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Asia FinTech Funding Initiative 2x That of US and EU

Latest Chinese Fintech FOF Completes Raise of 10-billion-yuan (US $1.8b) as Asia fintech funding continues to eclipse North America and EU allocation to financial technology initiatives..

(Econotimes.com) 28 December 2016- In a move to advance China as a financial and technology hub, Asia FinTech FOF, a foundation that aims to seek investment opportunities and fuel mergers and acquisitions (M&A) in Asia, was established in Beijing on Tuesday, China Daily reported. (feature photo also courtesy of China Daily)

With funds of 10 billion yuan ($1.44 billion), the foundation is the second fund of funds (FOF) after the Zhongguancun FOF, which is valued at 30 billion yuan. The Zhongguancun FOF was established in 2015 and expected to support acquisitions worth 150 to 200 billion yuan.

The Asia FinTech FOF was initiated by both private and State-owned capital. This includes Hong Kong-listed Credit China Fin Tech Holdings Ltd, Shanghai Xinhua Distribution Group Ltd and Jilin Province Investment Group Corp Ltd.

“Our investment will center on leading companies in the fields of big data, AI, cloud computing, mobile payment, supply chain financing and block chain,” said Sheng Jia, the executive director of Credit China Fin Tech, as quoted by China Daily.

Xie Sha, managing partner of Asia Fintech FOF, said that the fund already has some projects in the pipeline, which includes areas such as big-data driven consumption financing, blockchain infrastructure provision and AI-based credit service platforms.

While fintech has taken the global financial sector by storm, the Asian fintech funding market is spearheading this revolution. In the first half of 2016, the Asian fintech market saw $10 billion of investment far more than North America’s $4.6 billion and Europe’s $1.8 billion.

China, in particular, is in the forefront with policy support also stimulating the growth of country’s fintech market. The State Council in August published the national five-year plan on scientific and technological innovation by 2020, in which of fintech innovation is particularly encouraged.

“Fintech is reshaping the financial business. And this is an opportunity that neither traditional financial institutes nor technology firms want to miss,” said Xie.

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Steven Chow, Chief Strategy Officer, Prospectus.com

According to  Steven Chow,  the Hong Kong-based Director and Chief Strategy Officer for capital formation consultancy Prospectus.com, “Based on the projects that we’ve been engaged to assist throughout both 2015 and 2016, there is no question that that Asia domiciled companies, and particularly China-based start-ups are heavily focused on the fintech space.”  Added Chow, “However cyclical thematic investment trends tend to be, fintech is now justifiably an asset class unto itself. It is more than clear that the powers that be in China understand this, perhaps even better than their counterparts in the US or Europe.”

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To continue reading Asia FinTech Funding Initiative 2x That of US and EU, please visit Econotimes.com via this link

 

virtu says no to corporate bond etf market-making

Virtu Says NO to Corporate Bond ETF Market-Making

Virtu Says NO to Corporate Bond ETF risk-taking; Top Market-Maker Opines “Unable to Hedge ETF Constituents Due To Limited Liqudity”

During the better part of three years, MarketsMuse Fixed Income curators have often pointed to concerns expressed by market professionals who argue that the unfettered growth of corporate bond ETFs are masking the inevitable likelihood that once interest rates begin to rise, buy side fund managers fearful of mark-downs in their corporate bond positions will push the ‘sell button’ en masse to limit the P&L hit. Those in the camp expressing such concerns, which includes Virtu Financial, one of the most successful electronic market-makers in the industry, believe that such a mass exodus will wreak havoc on the now $8.4 trillion US corporate bond ecosystem* (*data according to Sifma), where new issuance for 2016 has just surpassed 1 Trillion dollars, and is a marketplace that since 2011 alone, has grown nearly 50% in terms of notional value and number of outstanding issues.

