Tag Archives: etp

ETP-3-trillion-dollar industry

ETF and ETP: Now a $3 Trillion Industry

Back in the day, when “trillion dollar” was a phrase not even contemplated by film writers, and barely envisioned by financial industry wonks (other than in context of US government deficit), and when even being a billionaire was limited to a universe of less than two dozen people, (e.g. Warren Buffett and Bill Gates 25 years ago), few would have predicted that a category of financial vehicle known as exchanged-traded products (ETP), with a sub-sect comprised of exchanged-traded fund (ETF) would become mainstream. Well, ETPs and ETFs are so mainstream now, assets invested in these products have surpassed $3trillion in each of the past two years.

(Traders Magazine) Assets invested in Exchange traded funds and ETPs listed globally have broken through the $3 trillion milestone for the second time at the end of Q1. At the end of May 2015 the assets in ETFs/ETPs listed globally first exceeded the $3 trillion milestone.

During March 2016, ETFs/ETPs listed globally gathered $45.30 in net new assets, according to research from ETFGI, a London-based market research firm. This marks the 26th consecutive month of net inflows. The Global ETF/ETP industry had 6,240 ETFs/ETPs, with 12,042 listings, assets of $3.07 trillion, from 277 providers listed on 64 exchanges in 51 countries, according to preliminary data from ETFGI’s March 2016 global ETF and ETP industry insights report.

U.S. equities rebounded in March ending the month up 7 percent. Emerging markets and Developed ex US markets also had a strong March ending up 12.5 percent and 7.2 percent respectively. Based on comments from the Fed there is a growing belief that interest rates will be held lower for longer than previously anticipated. The European Central Bank cut rates and announced additional stimulus will begin in April, accelerating the rate of bond purchases from 60 to 80 billion euros per month,” according to Deborah Fuhr, managing partner at ETFGI.

Some ETF numbers, via ETFGI:

In March 2016, ETFs/ETPs saw net inflows of $45.30 Bn. Equity ETFs/ETPs gathered the largest net inflows with $26.30 Bn, followed by fixed income ETFs/ETPs with $14.80 Bn, and commodity  ETFs/ETPs with $2.42 Bn.

In March 2016, 71 new ETFs/ETPs were launched by 27 providers and 30 ETFs/ETPs were closed.

iShares gathered the largest net ETF/ETP inflows in March with US$20.97 Bn, followed by Vanguard with US$9.74 Bn and SPDR ETFs with US$6.25 Bn in net inflows.

YTD, iShares gathered the largest net ETF/ETP inflows YTD with US$24.54 Bn, followed by Vanguard with US$17.82 Bn and SPDR ETFs with US$8.78 Bn net inflows.

S&P Dow Jones has the largest amount of ETF/ETP assets tracking its benchmarks with 27.5 percent market share; MSCI is second with 14.6% market share, followed by FTSERussell with 12.4 percent market share.

Keep reading Traders Magazine story via this link

Leveraged ETF, ETP and Risk-Parity Schemes: Caveat Emptor

In the wake of recent weeks’ volatility and pricing dislocations across the exchanged-traded product space, news media and Mutual Fund marketers are having a field day putting the feet to the fire–and those toes being torched are connected to the universe of juiced-up and levered ETF and ETN products, as well as hedge funds that specialise in so-called “risk-parity funds” that employ lots of leverage. Is it fair to bash these ‘alternative’ strategies, or should the SEC require that the prospectuses (or is it “prospecti”?) for these protein-enhanced products have a coverage page that displays Caveat Emptor in caps? For those not fluent in Latin, the phrase means: Buyer Beware.

NYT Dealbook columnist Landon Thomas Jr. poses that issue in his a.m. piece: “Investment Strategies Meant as Buffers to Volatility May Have Deepened It”–and before pointing MarketsMuse readers to that article, MarketsMuse editors remind our readers that ETF red flags are nothing new. Levered products, often in the form of ETNs (exchange-traded notes) that seek to either mitigate risk or enhance returns via the use of futures products are notorious for being fit for trading market professionals only; not retail investors and not even for so-called sophisticated institutional investment managers.

Corporate bond ETFs have also been put on ‘watch lists’ in recent months, even though they are all the rage for many of the right reasons, including offering exposure and ‘greater liquidity’ for those needing to allocate investment  funds to corporate debt issues across various industry sectors and ratings categories. That said, Apocalypse Watchers warn that when interest rates spike, corporate bond investors will all run for the exits together (to avoid mark-downs in their holdings) and the market-makers who specialize in ETF products connected to this asset class will be overwhelmed with nowhere to go–and no [reasonable] bid to offer to those sellers–simply because the glass-is-half-empty crowd contends those market-makers will be unable to find buyers for the underlying constituents as a means to hedge their purchase of the cash ETF product. That particular thesis has not yet been fully tested, but it does offer an agenda for spirited debate.

The Dealbook column does put context into the discussion with the following:

Defenders of risk-parity investing say that these investment styles are not set in stone and that portfolios can be recalibrated on fairly short notice to make them less vulnerable.

As for E.T.F.s, practitioners say that the funds to date have held their own despite some concerns over how portfolios were being valued during the very sharp market sell-off late last month.

