Tag Archives: etf

insurance-co-pms-etf

Insurance Co PMs Getting The Memo: ETF Products Make More Sense

Insurance Co PMs are increasingly getting  “the memo” : Exchange-Traded Funds (ETFs) Make Sense..

(Pensions & Investments) Exchange-traded funds have permeated almost every corner of the financial markets, but insurance companies have primarily kept their distance. That may be changing.

Though several U.S. insurers have navigated the $2.4 trillion ETF marketplace through variable-annuity products, integration into general accounts has been more recent, many observers say.

According to S&P Dow Jones Indices, insurers have only scratched the surface in their use of ETFs. Analyzing National Association of Insurance Commissioners data through 2015, S&P found that property and casualty, life and health insurers only reported an aggregate $15 billion invested in ETFs for general accounts, but the growth of ETF assets has outpaced overall growth of general account assets, which approached $6 trillion at the end of 2015, according to SNL Financial.

Since 2006, the amount of ETFs held by Insurance Co PMs has increased 146% and grown 14.5% per year, whereas total assets in general accounts have increased 26% in the same period, according to S&P. And, as with many measures of institutional investment in ETFs, year-end holdings are not necessarily indicative of ongoing ETF usage in more temporary functions such as transitions and liquidity management.

S&P projects ETF asset values for insurers to double in five years, in line with Greenwich Associates’ annual institutional ETF survey which indicated 71% of insurers surveyed in 2015 expected to increase their allocation to ETFs.

“It’s clear that the largest ETF providers — BlackRock (BLK), State Street and Vanguard — have been working more closely with the insurance companies,” said Todd Rosenbluth, director of ETF and mutual fund research at S&P Global Market Intelligence, New York. “But it’s also a size aspect. Smaller insurers with fewer resources have been more willing to use index ETFs compared to larger insurers paying for active management and investment due diligence.”

“Compared to financial advisers and pension managers, insurance general account managers have more assets and greater risk aversion,” added Mr. Rosenbluth. “The ETF education model is different.”

If you’ve got a hot tip, a bright idea, or if you’d like to get visibility for your firm through MarketsMuse via subliminal content marketing, advertorial, blatant shout-out, spotlight article, etc., please reach out via this link

More recently those “educational” conversations are including the growing asset base and efficacy of fixed-income ETFs, said Steve Mickle, a director of institutional sales and trading with WallachBeth Capital LLC in San Francisco. He said that insurers have become the agency brokerage firm’s fastest growing clientele. “They see the size and liquidity of some of the earliest and most foundational fixed-income ETFs as utility products, ones that work for parking cash or interim benchmarking,” said Mr. Mickle.

According to WallachBeth, 132 fixed-income ETFs have been assessed by the National Association of Insurance Commissioners for risk-based capital treatment that could potentially be more favorable than common stock (as ETFs are traditionally reported).

“The NAIC designation is an added feature,” said Bill Best, managing director at VanEck in New York, “but some of the largest insurers are still working through the products and mechanics of ETFs.”

Josh Penzner, managing director at BlackRock Inc. (BLK), has observed insurers testing the waters of fixed-income ETFs, particularly to manage cash liquidity and investment exposures as a placeholder before purchasing bonds that have been “and will continue to be” the core of insurance general account portfolios.

To continue reading, click here

MarketsMuse blog post title Insurance Co PMs are increasingly getting  “the memo” : Exchange-Traded Funds (ETFs) Make Sense..

fintech-etf-marketsmuse

What’s Next? A Fintech ETF!

Just when you were about to ask “What’s the next type of exchange-traded fund that nobody else has come up with?, PureFunds has launched a fintech ETF!

If you’re not familiar with the phrase ‘fintech’, you’re likely not qualified to put assets into this latest exchange-traded fund that specializes in one of the hottest trends-financial technology companies.

Caveat: According to 4 Pinocchio star winner Donald Trump, “Many people are saying..” that “fintech” is a phrase associated with start-up companies focused on delivering innovative software applications used to streamline financial industry centric services. The fact is that ‘fintech’ is a term that is applied to the full gamut of companies that specialize in financial industry technology solutions, as evidenced by the criteria for constituents within PureFunds latest ETF product, Solcative Fintech ETF (FINQ).

FINQ allows investors to invest in this fast-growing segment of the industry without having to select individual companies. The rules- based index approach allows us to capture exposure to companies at the forefront of innovation in the financial industry.”

But don’t just take our word for it, below is the press release that just crossed the tape..