Per one senior market risk expert familiar with the thinking at Virtu, “Their’s isn’t simply a view typically attributed to academics, who have increasingly warned and have been equally derided by ETF lobbyists for suggesting a secondary market meltdown in corporate bond ETF products is inevitable when rates rise. Instead, Virtu has concluded that for those who make a business of ‘taking the other side’ of corporate bond exchange-traded funds, whether investment grade (e.g $LQD) or high yield themed (e.g $HYG), will find themselves playing a game of musical chairs, but there will be no chairs available for anyone when the music stops and traders will find themselves unable to find any liquidity in the respective ETF underlying constituents.”

Below opening excerpt from mainstream media outlet Bloomberg LP and reported by Bloomberg reporter Annie Massa:

One of the world’s largest electronic market makers won’t touch increasingly popular corporate bond ETF products because the underlying securities are too hard to trade.

Although New York-based Virtu Financial Inc. buys and sells everything from stocks to government bonds and futures on more than 235 exchanges around the world, it shuns products linked to corporate bonds like the $15 billion iShares iBoxx $ High Yield Corporate Bond ETF. The reason, according to Chief Executive Officer Doug Cifu, is that it’s too hard for Virtu to precisely hedge the trades.

“It’s definitely concerning you don’t have full and unfettered access to the underlying,” Cifu said, speaking at a Security Traders Association conference in Washington on Thursday. “That’s troubling.”

During the fourth quarter of 2015, TABB Group interviewed key US corporate bond market participants across buy-side, sell-side and specialized trade service providers.Across all segments covered within the survey, participants’ responses reflected dim expectations for liquidity available in the US corporate bond market for 2016. Apart from the threat of a “large scale macro crisis,” the most serious threat that participants identified was the ongoing decline in immediacy (balance sheet) provided by dealers.

Worldwide assets in bond ETFs have surged in recent years, jumping fivefold since January 2010 to about $600 billion, according to data compiled by Bloomberg. About 88 million shares of fixed-income ETFs have traded daily in the U.S. during the past 30 days, according to data compiled by Bloomberg.

Other market makers including Citadel Securities and Susquehanna do trade the ETFs, but Virtu’s absence is notable given how dominant the company is in other areas. Cifu said Virtu does trade ETFs containing U.S. Treasuries, including the ProShares UltraShort 20+ Year Treasury.

To read a Bloomberg Markets profile of Virtu, click here.

Virtu’s strategy involves arbitraging price difference in related assets, quickly entering and exiting the positions. With fixed-income ETFs, the company is concerned it can’t get access to the related bonds fast enough. Market makers with longer trading time frames may be less reluctant. Virtu’s line of thinking echoes worries elsewhere in the industry. Shares of the funds are often easier to trade than their underlying bonds, potentially posing a risk if there’s a sudden rush for the exit.

To continue reading, please click here

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CME Launches Tool To Compare ETF Pricing vs Futures

(Traders Magazine)-CME Group, the US derivatives exchange, has launched an online tool to allow investors to compare the costs of futures against exchange-traded funds, as some ETF issuers have claimed the funds are now cheaper to use.

Last month the CME launched the Total Cost Analysis tool to allow investors to compare the all-in costs of replicating the S&P 500 by trading equity index futures versus ETFs, and intends to expand the tool to other indexes.

Tim McCourt, global head of equity products at CME Group, told Markets Media: “The online tool gives customers the flexibility to compare costs for specific variables such as commissions, trade size and time period.”

The tool focuses on three different components of the total cost of trading – transaction costs, implementation costs and holding costs. McCourt claimed that for an active trader on a short time horizon, futures are overwhelmingly cheaper on a total cost of trading basis, which includes both fees and market impact but in certain circumstances, over different time periods, this could change.

Source, the European ETF issuer, had issued a paper in April, “ETFs vs Futures”, which said futures have become more expensive due to bank regulation while ETFs have become cheaper due to increased competition. The paper said that futures costs have been cheaper recently, this is expected to change. “We expect that, as volatility reduces, the usual imbalance between buyers and sellers in the futures markets will resume and futures costs will return to the levels we saw between 2013 and 2015,” said the report.

In addition Source said futures are particularly expensive relative to ETFs at the December roll as banks have less risk appetite at the financial year-end. “For investors planning to hold an exposure over the December-March period, it may make sense to buy ETFs instead of futures,” added Source.

