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ETF News

Threat Of Hackers Grows And So Does Cyber Security ETFs

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MarketMuse update courtesy of Todd Shriber of ETF Trends, profiles the increase in cyber security ETFs as the threats of being hacked become more and more relevant.

The PureFunds ISE Cyber Security ETF (NYSEArca: HACK) continues to cement its status as a legitimate event-driven exchange traded fund.

HACK is higher by 0.7% Tuesday on volume that is already more than quadruple the daily average after Russia’s Kaspersky Lab, a major cyber security firm, said a group of hackers have stolen as much as $1 billion from over 100 banks in 30 countries since late 2013.

Various media outlets are reporting those hackers are more interested in financial gain than pilfering personal information from the banks’ customers. That point is unlikely to assuage the banks or their customers, but it is enough to have HACK trading at record highs for the second consecutive session.

HACK’s Tuesday momentum is carrying over from last Friday when the ETF soared to a record high on volume of nearly 1.4 million shares as President Obama hosted the first-ever cyber security summit, which featured luminaries from throughout the tech industry, including Apple (NasdaqGS: AAPL) CEO Tim Cook.

Importantly, most of the action in HACK last Friday was of the bullish variety. So intense was buying activity in the ETF that the fund is now home to $231 million in assets under management, confirming HACK’s place on the list of most successful ETFs to debut in 2014. Impressively, HACK’s ascent to $231 million in AUM means the ETF has more than doubled in size over the past six weeks after topping $100 million in assets in early January. The ETF debuted in November.

News of the $1 billion bank hack, while positive for HACK in the near-term, also serves as reminder of the long-term opportunity with the ETF because the financial services industry is expected to be one of the largest spenders on cyber security enhancements in the coming years.

In October 2014, J.P. Morgan Chase (NYSE: JPM) CEO Jamie Dimon said the banking giant will likely double its cyber security spending to $500 million within the next five years.

HACK benchmarks to the ISE Cyber Security Index, “which tracks the performance of companies actively engaged in providing services for cyber security and for which cyber security business activities are a key driver of their business model. These cyber security services are designed to protect computer hardware, software, networks and data from unauthorized access, vulnerabilities, attacks and other security breaches,” according to PureFunds.

 

ETF News

PIIGS Bring Home the Bacon For The Eurozone

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MarketMuse update is courtesy of Tom Lydon from ETF Trends. 

Continuing with what has turned out to be exhausting coverage of European ETFs, the Portuguese, Irish, Italian, Spanish and Greek stocks (the PIIGS) ETFs are showing a bright immediate future for the Eurozone. 

Though still controversial, due in part to looming speculation that Greece could potentially depart the Eurozone, exchange traded funds tracking Portuguese, Irish, Italian, Spanish and Greek stocks (the PIIGS) have the look of value propositions.

Even with Greece’s change in government, one that threatens the country’s ability to pay its debts, meet funding needs and could hasten the country’s Eurozone departure, the Global X FTSE Greece 20 ETF (NYSEArca:GREK) has mustered a small year-to-date gain.

Earlier this month, Standard & Poor’s pared its rating on Greece’s sovereign debt to B- from B. The ratings agency is keeping the long- and short-term ratings on Greece on CreditWatch with negative implications. Greece’s B- rating is just one notch above CCC, a rating that implies vulnerability to nonpayment “and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation,” according to S&P, scenarios that Greece is unlikely to meet in the near-term.

The iShares MSCI Italy Capped ETF (NYSEArca: EWI) and the iShares MSCI Ireland Capped ETF (NYSEArca: EIRL), often seen as the steadiest hand of the five PIIGS ETFs, have been far more alluring than GREK this year. EWI and EIRL are up an average of 6.5% with average volatility of about27%. GREK is up about 2% with 93% volatility.

Investors looking for exposure to multiple PIIGS through the convenience of one ETF that emphasizes value investing can turn to the actively managed Cambria Global Value ETF (NYSEArca: GVAL).