SUMMIT, N.J.–(BUSINESS WIRE)–ETF Managers Group in partnership with PureFunds today debuted their newest fund, the PureFunds Solactive FinTech ETF (FINQ).

“FINQ allows investors to invest in this fast-growing segment of the industry without having to select individual companies. The rules- based index approach allows us to capture exposure to companies at the forefront of innovation in the financial industry.”

Trading on the NASDAQ, the fintech ETF “FINQ” invests in global companies disrupting the multi-trillion dollar financial industry by offering technology-based solutions designed to revolutionize how financial industry firms interact with their customers and run their businesses.

The fund’s holdings include technology services companies that principally derive revenue from the sale of financial-related information, financial data analysis services, financial services software tools or platforms or web-based financial services. Each company in the fund and its corresponding index – 31 in total – has a minimum market cap of $200 million.

“Financial technology is a rapidly growing subsector of the overall financial services industry, and our fintech ETF FINQ seeks to tap into the potential investment opportunity created by these disruptive, forward- thinking companies,” Andrew Chanin, CEO of PureFunds, said. “FINQ allows investors to invest in this fast-growing segment of the industry without having to select individual companies. The rules- based index approach allows us to capture exposure to companies at the forefront of innovation in the financial industry.”

If you’ve got a hot tip, a bright idea, or if you’d like to get visibility for your firm through MarketsMuse via subliminal content marketing, advertorial, blatant shout-out, spotlight article, etc., please reach out to our Senior Editor

Sam Masucci founder and CEO of ETF Managers Group said, “The idea behind PureFunds ETFs is to make available – in a single diversified investment – unique areas within markets that have been greatly enhanced by technology. Technology allows businesses to offer new innovative services that can positively affect a consumer’s experience.”

FINQ will cost 68 basis points* and will be equal weighted. It joins PureFunds’ suite of products, BIGD, GAMR, HACK, IFLY, IPAY, SILJ and IMED, which also begins trading today on the NASDAQ.

* A basis point is one hundredth of a percent

About PureFunds

As an innovator of ETF concepts, PureFunds® strives to provide the market with easy access to in-demand industries through pure-play ETFs. We are a New York City-based research and business management firm, serving as the Manager and/or Sponsor to the suite of PureFunds ETFs. We aim to provide investors with tactical ETFs that may offer attractive investment opportunities in sectors that traditionally have been difficult to invest in. With vast experience in global equity investing and ETF trading, PureFunds has a refreshing and alternative insight into the growing world of ETFs. We have constructed our distinct suite of products in an attempt to meet the needs of investors and traders alike.

About ETF Managers Group

ETF Managers Group, LLC is a leading Exchange Traded Funds (ETF) private label services company. ETF Managers Group offers a full range of ETF product services to the asset management community including commodity pool ETPs as well as both active and passive ETF funds. The services provided include product operations, regulatory, financial and compliance management. ETF Managers Group offers active marketing and dedicated wholesale services for all ETF product types and index construction.

oleary-shark-tank-etf-marketsmuse

O’Leary of Shark Tank Brands Bigger Pool of ETF Products

The summer interns at MarketsMuse had already voted “Shark Tank” as their favorite TV show,  so it was no surprise that our senior curators took their cue to advance the latest news from Kevin O’Leary, the celeb entrepreneur and more recently, an ETF aficionado who has extended his brand to the world of exchange-traded fund (ETF) products under the O’Shares Investment umbrella.

(Bloomberg) — Kevin O’Leary is out to carve a niche for himself in the world of exchange-traded funds.

The chairman of O’Shares Investments and Shark Tank personality has filed a prospectus with the Securities and Exchange Commission to launch 17 ETFs. All the proposed offerings have “quality” in the name and would employ a passive investing approach. The investable universe of these funds includes emerging-market equities, small-cap U.S. stocks, preferred shares, and even corporate credit.

“It’s rare for an indie shop like this to put this many funds on one filing,” said Eric Balchunas, ETF analyst at Bloomberg Intelligence.

O’Leary’s celebrity status and the application of smart-beta strategies to fixed income could help the Canadian businessman differentiate himself and attract assets in what’s becoming a crowded ETF space, with roughly 60 issuers in the U.S. The “quality” designation suggests O’Leary’s ETFs will put a priority on conservative factors, which are in vogue as the bull market enters its eighth year.

O’Shares’ most popular current offering, the FTSE U.S. Quality Dividend ETF (NYSE ARCA: OUSA), has $240.5-million in assets and has outperformed the S&P 500 so far this year:

Details on expense ratios or fees for O’Shares‘ proposed ETFs weren’t included in the preliminary prospectus. The FTSE U.S. Quality Dividend ETF has an expense ratio of 0.48 percent, which is roughly in line with that of other smart beta offerings.