To continue reading, please click here

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Pac-Man Time for ETF Issuers

If you thought the ETF Issuers industry is getting crowded, you are right. While the barrier to entry is relatively low, the path to traction-measured by AUM can prove rocky, if not populated with land mines. What’s an Issuer to do? Join the Pac-Man Party and sell out what you’ve built to those with a fresh perspective who want to Pass Go and collect the $200 (metaphorically speaking) without having to start from scratch. MarketsMuse gives a shout-out to P&I contributor Randy Diamond for the following update..

“More and more money managers are looking at a way to get into the ETF marketplace,” he said. “The fastest way to do that is through an acquisition; buy something already out there.”

Small ETF providers might have little market share, but that hasn’t stopped them from being acquired by larger active money management firms looking for a quick way to enter or expand their exchange-traded funds business.

Hartford Funds, Radnor, Pa., announced May 17 its purchase of Lattice Strategies, a San Francisco firm known for its smart-beta ETFs. Just a week earlier, Columbia Threadneedle Investments, Boston, said it would acquire New York-based ETF provider Emerging Global Advisors.

The two announcements by money management firms are the latest in a string of deals that began in late 2014.

At least two more ETF providers will be sold in 2016 to money managers, predicted investment banker Donald Putnam, a managing partner at San Francisco-based Grail Partners LLC. Mr. Putnam said likely buyers will be firms with 20% to 40% of assets under management in mutual funds. “A lot of it has to do with pivoting existing mutual funds into ETF clones, a lot of it has to do with taking asset management styles that are not in mutual funds and putting them in ETF form initially rather than in old-fashioned mutual fund form,” he said.

Mr. Putnam wouldn’t say which ETF companies he believes are ripe for acquisition, but Reggie Browne, senior managing director and head of ETF trading at Cantor Fitzgerald LP, New York, said potential acquisition targets include AdvisorShares Investments LLC and WisdomTree Investments Inc., New York.

AdvisorShares, Bethesda, Md., with $1.2 billion in assets under management, is the more typical size of ETF managers being acquired. Publicly traded WisdomTree, on the other hand, is the largest independent ETF company in the U.S., with $42 billion in assets under management.

Jan van Eck, president and CEO of New York-based VanEck Global, an ETF company with $23.7 billion in U.S. ETF assets, said in the past year he has talked to at least 10 managers interested in acquiring an ETF company. “We stay in touch with potential strategic partners and investors, but we don’t see a reason for a transaction,” he said. “We think we can grow sufficiently as an independent company.”

Capture a slice

Todd Rosenbluth, a New York-based senior director and director of ETF and mutual fund research at S&P Global Market Intelligence, said as asset flows continue to move from active management and into areas such as ETFs, active managers are trying to position themselves to capture a slice of the growing business.

“More and more money managers are looking at a way to get into the ETF marketplace,” he said. “The fastest way to do that is through an acquisition; buy something already out there.”

To continue reading, please click here

BrokerDealer Exchange Rebates: BuySide Not Happy

On the heels of the recent NYSE ‘outage’, which actually had little impact on overall equities trading volume, but did lead to volume spikes away from the NYSE and at competing exchanges across the fragmented marketplace, the volume also increased with regard to spirited discussions about market structure. And, whenever talking about market structure, the “rebate debate” insofar as “maker-taker” rebate and fee schemes remain a front burner topic. It is no surprise that many (but not all) sell-side brokerdealers are characteristically in favor of these complex Chinese menus offered by the assortment of major exchange venues and dark pool operators. After all, brokers are ever more dependent on these ‘rebates’ as the race to zero in terms of commission rates paid by institutional customers continues to eat into executing broker income. To counteract the business model impact on BDs, savvy executing brokers have [for a number of years] been making up for lower rates via capturing offsetting revenue from routing customer orders to those bounty-paying trade execution platforms.

