Director and global head of ETF research and implementation will open the doors of a new independent research firm, “ETF Global Insight” next Monday. Prior to Debbie’s 3-year stint at BlackRock/BGI, she was billeted for 11 years at Morgan Stanley’s London barracks where she was an MD and head of that firm’s  investment strategies group.

photo courtesy of CNBC

As reported by a variety of global business news outlets, Debbie’s new domain “will publish research on the ETF industry as well as providing education and assistance with product comparisons and asset allocation implementation.”  Debbie will be joined in this new  London-based boutique by former co-workers Shane Kelly and Matthew Murray. All three are widely-credited for developing the first ETF industry research reports.

While speaking to FT.com reporter Chris Flood in discussing the new firm, Debbie stated, “All the members of the ETF eco-system have been citing the need for more and better independent education and research to help navigate the now vast array of products that are available.”

Observed  Andy McOrmond, co-head of ETF Trade Execution for institutional broker  WallachBeth Capital and a long-time industry associate of Ms. Fuhr,  “Debbie is an industry icon, and her new focus on providing an independent perspective on the broad array of ETF products will undoubtedly prove to be a bonus for those keeping their fingers on the pulse of the ETF market place.”

 

ETF News, Tech Talk

PIMCO Primes The Pump for Launch of ETF

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Its countdown time for all of those following PIMCO’s entry into the ETF space; on March 1,  the House that Bill Gross Built is scheduled to debut The PIMCO Total Return Exchange-Traded Fund under the ticker TRXT. Those that click on the link to the fund will be able to review the entire prospectus.

According to Securities Technology Monitor reporter Tom Steinert, “This is akin to the day in 1981 when IBM blessed the desktop computer as a product worth buying into.”

Because Gross is notorious for being an active manager (vs. passive), some industry observers fear that by virtue of PIMCO’s size,  this new ETF might somehow exacerbate the overall equity market volatility that some believe is attributable to ETFs in general. The editors here say “some people still believe the world is flat” and expert ETF traders that we’ve heard from dispel the notion that market volatility is attributable to ETF products.  Perhaps argument for the defense can be found simply by looking at the [declining] volatility over the past 3 months and the steadily increasing volumes in ETF products.

Alas, if only the SEC could see more clearly and recognize that its a handful of badly-designed apples in the ETF mix that are spoiling the reputation of the orchard.

Click on the STM logo above to read the entire story.

ETF News, Global Macro Strategy, People Profiles

Amsterdam Hosting 3rd Annual InsideETFs Europe

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Where’s a better place than Amsterdam for an International ETF conference in the month of May? Our global concierge says,  “No place compares to Amsterdam, for a variety of reasons!”

Which is exactly why IndexUniverse, the largest ETF conference producer, is once again hosting its “Annual InsideETFsEurope” for the third year in one of the most entertaining cities in all of Europe.

US-based ETF market players who have attended InsideETFsEurope in prior years will confirm this program is a  “great do” for those that want to refresh relationships and make new acquaintances with the growing number of European fund managers that are building out their ETF portfolios.

Observed upcoming attendee David Beth, President of NYC-based WallachBeth Capital, one of the “go-to” firms for those seeking ETF best execution in US ETF products, “Having recently formed an alliance with London’s NSBO to replicate our best execution model for Europe, this conference will provide a great opportunity for portfolio managers and head traders to better understand what we do, and how we do it with respect to capturing better price executions than they might ordinarily be accustomed to.”

Cheers to all..click on the conference logo to register and don’t forget to make your dinner reservations well in advance!

ETF News

UK Wrap Platforms Wrapping Arms Around ETFs

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As reported by FT.com, retail investors in the UK are rapidly wrapping their arms around ETF products, and platform providers are ramping up their offerings to facilitate the burgeoning growth in what is already a ubiquitous product in the US.

  According to the FT.com story, David Bower, head of iShares UK, said the ETF industry  would be a major beneficiary of RDR which will ban commission payments to financial advisers from the beginning of 2013. ETFs, unlike many other investment funds, do not pay commissions to advisers.

Mr Bower said the strong growth that iShares saw on wrap platforms in 2011 suggested that ETF usage amongst financial advisers and discretionary fund managers would continue to rise.

BlackRock saw assets held in iShares ETFs across six wrap platforms used by IFAs increase 34 per cent in 2011 to £746m at the end of December.