Earlier this year, O’Leary indicated that he was considering a run for the leadership of the Conservative Party of Canada after former Prime Minister Stephen Harper’s Tories lost the 2015 federal election to the Liberals, led by Justin Trudeau.

bitcoin-etf-marketsmuse

Bitcoin ETF: Navigating SEC Spider Web: Spider Woman

Call it a Rat’s Nest, a Rabbit Hole, or a Rubik’s Cube, but no certified marketsmuse can dispute the fact the ETF industry has become a Spider’s Web of complexity when it comes to the assortment of products being promoted. And, who more qualified to advocate on behalf of a Bitcoin ETF than Kathleen Moriarty, who is often referred to as the Spider Woman of the ETF marketplace for her long history of traversing the SEC in the course of championing innovative products.

(Reuters) –When one of the first exchange-traded funds launched in 1993, securities lawyer Kathleen Moriarty received a gift from her legal assistant: a Spider-Man comic-book cover altered to depict the superhero facing off against a hulking Securities and Exchange Commission.

kathleen-moriarity-bitcoin-etf-lawyer
Kathleen Moriarty, Esq. (photo courtesy of Reuters)

Twenty-three years later, Ms. Moriarty’s ability to navigate the arcane rules that govern financial markets and products has built her a reputation as a top lawyer in the ETF business and earned her the nickname “Spider Woman.” Her latest challenge is convincing regulators that a bitcoin ETF is appropriate for the market. That isn’t necessarily an easy sell, given the explosion of ETFs across the market and their fraught role in a market meltdown last August.​

“I tend to concentrate on more exotic products,” Ms. Moriarty said. “Zero of my plans include retirement.”

ETFs have grown to become one of Wall Street’s most popular product categories by offering investors low-fee access to wide swaths of the market.​Investors had close to $3 trillion in assets across nearly 4,500 ETFs globally as of March, according to London-based research firm ETFGI.

“I don’t think anyone would have thought it was going to be this big,” said Ms. Moriarty, a partner at Kaye Scholer LLP, in an interview this year at her Midtown Manhattan office, which was adorned with decorative arachnids and the framed comic.

Ms. Moriarty, who turned 63 Tuesday, helped launch what is still the largest U.S.-listed exchange-traded fund—the SPDR S&P 500 ETF, or SPY—paving the way in 1993 for a booming industry.

“If you’re going to try to do something unique and novel in that space, you’re going to call Kathleen,” said Jim Ross, who heads State Street Global Advisors’ line of SPDR ETFs.

ast year, the agency proposed new rules that could limit ETFs’ growth and even slim down the current lineup, such as curbing the use of derivatives by mutual funds and ETFs and limiting their holdings of assets that are illiquid, or tough to buy and sell.

An SEC spokeswoman declined to comment for this article.

Ms. Moriarty said regulators’ concerns about the products’ proliferation is “extreme.”

“How many more mutual funds do we need? Nobody ever asks that question,” said Ms. Moriarty. (There are more than 8,100 mutual funds and about 1,600 ETFs in the U.S. as of February, according to the Investment Company Institute, a fund industry group.)

Ms. Moriarty cited bitcoin’s volatility as a risk in the filing she co-wrote. She said her proposed ETF’s structure is similar to that of the $32 billion exchange-traded gold product, the SPDR Gold Trust, that she helped launch in 2004 because it aims to give investors access to the commodity without having to hold it. The fund, GLD, has risen sharply along with gold prices this year.

“I’m optimistic,” Ms. Moriarty said about the bitcoin application.

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

canadian-exchanges-ETF

Canadian Exchanges Face-Off Over ETF Listings

Last week, Canadian upstart exchange Aequitas NEO announced its first ETF listing, and in response to that PR promotion, Toronto Stock Exchange (TSX), a subsidiary of TMX Group fired back with a slapshot, thanks to TD Asset Management (TDAM) listing and launching six new ETFs.

(TradersMagazine) Executives from TD Asset Management opened trading of its new exchange traded fund business at the Toronto Stock Exchange. Last week, TDAM’s six new passive ETFs began trading on TSX, including products designed to track the performance of Canadian fixed income markets as well as Canadian, U.S. and international equities.

ceo-tmx-group-eccleston
Lou Eccleston, CEO TMX Group (photo via Bloomberg)

“TSX is proud to welcome TD Asset Management ETFs to our Exchange. TDAM has been a great sponsor of the industry and our firm for many years,” said Nick Thadaney, president & CEO, Global Equity Capital Markets, TMX Group.

