Archives: February , 2013
ETF News, People Profiles

ETFs Spike Above 30% of Market Trading as Euro Fears Return: ETF Trends

Leave a comment

etftrends logo imagesCourtesy of John Spence, ETF Trends

The percentage of ETF trading relative to overall volume tends to shoot higher in headline-driven markets when asset classes are moving together on macroeconomic or political events.

That’s exactly what happened on Monday when global markets swooned on fears parliamentary elections in Italy will result in political gridlock. After months of simmering on the back burner, Europe’s debt crisis roared back into the news. [Italy ETF Swings Lower on Berlusconi, Election]

On Monday, ETFs accounted for 32% of overall dollar volume, and there have been multiple sessions in the past week when the share rose above 30%, says Chris Hempstead, director of ETF execution services at WallachBeth Capital.

Chris Hempstead WallachBeth Sep 2012 321
Chris Hempstead, WallachBeth Capital

“It’s rare when ETF volume goes above 30%,” he said in a telephone interview Tuesday morning.

Hempstead said he has seen the figure approach 40% on some days during the past few years.

“ETF trading spikes when people think events are highly correlated and macro in nature,” he noted. “When stock pickers are having a tough time and market correlations rise, that’s when we see the ETF percentage of overall volume start to creep up.”

For example, trading volume in volatility-linked ETFs soared in Monday’s risk-off attack as investors looked for shelter and hedges. The CBOE Volatility Index has jumped 54% in a week. [Volatility ETF Trading Surges on Market Jitters, VIX]

“When the percentage of ETF trading in markets pops, a lot of it is people putting on trades to hedge bets. It’s not buy-and-hold,” Hempstead said. Continue reading →

ETF News

Healthcare ETFs–Free Prescriptions Here…

Leave a comment

seekingalphalogobenzinga-logo   Courtesy of “The ETF Professor”–his work appears courtesy of Benzinga.com, and is also re-distributed through leading publishers

Conservative investors and risk-takers alike have been rewarded for owning U.S. health care stocks and ETFs focusing on those names in recent years.

The data supports that assertion. A look at three major health care ETFs, all of which do things a little bit differently, shows significant out-performance of the S&P 500 over various time frames.

For example, the Health Care Select SPDR (NYSE: XLV) is up 30.3 percent in the past five years compared to 12.3 percent for the S&P 500.

Since December 2011 when it became a Market Vectors fund, Market Vectors Pharmaceutical ETF is up almost 20 percent. The iShares Nasdaq Biotechnology ETF (NASDAQ: IBB) has nearly doubled in the past five years.

Bottom line: Investors have done well when staying at home with U.S. health care stocks, but that does not mean there are not global opportunities worth considering. After all, some of the biggest health care companies in the world are not U.S. firms.

France’s Sanofi (NYSE: SNY) and Israel’s Teva Pharmaceuticals (NASDAQ: TEVA) stand as just two examples.

Here is a look at some international developed market health care ETFs to see if going global with this sector is a better idea than staying domestic.

Read more: http://www.benzinga.com/trading-ideas/long-ideas/13/02/3357973/are-global-health-care-etfs-worth-prescribing#ixzz2LfCheYiO

 

ETF News

Franklin Templeton Planning First ETF, IndexIQ Files For Two US Equity Funds

Leave a comment

etfdb images Courtesy of Carolyn Pairitz

While the U.S. markets continue their bull run to baffle even the best investors on Wall Street, the ETF market has started to take off in the last two weeks, with a number of new funds entering the space. After the slow down of new funds since mid-January, the solid economic data being released from around the world has helped issuers recognize that now is a great time for new funds. For some institutions its their first time venturing into the industry, while others are just adding to their army, as both Vanguard and IndexIQ have  filed interesting proposals with the SEC [see ETF Database Launch Center].

California-based mutual fund firm, Franklin Templeton has filed for their very first ETF to meet the growing needs of their investors:

  • Franklin Short Duration Government ETF: This actively-managed ETF will own U.S.-issued debt, ranging from Treasuries to mortgage-backed securities to create a shorter duration portfolio of bonds. Focusing on shorter duration bonds could prove to be a very popular investment theory, as many investors are starting to hedge their funds against the eventual rise in U.S. interest rates.
IndexIQhas laid the groundwork for two new domestic equity ETFs focused on driving growth and innovation:
  • IQ Fastest Growing Companies ETF: This ETF will invest in 50 quickly growing U.S. companies, to be determined by a number of factors including sales, net income, cash flow growth and total return. This strategic exposure to companies that not only currently have high growth indicators but also have featured high returns in the past, may interest investors who are looking for a bit of a riskier play on the U.S. equities market.
  • IQ Innovation Leaders ETF: Using a rule-based proprietary benchmark, this ETF is intended to invest in 100 companies that are seen as innovative based on their sales growth, research and development of assets and expenses, along with retained earnings growth. Another requirement of inclusion, these growing firms need to have a market cap of at least $300 and be a U.S. firm.
ETF News

Benzinga Asks: Is This ETF Home to Buffett’s Next Target?