On the other hand, nobody should be surprised that an increasing number of institutional investment managers from the buy-side are beginning to “get the joke”, but they aren’t laughing as many realize that brokers are effectively double-dipping by charging their customers a commission and also pocketing kickbacks from competing execution venues that pay those brokers to help light up their screens and provide so-called actionable liquidity execution.

A comprehensive database of global brokerdealers in more than 30 countries, including the US is available at www.brokerdealer.com

To wit, and in our continuing coverage of this topic, MarketsMuse curators spotlighted this week’s story from buy-side publication Pensions & Investment Magazine, which profiles the heightened concern on the part of buysiders and the growing number who are expressing their angst with the SEC, the agency that is ostensibly supposed to ensure fair market practices and protect the interests of public investors. Below are select take-aways from the P&I story.

The Buy-Side Says: “Along with conflict-of-interest issues with rebates, other concerns like increased transaction costs and lack of transparency have added to the complexity of today’s market structure,” says Ryan Larson, RBC Global Asset Management. Added Larson, “Whether it’s SEC mandated, or better yet, driven from market participants themselves, I think it’s time to finally address the elephant in the room and start thinking about possible alternatives to the maker-taker model. … It’s not just the buy side that has been calling for a pilot on maker-taker. It’s the sell side, some of the exchanges, Congress, even members of the (SEC) as well. When you see that diverse of a group calling for change, I think it suggests something very important — whether maker-taker is the right approach. This could be one of the most impactful tests ever taken up in market structure.”

The Not-So-Subjective Market Data Vendor Says: “The whole point of maker-taker is to incentivize display of liquidity in lit markets,” said Henry Yegerman, director of trading analytics and research at financial data provider Markit Group Ltd., New York. “Market participants who place trades that rest passively in a venue, and so add liquidity, get a rebate. Investors who aggressively cross the spread to access that liquidity pay a fee to do so.” Institutional investors that are looking to buy or sell large blocks of stocks “are frequently takers of liquidity,” he said.

The Altruistic Sell-Side Perspective: Joseph Saluzzi, partner, co-founder and co-head of equity trading of Themis Trading LLC, a Chatham Township, N.J.-based agency broker for institutional investors said the link between liquidity and maker-taker doesn’t exist. What maker-taker does increase, Mr. Saluzzi said, is volume. “Liquidity and volume are two different things,” Mr. Saluzzi said. “Maker-taker creates volume, and a lot of that is artificial.”

Mr. Saluzzi said liquidity access is not helped through maker-taker, but by changes in a fragmented market structure that would reduce the number of trading venues. “Liquidity is not helped by rebates, but by less fragmentation,” Mr. Saluzzi said. “Maker-taker is the linchpin of the problems with the market. It’s a relic of a system that was around 15 years ago.”

The Exchange Perspective: Not Everyone Agrees: IEX, the dark-pool operator whose ATS platform is now awaiting SEC approval to operate as a regulated exchange is perhaps the most outspoken critic of maker-taker fee/rebate schemes; customers are charged a flat rate commission irrespective of how an order interacts with prevailing bid-quotes. The New York Stock Exchange came out against maker-taker rebates in testimony by exchange executives in 2014, while Nasdaq Global Markets is running a pricing test program that lowers rebate pricing for select stocks to gauge the effects on liquidity. In two reports this year on the test, Nasdaq has said the lower rebates have had a negative effect on liquidity.

At the other end of the spectrum, executives at BATS Global Markets Inc., which is perhaps the second largest equities exchange as measured by volume, don’t support an outright maker-taker ban and think the rebate paid to liquidity providers matters, “particularly with less liquid securities,” said Eric Swanson, general counsel at BATS, Kansas City, Mo.

[MarketsMuse editor note: Mr. Swanson is a former SEC senior executive who served as Asst. Director of Compliance Inspections and Examinations during the same period of time that his wife Shana Madoff-Swanson, the niece of convicted felon Bernie Madoff, received millions of dollars in compensation while she served as head of compliance for Bernard L. Madoff Investment Securities. According to Wikipedia, Swanson first met Shana Madoff when he was conducting an SEC examination of whether Bernie Madoff was running a Ponzi scheme. Ms. Madoff-Swanson’s father Peter is the brother of Bernie Madoff and is currently serving an extended sentence in a federal jail while Uncle Bernie is serving a 150-year sentence.]