He added, “We have a rich history in supporting the successful growth of the ETF marketplace and we remain committed to serving this segment into the future. ETFs have become a vital part of Canada’s markets and a great example of the dynamic and diverse products we offer to investors.”

To celebrate the listing on TSX, Tim Wiggan, CEO, TDAM, joined Thadaney to open trading this morning.

As of February 29, 2016, there were 384 ETFs and exchange traded notes listed on TSX with a combined market capitalization of over $98 billion.

contango-uso-etf-oil

Only Idiots Use USO ETF to Trade Oil-It Can’t Tango!

For those who are confused as to the near-term, or even longer-term price direction of Oil, even J.R. Ewing would tell you there isn’t an oil man in Texas, including Boone Pickens, who can see far beyond the prices posted at the pump. Especially when one gas station in Oklahoma is now selling one gallon for .99 –a price that has been seen in certain spots, but not since 1993 has oil been so ‘cheap.’ For those who try to express a bet on price direction via a financial instrument, one leading markets muse is going so far as to infer that “..Only idiots use the ETF $USO to make a bet with.” Why? It Can’t Tango!  Well…that’s perhaps a poetic license pun on words, but..

Courtesy of the universally-known ETF Professor Todd Shriber, who pens for financial news site Benzinga, the markets muse in question turns out to be one of the global macro world’s more eloquent and most thoughtful gurus.. Here’s the extract from Shriber’s early a.m. column:

To say the United States Oil Fund LP (ETF) (NYSE: USO), which tracks West Texas Intermediate crude oil futures, is a flawed product is accurate and fair. Over the past three years, USO is down 77.1 percent, but the exchange-traded product remains a favorite, on both sides of the oil trade, of professional traders.

Inflows to USO confirm as much. After adding nearly $3.1 billion in new assets last year, USO has seen year-to-date inflows of almost $900 million. USO’s 2016 inflows put it just outside of the year’s top 10 asset-gathering ETFs.

USO And Contango

Perhaps the greatest source of criticism against USO comes from the fact that the ETF is frequently in contango. As it pertains to USO, contango occurs when the West Texas intermediate futures currently held by the ETF trade at higher prices than the market expects that contract to trade at for the months ahead.

“Oil traders should be aware that USO tracks front-month WTI future contracts and the underlying oil market is currently in a state of contango. Consequently, USO could experience a negative roll yield when rolling a maturing futures contract, or selling a contract that is about to expire in exchange for the next month contract,” according to ETF Trends.

WTI And Negative Yield Rolls

Speaking of negative yield roll, West Texas Intermediate futures are currently facing an epic negative yield roll.

neil azous
Neil Azous, Rareview Macro

“The widening in the ‘contango’ between the first and second futures contracts, or the March-April spread (CLH6-CLJ6), has exploded to ~8 percent in negative roll yield,” said Rareview Macro founder Neil Azous in a note out Wednesday evening.

As Azous noted, West Texas Intermediate’s current level of contango is quadruple that of Brent crude, the global oil benchmark contract, on a percentage basis.

The problem for any trader, professional or retail, who is long USO is that instances of exaggerated West Texas Intermediate have previously given way to savage declines for that contract and USO.

“The extrapolation that the market will likely make into next week’s crude oil futures roll and options expiration is that the next leg lower in the barrel has started and this CLH6-CLJ6 spread can widen out dramatically as evidenced by the extreme widening to 25 percent back in the winter of 2008-2009 when the barrel finally bottomed out for that cycle,” added Azous.

Read more: http://www.benzinga.com/news/16/02/6246307/how-contango-could-affect-a-popular-oil-etf#ixzz3zt6Cpp2D

 

HYG v VIX

High-Yield Credit Spreads, HYG and VIX-Reading The Tea Leaves

MarketsMuse followers have been reminded more than a few times that conventional wisdom requires investors to keep their eyes on corporate bond spreads so as to have a clear lens when considering the outlook for equity prices on a medium-to-longer time frame. The relationship between high-yield debt,most-often measured by HYG (the high-yield bond exchanged-traded fund) and VIX–the latter of which is an often misunderstood metric, is a telling indicator for stock investors. And, those who are experts at reading the tea leaves are pointing to red flags on the horizon..

Courtesy of CNBC, Neil Azous of Rareview Macro and Andrew Burkly of Oppenheimer, two of the industry’s most sensible pundits discuss the cause and ramifications of the recent junk bond sell-off, pointing to high yield bond ETF $HYG as a meter benchmark to in the video below..