Cambria’s Mebane Faber “Faber employs a statistic called the Cyclically Adjusted Price-Earnings (CAPE) ratio to evaluate countries. First developed by Nobel Prize winner Robert Shiller, the CAPE has proven effective at predicting the future performance of U.S. stocks. The lower the ratio is, the higher the expected return. Faber has applied the CAPE to other countries in his own research. Examining a period from 1980 through 2013, he found that those countries’ markets with a CAPE below seven subsequently produced a 14.4% 10-year annualized return while those with the highest CAPE above 45 produced only 1.2%,” reports Lewis Braham for Barron’s.

GVAL targets the cheapest, most liquid picks in countries where political or economic crisis have depressed valuations. GVAL’s eligible country universe includes Greece, Russia, Hungary, Ireland, Spain, Czech Republic, Italy and Portugal.

At the end of 2014, the five PIIGS member nations combined for 46% of GVAL’s weight,according to Cambria data.

Portugal’s CAPE is 7.7, Italy’s 9.6, Ireland and Spain about 11. The U.S.’s, by contrast, is 27, according to Barron’s.

Helped by its PIIGS exposure and what was an 8% weight to suddenly resurgent Russian stocks at the end of last year, GVAL is up 6.4% over the past month, giving the ETF an advantage of 60 basis points over the iShares MSCI ACWI ex U.S. ETF (NasdaqGM: ACWX).

For the original article from ETF Trends, click here

ETF News

Take A Bite Out of This Apple: Tech ETF Surges Off Of Apple’s Success

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MarketMuse update is courtesy of ETF Trends’ Tom Lydon. 

Shares of Apple (NasdaqGS: AAPL) are up a modest by the stock’s standards 0.6% today, pushing the iPhone maker’s market capitalization to a lofty $732 billion and some change.

As has been well-documented, Apple’s ascent to becoming the first company with a market value of $700 billion and its targeting of the unheard of $1 trillion stratosphere is benefiting plenty of exchange traded funds. One of those ETFs is the Fidelity MSCI Information Technology Index ETF (NYSEArca: FTEC).

FTEC is one of the newer kids on the sector ETF block, having debuted in October 2013 as part of Fidelity’s 10-ETF sector suite. That group has since grown by one with the recent addition of theFidelity MSCI Real Estate Index ETF (NYSEArca: FREL).

Fidelity has navigated the ultra-competitive sector ETF landscape with success. In June 2014, Fidelity’s original 10 sector ETFs had a combined $1 billion in assets under management, a number that has since more than doubled to $2.2 billion.

FTEC has been a primary driver of Fidelity’s sector ETF growth. At the end of January, the ETF had $352.6 million in assets under management, good for the second-best total among Fidelity sector ETFs behind the Fidelity MSCI Health Care Index ETF (NYSEArca: FHLC).

In an environment where Apple has more than restored its juggernaut status, FTEC earns its place in the Apple ETF conversation with a weight of 17.1% to the iPad maker. That is more than double FTEC’s weight to Microsoft (NasdaqGS: MSFT), its second-largest holding.

FTEC’s Apple weight of 17.1% also exceeds the weight to that stock found in one of the fund’s primary rivals, the Vanguard Information Technology ETF (NYSEArca: VGT).Unlike rival ETF issuers, Vanguard does not update its funds’ holdings on a daily basis, opting to do so once a month. VGT’s latest holdings update, from Dec. 31, 2014, showsan Apple weight of 15.3%. With the stock’s 14.5% gain this year, VGT’s Apple exposure is now likely well over 16%.

FTEC and VGT compete for the affections of cost-conscious investors as both charge just 0.12% per year, making the pair the least expensive tech sector ETFs on the market. Each has returned 2.1% year-to-date.

Like its rivals, FTEC is a cap-weighted ETF, meaning as Apple’s market value rises, the stock’s presence in FTEC grows. Since the start of December, FTEC’s Apple weight has increased by 140 basis points.

“FTEC offers more exposure to semiconductors and data processing & outsourced services companies and no exposure to integrated telecom services stocks,” according to S&P Capital IQ, which rates the ETF overweight.

ETF News

A Little Known ETF, Recon Capital, Comes Out Big in Its First Year

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MarketMuse update courtesy of ETF Trends, Tom Lydon. Tom Lydon highlights Recon Capital ETF that follows a covered call strategy successful first year. 

A little unknown exchange traded fund that follows a covered call strategy has generated robust dividend yields over its first year.

