By Simon Barriball, Head of ETP Trading Europe at ITG.
The name should say it all “Exchange Traded Fund”. You would reasonably expect that a fund describing itself as an Exchange Traded Fund would do just that – trade on exchange. The reality in Europe is quite different. Best estimates of European trading are that 50-70% of all ETF trading is off exchange on an OTC basis. One could therefore argue that ETFs fail to live up to their name. We should ask why this is and does it really matter?[continue reading...]
- ETF provider WisdomTree investigates benefits of optimised commodity strategies
- What’s in a name? For European ETFs, a lot of confusion
- Source research points to attractiveness of EM sovereign bond ETFs
- Thomson Reuters expands ESG suite with Diversity & Inclusion Index
- Institutional investors turning to bond ETFs for fixed income exposures
- ETFs react to first Clinton-Trump presidential debate
- Yahoo hack exposes potential for cyber security ETFs
- UBS’s SRI ETF suite surpasses $1bn in assets
- UK REIT and Financial ETFs still at risk post Brexit vote?
- Cass paper analyses ‘fallen angels’ phenomenon
- Elkhorn partners with Research Affiliates on smart beta commodity ETF
- Guggenheim expands suite of BulletShares defined-maturity bond ETFs
- ZyFin launches Europe’s first physical Indian equity ETF
- Morningstar reports increasing popularity of strategic beta ETFs
European ETF provider Source has released research revealing the relatively low indebtedness of emerging market countries compared to their developed peers. Indonesia and Russia performed particularly well with debt/GDP ratios of 64% and 84% respectively and low proportions of externally financed debt. Paul Jackson, Head of Research at Source, commented: “Based on their debt fundamentals, emerging markets are better placed than most developed markets, which make the yield premiums on their bonds even more attractive.”
The difficult trading environment in bond markets is fuelling the use of bond ETFs in institutional portfolios, according to a survey of institutional investors conducted by research firm Greenwich Associates. The survey found that longer execution times, higher execution costs and increasing difficulty sourcing bond securities and completing trades have driven institutions to look beyond individual bonds. “Bond ETFs are emerging as an important alternative, and institutions are incorporating the funds into their process of rotating sector allocations, increasing or reducing risk levels and adjusting duration,” said Andrew McCollum, Managing Director at Greenwich Associates.
Yahoo has announced the hacking of some 500m names, email addresses and passwords – the largest corporate data breach in history. The news not only highlights the growing scale of security problems but also the potential for growth in the cybersecurity industry, predicted to grow to $202.3bn by 2021 according to research firm MarketsandMarkets. Investors may gain access to the cybersecurity industry through ETFs offered by PureFunds, First Trust and ETF Securities.
Assets under management within UBS’s Socially Responsible Investing (SRI) exchange-traded fund suite have surpassed the $1 billion mark. The suite, comprising both equity and fixed income exposures, is the most comprehensive SRI ETF product range in Europe. Andrew Walsh, Head of UBS ETF Sales UK & Ireland, said: “Reaching this milestone shows that investors are recognizing the importance of sustainability and are keen to use the opportunities offered by UBS SRI ETFs in their investment portfolio.”
ZyFin has launched Europe’s first physically replicated Indian equity exchange-traded fund: the LAM ZyFin MSCI India UCITS ETF. The LSE and Xetra-listed ETF tracks the MSCI India 10/40 Index, providing access to the performance of the large- and mid-cap segments of the Indian equity market. Sanjay Sachdev, Executive Chairman at Singapore-headquartered ZyFin, commented: “The LAM ZyFin MSCI India UCITS ETF is an ideal solution for offering investors access to attractive growth opportunities in India. With economic growth for the current and forthcoming year projected at 7.4%, a huge workforce and growing middle class the investment case for India is compelling.”
Nick Leung, Research Analyst at ETF provider WisdomTree, investigates the performance of BNP Paribas’ Optimised Commodities Index compared to ‘traditional’ broad commodity strategies such as the Bloomberg Commodity Index. The results show that the Optimised Commodity Index has outperformed year-to-date both in terms of return, attributable to the benefits of an enhanced rolling strategy versus a front-month approach, and in reducing risk by enhancing diversification through sector cap constraints.
The ‘fallen angels’ phenomenon can offer the opportunity to enhance the returns on a multi-asset portfolio and the potential to improve diversification, according to a research paper from Cass Business School. The paper, “Fallen Angels: The investment opportunity”, written by Professors Andrew Clare (pictured), Stephen Thomas and Dr Nick Motson, and supported by ETF issuer Invesco PowerShares, is believed to be the first piece of academic analysis focusing specifically on the impact on bond prices of a downgrade from investment grade status to high yield status.
According to a recent statement from the Bank of England, the UK may still face a “challenging period of uncertainty and adjustment” in the wake of the Brexit referendum. The Bank’s Financial Policy Committee said that although immediate capital market volatility has calmed down since June, there remain elevated risks, such as the threat of a “sharp adjustment” in the commercial property market and the danger that foreign investors could divest from the UK. UK property ETFs such as the iShares UK Property UCITS ETF (LON: IUKP) are down roughly 10% year-to-date.
Thomson Reuters has launched the Diversity & Inclusion Index, measuring the performance of 100 global companies with diverse and inclusive workplaces. The index may form the basis for future investment products such as ETFs. Debra Walton, Chief Product & Content Officer at Thomson Reuters, commented: “Our research shows that companies that make investments and focus on ESG matters can have a stronger stock performance and better long-term profitability.”