Leave a comment

benzinga-logoCourtesy of the ETF Professor at Benzinga.com

The $28 billion purchase of ketchup king H.J. Heinz (NYSE: HNZ) by Warren Buffett’s Berkshire Hathaway (NYSE: BRK-A) and Brazilian financier Jorge Paulo Lemann has had a predictable result. Traders and investors want to know who is next; what company will be Buffett’s next elephant?

Buffett has an enviable problem: Berkshire’s cash hoard. Even after committing $12.1 billion for Heinz, Berkshire still has $15 billion left to go shopping with, and that number grows by the month according to Bloomberg.

By his own admission, Buffett’s thirst for big deals, or “elephants” as he calls them, is not quenched. That likely means traders and investors are already trying to figure out what company could be next on Berkshire’s shopping list.

As has been previously noted, ETFs ranging from the Market Vectors Coal ETF (NYSE: KOL) to the Industrial Select Sector SPDR (NYSE: XLI) are home to some potential Berkshire targets.

Following the Heinz deal, another ETF has jumped to the forefront of the Berkshire deal speculation conversation. That ETF is the PowerShares Dynamic Food & Beverage Portfolio (NYSE: PBJ). Shares of PBJ, which is home to almost $111 million in assets under management, have jumped 2.2 percent in the past week and are now trading at an all-time high.

The ETF’s recent bullishness is due in large part to the Heinz deal because that stock is is PBJ’s largest holding, accounting for 5.7 percent of the fund’s weight. To be fair, some of PBJ’s recent upside has come by way of Constellation Brands (NYSE: STZ), another top-10 holding in the ETF, making a deal with AnheuserBusch InBev (NYSE: BUD) that gives the former rights to sell Corona and other Grupo Modelo beer labels in the U.S.

Still, near-term ebullience pertaining to PBJ is likely to be fueled by speculation that the ETF is home to another Buffett acquisition candidate. Including Heinz, PBJ is home to 30 stocks. Of the remaining 29 stocks, eliminating unlikely Berkshire targets is not difficult.

People Profiles, Strike Price

Laszlo Birinyi Now Says “Equities Markets are Headed…

Leave a comment

nytlogo379x64

Courtesy of Jeff Sommer, New York Times

THE economy may be lurching into another crisis, but you wouldn’t know it from the stock market, where an epic party is under way.

Yet this effervescence belies some ominous developments in politics and the economy. After the State of the Union address by President Obama on Tuesday — and the negative reaction to it among many Republicans in Congress — it seemed quite possible that $1.2 trillion in automatic government spending cuts might begin in just a few weeks, delivering yet another blow to an already lackluster economy. Most economists had expected minimal growth this year, even without a new shock from Washington — or from Europe or anywhere else.

These apparently conflicting pictures pose a quandary for market strategists. Which signals should an investor emphasize: the signs of disharmony in Washington and the negative indicators for the economy, or the upward trend of the stock market?

For Laszlo Birinyi, the veteran strategist and longtime market bull, the contest isn’t close. He says he starts by assuming that the market is smarter than any analyst. “We focus on the market itself, on what it is actually telling us,” he said.

In September 2009, when very few strategists were overtly bullish, Mr. Birinyi, president of Birinyi Associates, the stock market research firm in Westport, Conn., told me that we were in the early stages of a classic bull market. That analysis was prescient. The S.& P. 500 has returned more than 50 percent since then.

In a conversation last week, he said we were Continue reading →

ETF News

Biggest Buyers Stampede From Junk Bonds on Loss:

Leave a comment

bloombergCourtesy of Lisa Abramowicz

The biggest buyers of junk bonds are in retreat as exchange-traded funds suffer unprecedented withdrawals with the debt facing its first losses in eight months.

The outflows sent the combined value of the five biggest junk-debt funds down 7 percent from a four-month high in January to $29.8 billion, according to data compiled by Bloomberg. State Street Corp.’s $11.9 billion fund reported withdrawals of about $988 million in the 12 days ended Feb. 13, the longest stretch since August 2011.

A pullback three times bigger than that for mutual funds which cater to individuals suggests investors such as hedge funds and banks are cherry picking rather than investing in the broader market, said Peter Tchir of TF Market Advisors. Almost six years after the first high-yield ETF was created, the funds have been drawing the interest of institutions seeking rapid entries and exits with securities that traditionally were traded over the counter.