The Recon Capital NASDAQ-100 Covered Call ETF (NasdaqGM: QYLD), which began trading on December 12, 2013, has provided a distribution yield of 10.4% in 2014, according to a press release.

QYLD provides a covered-call strategy that targets Nasdaq-100 securities. Additionally, for those who rely on regular income payments, the ETF provides monthly distributions.

The covered-call options strategy allows an investor to hold a long position in an asset while simultaneously writing, or selling, call options on the same asset. Traders would typically employ a covered-call strategy when they have a neutral view of the markets over the short-term and just bank on income generation from the option premium.

In a flat market condition, the trader would use the buy-write strategy to generate a premium on the option. If shares fall, the option expires worthless and one still keeps the premiums on the options. However, the strategy can cap the upside of a potential rally – the trader keeps the premium generated but any gains beyond the strike price will not be realized.

During last year’s rally, QYLD underperformed the broader market, rising 3.6% over the past year. Nevertheless, the ETF somewhat made up the difference through its robust income generation on option premiums.

The monthly options premiums also provided a buffer from market volatility and helped hedge traditional investment allocations. The covered-call ETF strategy may act as a decent alternative investment strategy to a traditional equity and fixed-income portfolio, especially in the environment ahead.

“Unlike many fixed income investments, QYLD faces no headwinds from rising interest rates, nor is it susceptible to duration risk,” Kevin R. Kelly, Managing Partner of Recon Capital, said in the press release. “Rather, QYLD seeks to provide investors with a low volatility, non-leveraged, tax-efficient product that pays out a monthly income, instead of making distributions by quarter or on an annual basis. We are proud to round out 2014 – and the first year of QYLD trading — with a 10.4 percent yield for our investors, particularly as the 30 Year Treasury sits below 2.75 percent.”

 

ETF News, Global Macro Strategy

Breaking News: The Black Swan from Switzerland: A Macro View and the ETF Angle

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Marketsmuse.com update profiling Swiss National Bank (SNB) lowering of deposit rate to a -0.75% has, as noted by Neil Azous of global macro think Rareview Macro LLC,  “shocked the markets” and “will be booked into the Black Swan record books as an event to be remembered. ” Below update starts with extract from late morning edition of Rareview Macro’s “Sight Beyond Sight” and followed by the ETF angle, courtesy of late morning summary from ETFtrends.com

Neil Azous, Rareview Macro
Neil Azous, Rareview Macro

Historic Day for Global Investors…Impact Will Be Felt for Weeks to Come

  • Model Portfolio – Update
    Can You Trade Swiss Franc?
    Commodities – Quick Thoughts
    Big Picture – Asset Allocation

 

This morning, in a move that shocked the markets, the Swiss National Bank (SNB) removed its minimum exchange rate policy of holding the Euro-Swiss (EUR/CHF) at 1.20, lowered its deposit rate to -0.75% from -0.30%, and their target LIBOR rate to between -1.25% and -0.25%. The main reason offered by the SNB for its decision was the strength of the US Dollar and the diverging monetary policy between regions.

As a reminder, the SNB had a regularly scheduled meeting on December 11th where no changes to policy were made, just a reiteration that it remained steadfast in its commitment to the EUR/CHF 1.20 floor. On December 18th, largely as a result of very strong safe-haven inflow from Russia, the SNB surprised the market and reduced its deposit rate to -0.30% from -0.05%, surpassing the European Central Bank’s (ECB) which set its deposit rate at -0.25%. Two days ago the SNB’s vice-chairman said that the bank “are convinced that the minimum exchange rate must remain the cornerstone of our monetary policy”. In other words, there was no warning of this.

Since the EUR/CHF 1.20 floor was introduced a few years back the market sentiment was firm in that if the floor was to ever break then the initial downside risk was 1.15-1.10 at a maximum.

The Electronic Broking Services (EBS), the benchmark for professional FX trading, said the market low for the EUR/CHF on its platform was 0.8500 Francs per Euro and confirmed the “miss-hit” at 0.0015.

THAT MEANS NO ONE GOT STOPPED OUT OF THEIR LONG EUR/CHF POSITION ABOVE 1.0000!