The six platforms are run by Ascentric, Novia, Nucleus, Raymond James, Standard Life and Transact.

Novia saw assets held in iShares ETFs increase 96 per cent last year while Ascentric reported an 88 per cent rise.

Paul Boston, sales and marketing director at Novia, said that ETFs were playing an increasingly important role in both advisory and discretionary portfolios on the Novia platform.

“This is proving to be a well-trodden investment strategy that significantly reduces the overall cost of a client’s portfolio,” Mr Boston said.

Further affirming this trend, UK-based institutional broker North Square Blue Oak (NSBO) has recently aligned with US-based ETF market expert WallachBeth Capital to form WallachBeth International, whose role, according to NSBO principal Laurie Pinto, “will include servicing institutional portfolio managers as well as leading wrap account administrators in the course of their securing best execution in a market place that is still catching up to the level of transparency that is available for US-centric ETF products.”

Added Pinto, whose firm is headquartered in London with an affiliate office in Beijing, “We certainly expect the demand for ETF products in the European market will emulate the growth trajectory which the US market has experienced over the past several years. To the extent that we can introduce best practices for true best execution, we believe we’ll be adding significant value to institutions that are utilizing these products.”

ETF News

HFTs Hampering Trade in ETFs? SEC Wants to Know.

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As reported by Reuters, U.S. securities regulators have widened their inquiry into the trillion-dollar market for exchange-traded funds, according to a person familiar with the matter.

Prompted by a delay in a big trade at a popular ETF, the U.S. Securities and Exchange Commission is taking a closer look at a possible connection between high-frequency traders and hedge funds jumping in and out of ETFs, and instances where ETF trades fail to settle on time, this person said.

The SEC’s inquiry is part of a wider probe that began last year and focused on complex ETFs that allow investors to magnify returns or bet against stock indexes.

U.S. and UK regulators are concerned that so-called settlement fails – when trades are not completed on time – could contribute to volatility and systemic risk in financial markets.

The probe’s main focus is on illiquid ETFs, but regulators are now also examining popular ETFs and failed trades, according to the person.

An SEC spokesman confirmed that the agency is looking into failed trades and ETFs, but declined to elaborate.

That said, the SEC might be barking up on the wrong tree, as many ETF experts discount criticism of the impact ETFs might have on trade settlement processes. In a recent report, State Street Corp, a Boston asset manager that created the first ETF in 1993, said that “short interest theoretically should have no impact on an ETF’s performance.”

ETF industry leaders say the data on ETF trade failures does not account for the fact that market-makers, the firms that do the bulk of ETF trading, have seven days to clear trades. The data assumes that all market participants must clear in four days, and any trade that settles later is counted as a failed trade by the National Securities Clearing Corp, a trade processing subsidiary of the Depository Trust & Clearing Corp.

READ THE ENTIRE STORY HERE

ETF News

ETF Fund Flow: Trumping Mutual Funds

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According to technology and trading firm ConvergEx Group, during the first 6 weeks of 2012, more than $8 billion has flowed in to U.S. Equity ETFs, while nearly $8 billion has “flown out” of U.S. equity mutual funds.

“Some of the commentary surrounding these products has made them sound like the hoof beats which precede the Four Horsemen of the Apocalypse,”  said Nicholas Colas, ConvergEx’s Chief Market Strategiest, alluding to various critiques of ETFs that have emerged over the past 18 months, notably Kauffmann Foundation reports that blamed ETFs for a dead U.S. initial public offering market, and argued huge short interest in some funds could pose systemic risk.

“If you want to understand how investment capital flows play into the year-to-date rally for risk assets, the world of exchange-traded funds is essentially your ‘One Stop Shop,’” Colas said in the note, stressing that whatever negative comments are being made about ETFs, they are a great way to gauge overall sentiment in financial markets.

“But for 2012, you can just as accurately call them the most visible source of capital to help U.S. stocks and other risk assets higher,” Colas wrote.

Most Popular Funds

As far as the individual funds that have really “Killed it” in year-to-date asset gathering this year-to-date, Colas said the ETFs that have pulled in over $1 billion include:

  • iShares iBoxx $ High Yield Corporate Bond Fund (NYSEArca: HYG)
  • iShares MSCI Emerging Markets Index Fund (NYSEArca:EEM)
  • iShares Russell 2000 Fund (NYSEArca:IWM)
  • iShares $ Investment Grade Corporate Bond Fund (NYSEArca: LQD)
  • Vanguard MSCI Emerging Markets ETF (NYSEArca:VWO)
  • Powershares QQQ (NasdaqGM QQQ)
  • SPDR Barclays High Yield Bond ETF (NYSEArca: JNK)
  • SPDR Gold Trust (NYSEArca: GLD)

Apart from the strong push into U.S. equities, Colas said emerging markets and precious metals are coming back into favor, with inflows of $9.1 billion and $2 billion, respectively.