Is an ETF for Equity Crowdfunding Far Off?-Global Directory Announces Launch

For followers of the global equity crowdfund movement and fintech aficionados who are fluent in ‘what’s next?’, this is a big news week from the crowdfund world. Yesterday, MarketsMuse curators spotlighted a just-launched trading exchange that brings billions of dollars worth of private shares into the wacky world of secondary market trading. While there are rumored to be various efforts to package equity-crowdfunded ‘equity stakes’ into exchange-traded fund structures, which is arguably the “next great idea, “the first ETF for Equity Crowdfunding” has yet to be formally announced.

Before that announcement actually happens, today’s announcement from the multi-billion crowdfunding space (see link below) might be the data foundation such an initiative. and could very well be the vision spearheaded by this new portal, RaiseMoney.com.

MarketsMuse editor note: fully-disclosed, one of our favorite staff members was cited in this news story with the following comment

“Noted Pete Hoegler, senior analyst for financial industry blog, MarketsMuse.com, “The RaiseMoney.com platform has three critical elements in its favor. Firstly, they have a really compelling domain name that inspires immediate brand recognition.” Added Hoegler, “Secondly, this group has the benefit of not having “first-mover disadvantage” and most important, RaiseMoney.com is providing a much-needed service for a still nascent industry that is capturing the attention of millions of people and billions of dollars.”

Click below for the formal announcement distributed by NASDAQ’s GlobeNewswire

Wall St Ex-Pats Launch Global Directory for Crowdfunding Industry”

Global Macro Rareview: ETF Investors and The Ivy Portfolio

If the second shoe is actually falling as US (and all other) equities markets appear to indicate this morning, MarketsMuse ETF and Global Macro editors were stimulated by having Sight Beyond Sight with this morning’s coffee, courtesy of Rareview Macro’s Neil Azous. Of particular interest, Azous points to Mebane Faber’s The Ivy Portfolio for those who have defaulted to using exchange-traded funds and to the reference to Occam’s Razor, a principle that global macro enthusiasts will appreciate.

Without further ado, please find an extract from this morning’s edition of Sight Beyond Sight…

Corporate Buybacks Not Strong Enough to Save Stocks Today…Retest of the Lows Now Underway

  • Negative Statistical Analogs
  • No September First of the Month Inflows
  • China Quantitative Tightening (QT)
  • Trends Switch to Medium- from Short-Term
  • Correlation Breakdown
Neil Azous, Rareview Macro
Neil Azous, Rareview Macro

The key takeaways to start September are invisible to the naked eye; a little sight beyond sight is required this morning in order to see them clearly.

Firstly, we are not sure who the source was, but the following S&P 500 analog was sent to us:

In the 11 times the S&P 500 fell by more than 5% in August it declined in 80% of the subsequent Septembers; the average decline in September in those years was 4%.Now, there are many statistics with similar odds of success being circulated out there, but in aggregate these one-liners miss the bigger picture, in our opinion.

The message is that the higher volatility witnessed during August has carried over into September. It took eight hours of the overnight session for S&P futures (ESU5) to confirm 65% of the above analog, as the index was -2.6% at one point.

Secondly, the first of the month inflows into risk assets that professionals are accustomed to relying on to support their long equity positions has gone missing this year. Inflows into equities are generally expected to follow the simultaneous release of PMI manufacturing data, especially when the data historically points to a stronger global growth profile. However, the data released this morning was uniformly weak, and serves as a reminder of the regional synchronicity – that is, Japan’s consumption-led recovery is faltering, the US has a second half of the year inventory overhang to work through, Europe’s inflation profile is reverting back to pre-“QECB” profile, and China remains an unknown.

Thirdly, given the overall weakness in risk assets the sell-off in the German Bund (RXU5) over the last 24-hours is confounding professionals. Occam’s Razor, a principle that states that among competing hypotheses that predict equally well, the one with the fewest assumptions should be selected, suggests that the Chinese central bank is once again selling dollars and foreign fixed income reserves to buy yuan. As a reminder, FX intervention means foreign reserves have to shrink. The mechanics are as follows: sell foreign sovereign bonds > receive US dollars (USD), euro (EUR), yen (JPY) > use USD/EUR/JPY proceeds to buy CNY = no impact to private economy.

The Chinese Yuan, both the onshore (USD/CNY) and offshore (USD/CNH) versions, is trading at its strongest level since the devaluation. The key difference today however is that the central bank is not defending yuan weakness. Instead, in the spirit of managing volatility, it appears it is proactively reminding speculators who their daddy is and doing a good job of crushing their souls at the same time.