This is not the commodities market, where traders place stop-limit orders and wait for a product to bounce back before being taken out of their position due to illiquidity. It is FX where stop-loss orders are predominantly used and you are taken out at the level at which the market first traded.

Therefore, today will go down in history as a “Black Swan” event. Continue reading →

ETF News

Issuers Get Pickier Over Which ETFs to Launch

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MarketMuse update courtesy of ETF Trends’ Tom Lydon.  

In 2014, just over 200 new exchange traded products launched in the U.S., more than double the nearly 90 that closed, but even with launches continuing to easily outpace closures, some major ETF issuers are getting choosy about the new number of rookie products they bring to market.

For example, BlackRock (NYSE: BLK), the parent company of iShares, the world’s largest ETF sponsor, launched 29 new ETFs in 2014, a number that matches the ETFs shuttered by the firm, reports Victor Reklaitis for MarketWatch.

The bulk of iShares’ closures came by way of an August announcement declaring 18 closures. Ten of those 18 ETFs, all of which ceased trading in mid-October, were target date funds. In early 2014, iShares announced the closure of 10 ex-U.S. sector ETFs.

Some of the more successful ETFs launched by iShares last year include the $146.1 million iShares Core Dividend Growth ETF (NYSEArca: DGRO), the $206.2 millioniShares Core MSCI Europe ETF (NYSEArca: IEUR) and the $140.3 million iShares MSCI ACWI Low Carbon Target ETF (NYSEArca: CRBN).

Increased selectivity by issuers when it comes bring new ETFs could become a more prominent theme as the battle for investors’ assets intensifies. Simply put, many new ETFs struggle out of the gates and go months if not years with nary a glance from advisors and investors. As of late December, 92 of the ETFs launched last year had over $10 million in assets under management and none of 2014’s crop of new ETFs came within spitting distance of the over $1 billion accumulated by the First Trust Dorsey Wright Focus 5 ETF (NasdaqGM: FV). FV debuted last March and by November had over $1 billion in assets

There are more than 7,500 U.S. open-end mutual funds, MarketWatch reports, citing Morningstar data, implying there is room for the U.S. ETF industry to grow from the current area of about 1,700 products.

One thing is clear: Different issuers are taking different approaches to new ETFs. For example, Vanguard, the third-largest U.S. ETF issuer, did not bring a new ETF to market in 2014 but still managed to add $75.3 billion in new ETF assets, a total surpassed only by iShares. Earlier this month, Pennsylvania-based Vanguard said it expects to launch its first municipal bond ETF early in the second quarter.

First Trust, one of the fastest-growing U.S. ETF sponsors, launched 15 new products last year, including FV.

For the original article from ETF Trends, click here.

 

ETF News

Vanguard Files For The Company’s First Muni Bond ETF

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MarketMuse update courtesy of ETF Trends’ Tom Lydon’s 6 January story.

Vanguard, the third-largest U.S. issuer of exchange traded funds, has filed plans with the Securities and Exchange Commission to introduce the firm’s municipal bond ETF.

The Vanguard Tax-Exempt Bond Index Fund will be the firm’s first tax-exempt index fund and ETF. Pennsylvania-based Vanguard already has a substantial municipal bond footprint with about $140 billion in tax-exempt bond and money market funds, according to a statement issued by the firm.

Vanguard offers 12 actively managed municipal bond funds (five national, seven state-specific) and six tax-exempt money market funds (one national, five state-specific), according to the statement.

The Vanguard Tax-Exempt Bond Index Fund is expected to debut in the second quarter with three share classes – Investor Shares, Admiral Shares and ETF. The new ETF will have an annual expense ratio of 0.12%, well below the average annual fee of 0.49% on municipal bond ETFs, said Vanguard, citing Lipper data.

The statement did not include a ticker for the new ETF.

“For investors in high tax brackets, a high-quality, broadly diversified municipal bond fund or ETF can provide tax advantages as well as diversification from the risks of the equity market,” said Vanguard CEO Bill McNabb in the statement. “Vanguard is pleased to bring a low-cost index option to the municipal category as a complement to our lineup of low-cost actively managed tax-exempt bond funds.”