The full story from P&I can be accessed by clicking this link.

 

Electronifying The Corporate Bond Market Chapter 15: Liquidnet Tosses Hat Into the Ring

MarketsMuse editors are almost starting to lose count when it comes to the number of electronic trading initiatives from FinTech aficionados who purportedly intend to make the institutional corporate bond market more transparent, and hence more liquid..

Thanks to Liquidnet, the latest player to plug into the corporate bond market movement and throw their hat into the ring, there are now 15 (give or take) initiatives. We can only opine that those who believe that fragmenting marketplaces [particularly products that were never even centralized to start with] as a means to creating a competitive, transparent and hence liquid trading marketplace for institutional investors is at very best, counterintuitive. Some market structure experts might even go so far as to say this electronic bond free-for-all for market share is “completely assbackwards.”

Per coverage by Pensions & Investments Magazine, institutional trading network Liquidnet is set to launch an institutional dark pool for corporate bonds, in the third quarter this year. Best known as a dark pool provider for institutional equities trading, Liquidnet is integrating seven order management systems, which execute securities orders, to provide the connectivity and access to trading opportunities that are not currently available in the corporate bonds market. Liquidnet said in a news release Thursday the development will centralize “a critical mass” of corporate bond liquidity to market participants.

liquidnet“By connecting to (clients’) existing order management systems, asset managers will have direct access to a protected venue that allows them to exchange natural liquidity with minimum effort and minimum information leakage,” said Constantinos Antoniades, head of Liquidnet fixed income, in the news release. “The functionality, protocols and connectivity of our dark pool will create significant new liquidity in the broader corporate bond universe — not just in the most liquid segment of the market.”

Upon reading the press release via Pensions & Investments Magazine, one electronic market veteran had this to say, “The long-held thesis that a centralized marketplace, where all orders are routed and displayed in centralized limit order books (CLOBS) is the best foundation to attracting liquidity and by definition, also provides true best execution for legacy OTC products is a notion that seems to have gone with the wind.” Added that Opinionator (who chooses to remain anonymous given his current Industry role), “It’s only mildly surprising that the regulators (i.e. SEC) have no clue as to the impact of their enabling an industry-wide gambit that will turn the corporate bond market into an electronic rats nest. Despite a 5-fold increase in outstanding issuance during the past several years,  Dodd-Frank regulation has caused banks to step away from traditional market-making and risk taking, and consequently, the corporate bond market is only becoming increasingly more illiquid. More electronic platforms approved by regulators will simply make the corporate bond market even more fragmented and even less competitive.”

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#WhatsNext: The First Crypto Bond Issuance aka Bitcoin Bond

#WhatsNext? wonders the MarketsMuse.com editors and Overstock’s Patrick Byrne does not fail to surprise with another announcement that could disrupt the capital markets. As a follow-on to a $500mil stock offering reported here on April 29, now Byrne is pitching an offering that he hopes to be the first issuance of a crypto bond aka bitcoin bond using crypto technology.

Per extract below from BrokerDealer.com….

Last Autumn, the firm acquired a 25% stake in alternative trading system (ATS) PRO Securities as part of a long-term ambition to use the core blockchain technology to create a cryptosecurity trading system, in which computer algorithms are used to trade virtual stocks issued by public companies.
The company is now scouting institutional investor interest in its first digital bond issues, which is powered by Overstock.com’s TØ.com technology – a name that refers to the fact that trades on the system securely settle the same day, as opposed to the T+3 convention on Wall Street. – See more at BrokerDealer.com
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ETFs To Watch This Week Include ETFs Involved In Oil and The Yen

MarketsMuse blog update highlights the must watch ETFs for the first week of June. The ETFs range from health care, to oil, the Japanese Yen. This update is courtesy of the Benzinga’s author, David Fabian, and his article, “Healthcare, Yen And Oil ETFs To Watch This Week“, with an excerpt from the article below.