Next.. Continue reading

News Alert: SEC Set To Hit Pimco With Wells Notice in Probe of Bond ETF

Bond giant Pacific Investment Management Co. aka Pimco said Monday that it received a Wells Notice from the SEC and the firm could be sued by the country’s top securities regulator over how it valued assets in ETF $BOND, one of its most popular exchange-traded bond funds aimed at small investors.

MarketsMuse Flash News courtesy of WSJ; photo image courtesy of Bloomberg LP.

The Pimco Total Return ETF, previously managed by star investor Bill Gross, has been under investigation by the Securities and Exchange Commission for at least a year for artificially boosting returns, The Wall Street Journal has reported.

Pimco disclosed Monday that it received a so-called Wells notice from the SEC, an indication that the agency intends to file a civil enforcement action against the firm related to its investigation. The notice isn’t a formal allegation of wrongdoing and it doesn’t mean the agency has found that any laws were violated.

The original story from WSJ is available via this link

images

Swimming With New Sharks: Kevin O’Leary Jumps into ETF Biz

How big are ETFs these days? Even Kevin O’Leary, aka “Mr. Wonderful” of ABC’s “Shark Tank” is getting into the game. On Tuesday, O’Leary was on the NYSE floor to launch the O’Shares FTSE US Quality Dividend ETF, (ARCA NYSE:OUSA): a basket of high-dividend stocks.

But he’s not doing this just to enter the crowded ETF space, which already has 1,700 ETFs and more than 50 ETF providers.

As noted by the coverage from CNBC, “Mr. Wonderful” is entering the exchange-traded fund world as an Issuer because he needed an investment vehicle for the equity portion of his family trust, which he started in 1997. O’Leary claims he wanted an investment vehicle that was rule-based, first and foremost, so no one would tinker with it.

And he wanted dividends. Why dividends? As O’Leary accurately opines, 70 percent of the returns in the stock market over the past decade or so have come from dividends.

But O’Leary did not just want to buy a basket of the highest-yielding ETFs. You can get that already with Vanguard High Dividend Yield, and you can get variations, like the iShares Select Dividend, that screen by dividend-per-share growth rate, or the Vanguard Dividend Appreciation ETF, which focuses on companies that have steadily increased dividends. O’Leary’s rule-based system is predicated on the following:

  1. A total yield close to 3 percent
  2. with 20 percent less volatility than the market
  3. with stocks that all had strong balance sheets

OUSA is therefore comprised of 140 stocks selected from the FTSE USA Index, comprised of 600 of the largest U.S. publicly-listed equities.

Given the high-profile presence and PR power of O’Leary, O’Shares made its debut on Tuesday in heavy volume. It’s the latest in a flurry of new ETF launches this month; now with 28 new funds, July is already tied for the most ETF launches of any month this year.

 

 

images-1

John Hancock Selects Dimensional to Manage Smart Beta ETFs

Marketsmuse updates that fund giant John Hancock Investments will partner with Dimensional Fund Advisors on six “smart-beta” exchange-traded funds, according to paperwork filed with regulators early on Monday.

Dimensional, based in Austin, Texas, is one of the earliest proponents of factor investing. They blend elements of index-based investing and active investing in order to predictably exploit market returns and minimize trading costs. Many of today’s smart beta products — from index providers including FTSE Russell, WisdomTree, Research Affiliates — are based on a similar premise.

John Hancock unveiled in its preliminary prospectuses for the factor-based ETFs that DFA, the market-beating investment firm that adheres to the academic work of Eugene Fama and Kenneth French, will be the sub-advisor for its ETFs. John Hancock has worked with DFA on mutual funds and asset-allocation strategies since 2006.

John Hancock initially filed plans for ETFs nearly four years ago, but has yet to bring an ETF to market. However, a new filing with the Securities and Exchange Commission indicates the firm is getting closer to launching its first ETFs.

The new filing provides details and expense ratios on the proposed ETFs. For example, the John Hancock Multifactor ETF, which is expected to charge 0.35% per year, will track an index comprised a subset of securities in the U.S. Universe issued by companies whose market capitalizations are larger than that of the 801st largest U.S. company at the time of reconstitution. In selecting and weighting securities in the Index, the Index Service Provider uses a rules-based process that incorporates sources of expected returns. This rules-based approach to index investing may sometimes be referred to as multifactor investing, factor-based investing, strategic beta, or smart beta.