That jibes with Vanguard’s reputation for being one of the low-cost leaders in the ETF space. In December, Vanguard lowered fees on 12 of its equity-based ETFs, including 10 sector funds, moving the issuer into a tie with Fidelity for the least expensive sector ETFs.

Vanguard currently sponsors 13 fixed income ETFs, including the behemoth VanguardTotal Bond Market ETF (NYSEArca: BND). Home to nearly $24 billion in assets under management, BND was one of 2014’s top asset-gathering ETFs. Other Vanguard bond ETFs include the Vanguard Extended Duration Treasury ETF (NYSEArca: EDV) and the Vanguard Total International Bond ETF (NYSEArca: BNDX), two last year’s top performing bond funds.

Last year, investors poured a record $215.5 billion into Vanguard funds, including $75.3 billion into Vanguard ETFs. Including BND, four Vanguard ETFs were among the top 10 asset-gathering ETFs in 2014.

For the original story in ETF Trends, click here.

 

ETF News, Strike Price

Option Traders Aim For More Declines in Junk Bond ETFs

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MarketsMuse update courtesy of extract from ETFtrends.com column by Senior Editor Todd Shriber..

ETFTrends-logoExchange traded funds holding high-yield debt have stumbled this year due in large part to sliding oil prices. Some options traders are betting on further declines for the iShares iBoxx $ High Yield Corporate Bond ETF (NYSEArca: HYG), the largest junk bond ETF.

Options hedging against swings in HYG “cost the most since 2010 versus those on an ETF following Treasuries and were at an almost six-year high relative to contracts on a Standard & Poor’s 500 Index fund,” report Inyoung Hwang and Jonathan Morgan for Bloomberg.

HYG is off 3.1% this year, but the ETF’s declines and those of its rivals have worsened in the back half of the year as oil’s slide has gained speed. HYG is off 5.6% over the past six months as the United States Oil Fund (NYSEArca: USO) has plunged nearly 47% over the same period.

The message from the options market regarding HYG is clear: More declines are on the way.

“About 56,000 bearish and bullish options changed hands daily on average in December, compared with an annual mean of less than 23,000 through the end of November,” according to Bloomberg.

As oil prices have tumbled, high-yield corporate bond investors have become skittish due to the rising influence of the energy sector within the U.S. junk bond market. Energy issuers account for 15% of the U.S. high-yield market, up from less than 10% seven years ago. [Oil Will Drag Junk Bond ETFs Down]

Oil and gas issuers account for 13.5% of HYG’s weight, the ETF’s second-largest sector allocation behind a 14.9% weight to consumer services.

Then there is the matter of increased leverage. At the end of the second quarter, U.S. shale producers had a total of $190.2 billion in debt, up from less than $150 billion at the end of 2011, according to Bloomberg data.

For the entire story from ETFtrends.com, please click here.

Mr. Shriber has been involved with financial markets for over a decade and has been writing about ETFs for over seven years. Prior to joining ETF Trends, Mr. Shriber was the chief ETF analyst at Benzinga. His written work has appeared on MarketWatch, Minyanville and Investopedia, among other web sites and major daily newspapers such as the New York Times and Washington Post.

ETF News, Global Macro Strategy

Junk Bond ETFs: SOS for HY Sector ($USO, $XOP, $JNK, $HYG)

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etf-logo-finalBelow extract is courtesy of Oct 13 edition of ETFtrends.com and senior editor Todd Shriber

The United States Oil Fund (NYSEArca: USO) is off 6.4% in the past month as West Texas Intermediate, the U.S. benchmark oil contract, ominously descents to $80 per barrel.

Oil’s slide has wrought havoc for futures-based ETFs, such as USO, as well as scores of equity-bae funds with energy sector exposure. After a 9.5% third-quarter loss, was once the top-performing sector in the S&P 500 earlier this year has now turned into one of the worst groups. [Dour View on Energy ETFs]

Of the 25 worst-performing exchange traded funds over the past month, 12 are equity-based energy funds. However, weakness in the energy sector could be problematic for some an asset class some investors may not be overlooking as a victim of energy’s slide: High-yield bonds and the corresponding ETFs.