Some of the more exotic E.T.F.s that rely on leverage to juice investment returns could in some instances be the “tail that wags the dog,” said Steven Schoenfeld, an early pioneer in E.T.F. investing and founder of BlueStar Global Investors.

“But the fundamental advantage of E.T.F.s — transparency, liquidity and variety — that remains,” he said.

What remains unclear, however, is how an investing community that has become accustomed to churning out safe and steady returns in a low interest rate, low volatility environment adapts to the new reality of wild market swings.

Such sharp ups and downs in the market are expected to become more frequent as the time approaches for the Federal Reserve to push interest rates higher.

People might as well get used to them, says Nicolas Just, a portfolio manager at Natixis Asset Management, a French fund company that oversees $904 billion in assets.

“These types of sudden market swings will become more and more frequent,” he said. “So you have to be prepared for them at any time.”

For the full story from the NY Times, click here


ETFs with a Feminine Flair; $WIL She or Won’t She (Use these ETNs)?

wsjlogoMarketsMuse Editor Note: We so greatly enjoyed today’s WSJ column from Daisey Maxey, we felt compelled to provide extracts below (The entire column can be found by clicking on logo to your left)

Catalyst Inc., a nonprofit focused on increasing opportunities for women in business, issued a report that shows that from 2004 to 2008, Fortune 500 firms with three or more female directors had an 84% better return on sales and a 46% better return on equity.

Call it the XX factor for investing.

It is an intriguing concept: investing in stocks of companies with female leadership. Backed by studies that say such companies perform better, fund companies are stepping in with investments that snub male-dominated companies, and bet on women

Barclays Women in Leadership ETN ($WIL). Investors pay for the privilege. The Barclays ETN charges an annual fee of 0.45% compared with a 0.10% fee for the SPDR S&P 500 ETF. SPY5.LN +0.10% Morningstar is generally not a fan of ETNs, says Mr. Goldsborough, citing credit risks and fees that can be hard for investors to understand.

“Everyone is talking about women in leadership,” says Barbara Byrne, vice chairman in investment banking at Barclays. The London bank has 80-plus ETNs, so the notes were the logical framework, and its research shows market demand, she says.

women inleadershipBarclays isn’t the only firm leaning in. Ellevate Asset Management LLC, owned by Sallie Krawcheck, former high-profile executive at Bank of America Corp. , teamed with Pax World Management LLC in June to launch Pax Ellevate Global Women’s Index Fund. It invests in companies that seek to advance women. The fund is the successor to Pax World Global Women’s Equality Fund, which was merged into it.

There are caveats to ETNs (which are unsecured debt) and to women-focused investing strategies. Female leaders are often appointed in times of poor company performance, so their posts may be precarious, say Michelle Ryan and Alex Haslam, professors at the University of Exeter in the U.K. That “glass cliff” could make such companies less attractive to investors, the researchers say. Continue reading

BlackRock Bulks Up in Europe: Expanding “ETP Education” Campaign

However much the use of ETF and ETP products in Euro-Land continues to grow,  Global ETF Issuer iShares knows that it can grow faster and bigger.

Consistent with parent company BlackRock Inc.’s focus on staying in front of the pack, and as reported by IndexUniverseEU staff, iShares has recently introduced a “due diligence tool” aimed at helping professional investors obtain granular information about its European exchange-traded products.

According to iShares’ head of EMEA sales, David Gardner, “Our new “Know Your ETP” tool offers a robust framework, and clear standardised processes by which institutional investors can arrive an informed decision more effectively.”

On an objective note, ETF industry veteran Mike McCoy, a senior member of ETF liquidity aggregator WallachBeth Capital, who recently landed on the docks of London to help launch his firm’s new Euro ETF execution desk (in joint-venture with UK-based brokerage NSBO), said, “BlackRock certainly knows that the ‘educating your customer rule’ is integral to the evolution of ETF embracement. As quickly as the market is growing, its critical to maintain the education momentum with the spectrum of investors, however sophisticated they might be.”

For the complete story, click on the IU logo

Four New Brent Crude ETPs

ETF Securities (ETFS) has expanded its Brent Crude exchange traded products offering against a background of rising geopolitical tensions in the Middle East.

The issuer unveiled four ETPs on the London Stock Exchange, as Brent Crude’s importance as the new global benchmark for oil rises. West Texas Intermediate has been beset with local logistical issues that have seen it move to a significant discount to Brent.

The range of ETPs provide investors with long, leveraged, short and forward exposures to the Brent oil price and complement its existing offering of 1-month, 1-year, 2-year and 3-year exposures.

In a recent poll by ETFS, three quarters of respondents said they expected tensions in the Middle East to escalate while two thirds said this would occur within the first half of this year. The vast majority of these respondents also said this would impact their asset allocation decisions.

The ETFS Brent Crude oil ETPs are issued by ETFS Commodity Securities Limited, a Jersey-based special purpose vehicle.

The vehicles track the performance of the Brent Crude sub-indices of the Dow Jones-UBS Commodity Index, via fully funded collateralised swaps.

Exposure to Brent Crude is obtained via multiple swap counterparties, including UBS and Bank of America Merrill Lynch acting through Merrill Lynch Commodities.