John Hancock manages nearly $130 billion in mutual funds and money-market funds. Dimensional manages $406 billion. Dimensional already advises on John Hancock-branded mutual funds that have $3.2 billion in assets.

images

Currency Hedging On the Loose in ETF World

Do you hear that?  That stampeding sound you hear is coming from fund managers scurrying to get into the currency-hedging trade.

Currency hedging ETFs have been in vogue this year given the ultra-lose monetary policy across the globe and a strong U.S. dollar against a basket of other currencies. The bullish trend in the dollar is likely to continue as the Fed is primed to increase interest rates for the first time since 2006 later this year, as the U.S. economy roars back to life.

While cheap money flows are making international investment a compelling opportunity for U.S. investors this year, a strong dollar could wipe out the gains when repatriated in U.S. dollar terms, pushing international investment into the red in spite of well performing stocks. As a result, investors are flocking to currency hedged ETFs. This has a double benefit. While these ETFs tap bullish international fundamentals, they dodge the effect of a strong greenback.

As is often the case on Wall Street, the natural worry is whether the rush might come too late. Foreign exchange dynamics present earlier this year have abated somewhat, making the need to protect against currency movements less urgent for the moment.

With the race to the bottom heating up among global central banks, it’s no wonder fund managers are looking to capitalize.

 

 

 

images

Meet the Newest ETF in Cybersecurity

First Trust Advisors L.P.  expects to launch a new etf, the First Trust NASDAQ CEA Cybersecurity. The fund seeks investment results that correspond generally to the price and yield (before the fund’s fees and expenses) of an equity index called the Nasdaq CEA Cybersecurity IndexSM.

Cybersecurity is gaining global attention following recent high profile security breaches. With the heightened need for cybersecurity solutions, First Trust believes this could be a favorable time to invest in cybersecurity companies. The index is designed to track the performance of companies engaged in the cybersecurity segment of the technology and industrials sectors. It includes companies primarily involved in the building, implementation, and management of security protocols applied to private and public networks, computers, and mobile devices in order to provide protection of the integrity of data and network operations.

This new ETF includes companies primarily involved in the building, implementation and management of security protocols applied to private and public networks, computers and mobile devices in order to provide protection of the integrity of data and network operations.

As more companies are experiencing high-profile cybersecurity breaches, the industry is gaining global attention. With the heightened need for cybersecurity solutions, First Trust believes this could be a favorable time to invest in cybersecurity companies. The index is designed to track the performance of companies engaged in the cybersecurity segment of the technology and industrials sectors.

To read the full article, click here.

 

 

blair-hull

Hull Launches First ETF Product for U.S.

Hull Tactical Asset Allocation, LLC (“HTAA”), announces the launch of the Hull Tactical US ETF (“HTUS”), an actively managed exchange traded fund designed by industry veteran Blair Hull. The ETF is designed to deliver hedge fund-type management and trading tactics to a broad investor audience.

Working in partnership with Exchange Traded Concepts, LLC, the white-label ETF issuer platform, the team at HTAA believes that the Hull Tactical US ETF will be attractive as the market for institutional-quality equity products continues to grow.

HTUS is constructed to perform under all market conditions, with an investment objective of long-term capital appreciation, guided by the firm’s proprietary, patent-pending, quantitative trading model. The model selects indicators that HTAA believes can best forecast the next six months of return of the S&P 500. It takes long or short positions in ETFs, leveraged ETFs or other securities that seek to track the performance of the S&P 500 based on the model with the remaining assets in the portfolio being held in cash.

The fund is a good option for investors seeking to stay invested in the market under all conditions. “A wide range of investors – from sophisticated retail investors, to independent advisors to endowments and pension funds in the institutional space – should find our product advantageous,” says Steve McCarten, Chief Operating Officer of Hull Tactical Asset Allocation.

Given the current equity market condition, investors can expect to reduce volatility exposure to the equity market through this fund. This is especially true as the long-short positions taken by the fund help to withstand volatility. Moreover, the fund is expected to provide higher diversification benefits as the long strategy is believed to be highly uncorrelated to the traditional asset classes.

To read the full article, click here. 

 

ap_pot_colorado_tk_140101_16x9_992

Looking to Hit That Pot ETF? Here’s What It Could Look Like

Pot has been generating lots of buzz both in the public and private sectors.

Twenty-three states and the District of Columbia have legalized marijuana, either for medicinal or personal use, while an additional 13 have planned votes by 2016. If the trend toward legalization continues, there’s big profit potential, considering $2.5 billion in legal sales last year—and the estimated $60 billion in illegal sales.