”We’ve noticed a trend now for at least a year where investors use country-specific funds in lieu of regional products,” Colas said, singling out a number of those funds that have gathered more than $100 million dollars in new investments since the start of the year.

Among those are:

  • iShares FTSE China 25 Index Fund (NYSEArca: FXI)
  • iShares MSCI China Index Fund (NYSEArca: MCHI)
  • iShares MSCI Germany Index Fund (NYSEArca: EWG)
  • Market Vectors Russia ETF (NYSEArca: RSX)
  • iShares MSCI Chile Index Fund (NYSEArcaECH).

“I have no doubt that mutual fund flows will eventually turn positive, and we’ll have to keep an eye on this trend when it develops,” Colas said.

“But for now, exchange traded funds look to be the horse pulling the market’s proverbial cart.”

ETF News

Bullion Bulls Back Buying SPDR Gold (GLD)?

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Despite cutting his GLD holdings at the end of 2011, Billionaire John Paulson is, according to a letter to investors obtained by Bloomberg LP, bullish on bullion, and adding to his 17 million+ share position in the yellow metal ETF.

Similar stellar hedge fund managers, who have been trading the trend and more recently cashed in on paper profits,  have purportedly since used the recent lackluster period of early January through mid February, in which gold traded down 20% from all time highs to re-load.

One in-the-know hedge fund trader (who asked not to be identified) observed, “you can look at 13-F’s and make all the interpretations that you want, but those filings only report yesterday’s news, whether its Soros adding, or SAC cutting back, or Tudor liquidating all of its GLD during the last quarter; the fact is, everyone still has an axe in owning gold to a much greater extent than they would have 3-4 years ago.

ETF News, Tech Talk

“Navesis-ETF” Launches Today: 1st Euro-based Alternative Trading System for ETFs

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A joint partnership between Normua Holdings and inter-dealer broker Tradition PLC formalized the launch of the ETF industry’s first electronic exchange platform.  Based in London and designed for the European theatre, where ETF transparency is often problematic, “Navesis-ETF” is  intended to provide “qualified customers” the ability to trade ETFs in real-time, and enable investors to create and redeem ETF units based on the fund’s net asset value (NAV). The initial launch of the platform will facilitate trade in upwards of 100 different Euro-centric ETF issues.

According to Rupert Hodges, managing director of  TFS Derivatives, the brokering division of Compagnie Financiere Tradition that has partnered with Nomura, ” Up until now, institutional investors in ETFs on the primary market could only buy and sell units via market makers and other ‘authorised participants, accepting an indicative price determined by the supply and demand for the ETF offered. By offering the ability to trade based on NAV, Navesis-ETF is a game changer.”

Lee Burrows, Head of Delta One, EMEA for Nomura added, “Listing on a MTF will allow us to provide more liquidity and maximise efficiency in pricing.” Navesis-ETF has been in development for almost a year and according to the joint venture press release, the platform has been beta-tested for the past two months by clients that include Credit Suisse, HSBC and UBS.  Burrows stated there will be a minimum order size for units of 25,000-100,000 ETF shares and will operate in two phases. From 0900-1200 GMT it will operate a continuous call phase, accepting bids and offers. Then, from 1200-1215 GMT, there will be a “dark option” phase similar to dark pool trading. It will also provide an auction process once a day.

 

 

ETF News, People Profiles

Bogle Boggles and Balks re: ETFs

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In the category of  “He who speaks with forked tongue…” Index Icon and Vanguard Group founder John Bogle once again threw a curve ball while speaking at today’s Bloomberg Portfolio Manager Mash-Up.

John Bogle, Vanguard Group founder

Stating “ETFs are the greatest trading innovation of the 21st century,” what the Midas of Mutual Funds added with a big (*) was : “But the question is,  ‘Are they the greatest investment innovation?’ and the answer is ‘no.”