Investors who poured $8 billion into junk ETFs in 2012 when the securities gained 15.6 percent are fleeing as Morgan Stanley strategists predict the debt will return 3.1 percent this year, less than its coupon. Dollar-denominated junk bonds lost 0.4 percent in the week ended Feb. 6, when the funds reported an unprecedented $1.1 billion of withdrawals, according to Bank of America Merrill Lynch index data.

Prices are dropping from a record 105.9 cents on the dollar on Jan. 25 as concern deepens that values are unable to go much higher with interest rates rising from record lows and after four years in which average annualized returns reached 21.6 percent, compared with 3.6 percent losses in the preceding period.

For the complete Bloomberg LP story, please click here

Tech Talk

NYSE Adds #Social-Sentiment to Data Feed–Wacky or Wily?

Leave a comment

securities technology monitorCourtesy of Laton McCartney at Securities Technology Monitor

Editor note: this story is from the Believe It or Nuts aka If you’re a twit you should tweet Dept.

NYSE Technologies said it will begin distributing sentiment statistics based on social media postings, through its SuperFeed market data service.

The statistics, developed in conjunction with Social Media Analytics, will be distributed through NYSE Euronext’s Secure Financial Transaction Infrastructure, which reaches market participants in the United States, Europe and Asia.

The Sentiment Signature Feed can be fed into trading analyses and automated decision-making processes, the companies said. The feed will draw on a feed from Twitter, known as the “fire hose,” which generates 500 million Tweets a day.

As part of the agreement, NYSE Technologies’ subscribing customers can access data from SMA’s social media monitoring engine. SMA’s engine extracts, evaluates and calculates data in real-time to attempt to generate directional and volatility indications on individual stocks, exchange-traded funds, sectors of the economy, and indices by measuring the level and quality of social media interactions on social media sources compared to historical levels.

SMA’s engine seeks to create a social media “signature,” consisting of seven statistical indicators generated by the comparisons: a score, an average, a change, the volatility, the buzz and the “dispersion” of the social media commentary.

Social Market Analytics is a Naperville, Ill.,firm founded last year by financial Professionals who create databases and ways to analyze their contents for hedge funds, money managers, and investment banks. The company has a patent pending on its social media monitoring engine.

Start- up SMA is headed by former Thomson Reuters executives, Fady Harfoush and Joseph Gits. Last year it began beta tests of a set of products designed to convert social media data, Twitter posts into quantifiable and actionable indicators for traders and trading algorithms to use as part of their strategies. Continue reading →

ETF News, People Profiles

James Grant: Short $LQD Before Bonds Fall

Leave a comment

indexuniverseCourtesy of Olly Ludwig

Sooner or later the bond market is going to start falling, and a perfect exchange-traded vehicle to play the unraveling of the more than three-decade rally in fixed-income markets is “LQD,” a corporate bond fund that happens to be one of the largest fixed-income ETF in the world, James Grant told attendees at IndexUniverse’s Inside ETFs conference this week.

But Grant, the editor and publisher of Grant’s Interest Rate Observer, said that while he is short the iShares iBoxx $ Investment Grade Corporate Bond Fund (NYSEArca: LQD), it’s terribly difficult to time such trades, as markets are “unreliably efficient” and “reliably inefficient” and, moreover, the Federal Reserve’s loose-money policies since 2008 essentially mean that interest rates are not in a free market.

Grant’s comment about LQD came in response to a question from IndexUniverse Chief Executive Officer and founder Jim Wiandt, who introduced Grant and asked what investors—faced with the prospect of the end of a secular bull market in bonds since the early 1980s—should now do.

“Short,” said Grant. “I’m short something called LQD.”  The ETF, the iShares iBoxx $ Investment Grade Corporate Bond Fund (NYSEArca: LQD) is quite liquid and has $24 billion in assets under management.

Grant, a longtime critic of the Fed and a proponent of a return to the gold standard, was the grand finale at the 6th Annual Inside ETFs conference, which took place in Hollywood, Fla. from Feb. 10-12. The event, which has become the see-and-be seen event in the world of ETFs, was attended by nearly 1,300 people, most of them financial advisors and fund sponsors. Continue reading →

ETF News, Strike Price

Hedge Is The Word For 2013-ETFs For the Risk-On Risk-Off Universe

Leave a comment

seekingalphalogo

Courtesy of Brad Zigler. This article first appeared in the February 2013 issue of REP/WealthManagement.com.