There is an ETF for just about any investing theme you can think of. Still, marijuana is a relatively new legal industry regionally, with very few legitimate public companies in the sector that have generated revenues and that have been run by officers who know what it takes to be a public company.

Companies that would be included in any serious ETF would likely be limited to legitimate reporting companies. Some of these companies included in an ETF would almost certainly be companies that service the marijuana industry but that are much larger and focus on farming and cultivating throughout the broader agricultural sector.

One ETF inclusion would be a so-called hemp-friendly bank, which is yet to be determined. Federal laws and regulations still make the business of marijuana almost impossible to bank on. It is currently a high-cash business. You know that one bank will be the first to embrace the industry, and marijuana entrepreneurs and store owners almost certainly will flock to that bank. Again, this bank is a draft to be announced at a later date

However, if we look on the other hand, pot may be a perfect example of when an exchange-traded note (ETN) makes more sense than an ETF. ETNs don’t have to hold any of the stocks. The notes are unsecured debt obligations that are basically, promises to pay the returns of an index. So it doesn’t matter if the stocks are illiquid or not. What matters most is the creditworthiness of the ETN issuer.

ETNs were first introduced 10 years ago for this very purpose—to get into places that were particularly tough for ETFs to track. For example, the iPath India ETN (INP) was launched in 2006 to get around the strict foreign ownership restrictions that made an ETF impossible. It accumulated more than $1 billion within two years.

An ETN issuer could do the same thing, using a self-made pot index or something like the MJIC Marijuana Global Composite Index. The downside to ETNs is there is always risk that the issuer will default, just as with a bond. For investors “jonesing” hard enough for a pot ETF, this may not matter.

If you are interested in reading more on this subject, read this Bloomberg Business article.

 

 

jobs-act-senate-passes

What’s Next: ETFs For Crowdfunding Industry?

This post was written by Pete Hoegler, Washington DC-based Social Media Savant for The JLC Group. 

Three years after the JOBS Act was passed, it seems that Washington is back for more–a curtain call if you will–making it easier for small ventures to raise capital.

The House Financial Services Committee in early June floated a draft bill that would allow the creation of “venture exchanges” tailored to the needs of small companies looking to raise money. In many ways, the success of the JOBS Act hinges upon the creation of such markets. A healthy secondary market created liquidity that is critical to building investor confidence and creating a robust alternative to the global markets that today are dominated by enormous corporations.

The new proposed “venture exchange” laws are aimed at increasing access to early stage investors in private startups and small businesses (some of which could be JOBS Act enabled investors), as a lack of liquidity was a concern voiced by some surrounding the new laws for equity crowdfunding with non-accredited investors.

Investors in technology startups, for example, are likely to have to hold their position in any one investment for an average of 7 years. Creating opportunities for selling private stock in a start-up investment sooner through venture exchanges has the potential to reduce some of the early stage investment risks.

Where or How is there a link between Crowdfunding and Exchange-Traded Funds? Well, those following the creative finance wizards from the world of exchange-traded products can speculate the next  innovation will be ETFs comprised of non-public companies that were funded via crowdfunding platforms..and those companies will be labeled “pre-emerging start-ups” and there will be ETFs for each category of ‘project.’

While the underlying components might not necessarily be easily-traded by the universe of market-makers who profit by arbitraging the cash index vs. the underlying constituents, the advent of ETMFs, a structure that Eaton Vance hopes to bring to market and is based on a “non-transparent” construct (meaning the investor has no idea what the underlying constituents are), Crowdfunding ETFs could create markets that allow early investors who invested via equity crowdfunding to hedge their bets far before any kind of liquidity event like a public offering (IPO) might take place, spelling an opportunity for liquidity for those early investors.  Just like the current ETF landscape, these crowd-funding indexes would be themed according to industry sector and/or product categories.

OK, some of the wonks who are reading that last tongue-in-cheek idea might be rolling their eyes. That said, given the creative juices that flow from the capital markets, we’re willing to bet that at least one of the current innovators in the ETF world grabs on to this idea and such products will be introduced within the next 18-24 months. Oh, it was our idea…

The number of IPOs has gone from an average of 311 from 1980-2000 down to an average of 99 IPOs each year from 2001-2011 so opening up other alternatives for liquidity will de-risk the growing number of startup investments happening online.

This is yet another step towards reforming our capital markets. The first step was to enable access, and was addressed by Titles II, III & IV of the JOBS Act. So regardless of your opinion on this matter, the summer is shaping up to be an interesting time for equity crowdfunding investors, accredited and non-accredited alike.