Booming production at the Eagle Ford Shale and other shale formations has helped make Texas the envy of large state economies. That same theme has also been viewed as one of the more favorable long-term catalysts for ETFs ranging from the SPDR S&P Oil & Gas Exploration & Production ETF (NYSEArca: XOP) to the Market Vectors Unconventional Oil & Gas ETF (NYSEArca: FRAK), but oil’s decline is threatening producers ability to profitably tap North American shale plays. [Fracking ETFs Foiled by Slumping Oil Prices]

“Texas is the anchor to shale production, employment growth, positive real estate trends, and overall positive moral. With Crude Oil at or below the cost of production for many project, the State with the highest economic multiple needs to contract,” said Rareview Macro founder Neil Azous in a research note.

But there’s more, including the threat falling oil prices pose to the high-yield bond market. Continue reading →

ETF News

Brazilian ETFs take hit due to Moody’s Rating

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etfmarketmuse post made possible through ETFTrends.com 

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The iShares MSCI Brazil Capped ETF (NYSEArca: EWZ) and other Brazilian ETFs have been enjoying a mostly excellent 2014, but that ebullience has encountered some resistance in recent days. Investors’ willingness to stick by EWZ and Brazilian stocks in the run-up to next month’s national elections is being tested Tuesday after Moody’s Investors Service lowered its outlook on Brazil’s sovereign debt rating to negative from stable. Continue reading →

ETF News

Creating Your White Label ETF: Mark Your Calender Sept 29

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etf-logo-final

Courtesy of ETFtrends.com and reporter Max Chen

Asset managers who want to dabble in the exchange traded fund space do not have to go it alone. Some of the most innovative ideas have been launched based on ETF service providers partnering with forward thinking managers.

Those who are thinking about putting their own strategy to work in an ETF wrapper can attend the upcoming ETF Boot Camp conference event that is slated for September 29 and 30 in New York City to hear from the largest ETF providers on how to foster relationships, the process for joining forces and the benefit of these partnerships. Seeking to grow their assets under management, small money managers are taking a closer look at ETFs. However, some are turning to so-called white label, or turnkey, ETF companies to build and launch an investment idea.

ETF issuers like Exchange Traded Concepts, ActiveETF Partners, Golden Gate Investment Consulting LLC, ALPS, AdvisorShares and ETF Issuer Solutions, among others, help go through the regulatory approval process, provide a board of directors and get an ETF listed on an exchange for $20,000 to $100,000 in startup costs.

For instance, some small hedge fund managers see ETFs as an ideal way to increase assets under management. Smaller funds typically find it harder to bring in large pension funds and institutions that target large hedge funds with billions in assets under management and long track records. As a result, more are beginning to look at ETFs as a way to market their investment strategies, targeting financial advisors and retail investors instead.

“A lot of people are surprised that there’s no one way to do it,” according to Golden Gate Investment Consulting. “There are as many different operating models as there are ETF sponsors — you can outsource or take in-house just about any function.”

For the entire story from ETFtrends.com, please visit http://www.etftrends.com/2014/07/the-white-label-avenue-to-launching-an-etf/

 

 

ETF News

March Madness ETF Play

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etf-logo-finalCourtesy of Todd Shriber/ETF Trends.com

MarketsMuse Editor note: From the “what will they think of next dept..”

That great American pastime the NCAA Basketball Tournament, also known as March Madness, commences Thursday.

 

The start of March Madness means some lost productivity for American employers as workers sneak a few minutes here and there to watch games and monitor office pools. Those pools are big, but illicit business.

 

While billions of dollars are wagered each year in NCAA Tournament office pools, the Market Vectors Gaming ETF (NYSEArca: BJK) does not make for an ideal March Madness ETF play because although several states have seen fit to legalize marijuana, the moral crusade against sports gambling continues in every state but Nevada though New Jersey is trying to legalize sports betting as well. [Macau is Gambling ETF’s Lucky Charm]

Another March Madness ETF idea is the PowerShares Dynamic Media Portfolio (NYSEArca: PBS). Arguably, PBS is the most predictable ETF play on potential upside for stocks at the hands of the NCAA Tournament, but it is that predictability that means the $324.8 million PBS requires further examination.

To read the entirety, we’re putting the ball back into the ETFtrends.com court…click here for Todd Shriber’s column.