According to coverage of the event, fully credited to InvestmentNews, Bogle pulled no punches by calling out BlackRock for “just making a muddy pool muddier” in reference to BlackRock’s aggressive product launches. Bogle, who is also known as the “Midas of  Mutual Funds”, reminded the Bloomberg conference attendees “There’s something like 2000 ETFs now. That’s almost as many stocks as there are.”

One attendee then asked Mr. Bogle, “How many mutual funds are there?” In lieu of replying, he headed to the loo, where the self-proclaimed Buffet-like Market Bull took a bio break.

 

 

ETF News

iShares Adds More Junk (Bond) ETFs

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[slideshow]

For those raising their hands high and asking for more high yield bond ETFs, iShares is serving up two more corporate bond ETFs that “will cover a spectrum of credit quality ranging from low-investment-grade to junk bonds.” Both of the new funds will own corporates issued in US dollars, euros, British pounds and Canadian dollars.

iShares announcement is on the heels of Van Eck registering a bucket full of corporate bond ETFs earlier this week.

Kudos to Cinthia Murphy at IndexUniverse for keeping her fingers on the pulse of the new registration market!

ETF News

“Agency-Only Execution Firm” To Seed Hedge Fund Clients

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Cantor Fitzgerald, the “broker’s broker” that literally rose from the ashes of 9/11 to rebuild its business trafficking in multiple product types, including ETFs and options, and positions itself as an “agency-only” aka “conflict-free” broker, today announced the second phase of its plan to expand into the [often-conflicted] territory of hedge-fund seeding.

As reported by FINAlternatives,

Cantor hopes to raise $1.25 billion for their hedge fund seeding business, and the first tranche could provide between $25 million and $50 million to upwards of 25 emerging managers.

Cantor, which by virtue of its gargantuan global footprint, often finds itself not only standing in between captive buyers and sellers, but has occasionally been embroiled in issues that strike at the epicenter of the famous  Chinese Wall.  However much the strategy of a broker providing trading capital to its customers might seem to present potential conflicts with regard to the firm’s  “agency-only execution” model, one source who is not authorized by his firm to publicly comment, suggested “..industry watchers are confident that Cantor will always do the right thing..” Link to the full story by clicking on the FINAlternatives log.

ETF News

First Trust Launches More Intl. ETFs

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First Trust, the issuer of the first cloud computing ETF (SKYY) announced today they’ll be coming to market with a basket full of fun in their AlphaDEX Fund series.

Up to the plate for trading on Wednesday is a first string list of products: First Trust Canada AlphaDEX (NYSEArca : FCAN),  First Trust Germany AlphaDEX (NYSEArca : FGM), First Trust Switzerland (NYSEArca: FSZ), FirstTrust Hong Kong AlphaDEX (NYSEArca: FHK), First Trust Taiwan AlphaDEX (NYSEArca: FTW), and last, but not least, First Trust UK AlphaDEX Fund (NYSEArca: FKU)

Global Macro Strategy

No Free Luch Re: “Commission-Free” ETFs

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As observed by Forbes contributor Janet Brown, it seems the race to zero is becoming rampant in the brokerage community when promoting “commission-free trading for ETFs.” A closer look at the story tells us that discount broker talk is even cheaper than the commissions, and RIAs (and others) should read the fine print imbedded in various brokerage firm marketing materials.  Hold firm to Rule #1: : “There really ain’t no free lunch..”

According to Andy McOrmond, co-head of ETF trading for agency-execution firm WallachBeth Capital, “the article serves as yet another reminder that  beauty is not in the eyes of the ETF beholder when it comes to looking at trading screens, which simply don’t display the real best price available for even the most seemingly illiquid ETF product.”

Strike Price

VIX Options Volume Spike: Front-Runners Focus on Liquidation?

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A snarly spike in iPath’s VXX is causing some to scratch heads..is it a sign of things to come (change in recent weather of sunny and warm)? Or, was the volume surge a symptom of traders sensing that one customer was liquidated by their clearing agent?
Read the full story courtesy of ETF Daily News Continue reading →

Global Macro Strategy, People Profiles

WallachBeth ETF Trader Takes A Dive: To Raise $100k for ALS

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Chris Hempstead; Head of ETF Trading / WallachBeth Capital

Hands above your head and clap ’em together for Chris Hempstead, head of ETF trading at WallachBeth Capital..Hempstead recently took a dive (in frigid water), to help raise $100k for ALS…See the full coverage courtesy of TRADERS Magazine