In 2013, the market for alternative investment exchange-traded products seems to revolve around one word. That word is “hedge.” Judging by their proportion of regulatory filings and launches last quarter, product sponsors are keen on risk-controlled equity and bond plays.

No surprise there, really. After all, we’re just emerging from one of the most volatile periods in market history. Investors – and their advisors – are still a little dizzy after being buffeted by the frets of an impending “fiscal cliff,” a meltdown of the eurozone, further ballooning of the federal deficit and fears of potential asset bubbles.

Overall, the prospects for 2013 are mixed at best. Stocks, while not the raging bargains they were during the recent recession, may still be attractively priced, but their dynamics have changed. The recent equity rebound has largely been market driven. Value plays, starting in early 2009 as corporate profits widened, are now becoming sparse. Currently, the market is reacting more to political influences such as Fed policy and the deficit debate, causing some pundits to forecast an even riskier environment ahead. With such prospects, they say, a little hedging and bond buying seems prudent. Exchange-traded product manufacturers are happy to oblige.

Hedged Equity

Funds and notes geared to dampen market volatility have proliferated in the wake of the 2008-2009 crash. Some have enjoyed extraordinary success attracting assets. Witness, for example, the Invesco PowerShares S&P 500 Low Volatility Portfolio (SPLV), which has pulled in more than $3 billion since its May 2011 debut. SPLV is essentially a passive hedge. The fund mirrors a 100-stock portfolio, carved from the S&P 500 Index, representing issues with the lowest 12-month trailing volatility.

Invesco now offers investors a more sophisticated approach to managing volatility with its December 2012 launch of the PowerShares S&P 500 Downside Hedged Portfolio (PHDG). Like SPLV, the new PowerShares fund invests in U.S. stocks but hedges downside risk through futures contracts linked to that well-known “fear gauge,” the CBOE Volatility Index (VIX). Continue reading →

ETF News, People Profiles

Boutique ETF Broker Eyes Growth of ETF Market in Europe; WallachBeth International Brings US Approach to London

Leave a comment

marketsmedia logoCourtesy of MarketsMedia.com

The burgeoning exchange-traded funds sector in Europe is expected to grow still further in the coming years, after the industry recently celebrated its 20th birthday.

ETFs, which are funds that track baskets of shares, bonds or commodities and are traded like stocks, were invented in 1993 in the U.S. and have been on an upward growth trajectory ever since due to their low costs and simplicity since they generally track established indexes.

“ETFs started in the U.S. and they’ve certainly been embraced there by everyone from institutions to retail,” said James Ryan, vice-president, institutional sales and trading at WallachBeth International in London, a U.S. brokerage firm which brought its best execution ETF trading model to Europe last year.

jrETF team
James Ryan, WallachBeth International

“We set up in Europe for a couple of reasons. Firstly, we expect growth of the ETF market in Europe and second, we don’t think anyone is doing exactly what we do. You have other brokers, but our desk is ETF-centric.”

A recent study by ETF provider State Street Global Advisors (SSgA), the asset management unit of State Street, which surveyed 260 European corporate pension plans and 41 U.K. active fund managers, found that 39% had no holdings of ETFs at all while a further 32% held less than 10% of their portfolios in ETFs.

“Despite strong growth in the ETF business globally over the past 20 years, the European ETF business remains relatively small compared with the wider mutual funds and U.S. ETF businesses,” said Scott Ebner, global head of ETF product development at SSgA.

However, almost half of the European corporate pension plans surveyed by SSgA said that they planned to increase their allocations to ETFs over the next five years while 42% of the U.K. active fund managers indicated that they would also increase their ETF usage in future.

“The whole of Europe is starting to see more products and is embracing ETFs slowly,” said Alan Roldan, institutional sales and trading at WallachBeth International.

Alan RoldanWallachBeth International
Alan Roldan
WallachBeth International

“People like Vanguard [one of the largest ETF providers] have also set up over in Europe from the U.S.. That’s a good indication we are not the only ones who feel that way.”

The ETF sector is seen as more opaque in Europe, with as much as 70% of trades enacted over-the-counter. Trade reporting for ETFs in the U.S., in the form of a consolidated tape, is mandatory, although there are provisions for this to happen in Europe in the latest MiFID II proposals, but this is not likely to be enforced until 2015 at the earliest. And compared to the U.S., knowledge of ETF products generally is also seen as slightly lacking in Europe.

“Once education—getting acclimated to the product—and more transparency with the regulations happen, then that is going to be a massive catalyst,” said Roldan.

There also appears to have been a recent push by issuers of ETFs in Europe to target the retail sector, which has been relatively untapped so far.

“Once retail flow comes up that will also spur growth in the institutional market,” said Roldan.