The summer months are often characterized by lower volume and heightened volatility, which seems to be a trend that has already established itself this year.

Several important events this week have the potential to impact the market including: personal spending, motor vehicle sales and non-farm payroll data.

Here are the key ETFs to watch for the week of June 1:

Health Care Select Sector SPDR XLV 0.25%

Healthcare stocks have continued to show tremendous strength this year and XLV has been one of the leading sector components of the S&P 500 Index. This ETF is made up of 57 large-cap stocks in the pharmaceutical, biotechnology and medical services fields. Top holdings include well-known companies such as Johnson & Johnson JNJ 1% and Pfizer Inc PFE 0.9%.

CurrencyShares Japanese Yen Trust FXY 0.1%

After appearing to stabilize through the first four months of the year, the Japanese yen currency has once again plunged markedly lower versus the U.S. dollar in May. FXY tracks the daily price movement of the yen versus the U.S. dollar and is down 3.64 percent so far this year.

United States Oil Fund LP (ETF) USO 3.83%

Crude oil prices jumped 4 percent on Friday and managed to recoup the majority of the slide this commodity experienced in May. USO tracks the daily price movement of West Texas Intermediate Light Sweet Crude Oil futures and is the most heavily traded oil ETF.

To continue reading about why oil, the yen, and health care are must watch ETF categories according Benzinga reporter, David Fabian, click here.

 

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These ETFs Could Make You The Next Warren Buffett

MarketsMuse blog update profiles the best ETFs to invest in according to Zacks Equity Research to become the next Warren Buffett. The ETFs range from technology, to financial, to consumer. This MarketsMuse update is courtesy of Zacks Equity Research article, “Follow Warren Buffett with These Stocks and ETFs“, with an excerpt below. 

Everybody dreams of becoming rich and famous like Warren Buffett, Carl Icahn, Daniel Loeb and David Tepper. After all, these Wall Street gurus have successfully put their money in the right place and continued to reap huge returns.

Buffett’s Berkshire Hathaway has enjoyed an average growth rate of about 20% annually. Furthermore, Berkshire Hathaway has added more than 104% over the last five years that is better than the gain of over 94% from the broader market ETF SPDR S&P 500 ETF (SPY) during the same timeframe.

Thanks to this achievement, following billionaires’ investment strategies is now a fad these days. While investing in Berkshire is always a good way of following Buffett, who is commonly known as The Oracle of Omaha, there are numerous other ways to reproduce this stock market veteran’s investment theme and jazz up one’s portfolio.

Normally, Buffett takes interest in companies trading below what he believes is their intrinsic value.He aims long-term outperformance and apparently ignores short-term downturns. We have analyzed a few stocks that remain Buffett’s favorites and highlight the related ETFs for investors who want to follow this investment veteran.

The ETFs that Zacks Equity Research recommend to invest in to follow in Warren Buffett’s footsteps are as follows:

  • iShares U.S. Financial Services ETF (IYG)
  • SPDR Consumer Staples Select Sector ETF(XLP)
  • Market Vectors Retail ETF(RTH)
  • Consumer Staples ETF (VDC)
  • NASDAQ Technology Dividend Index Fund (TDIV)
  • Direxion iBillionaire Index ETF (IBLN)
  • Validea Market Legends ETF (VALX)
  •  Global X Guru Holdings Index ETF (GURU)

To read more about why Zacks Equity Research named these ETFs the best to be like Warren Buffett, click here.

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Coal ETF’s Burns Dim

While many are looking to move away from coal as a power source, such as China, the coal ETF, Market Vectors-Coal ETF (NYSEArca: KOLand recently launched coal ETF, GreenHaven Coal Fund (NYSEArca:TONS), have to continued to demonstrate that trend as their fires dim down to a mere dust.  This MarketsMuse update profiles the dim outlook two above listed coal ETFs are facing as countries explore other sources of power. This update is courtesy of ETFTrends’ Tom Lydon and his article, “Coal ETF Outlook Growing Dim” with an excerpt. 

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Some bargain hunters may be looking at the downtrodden coal industry and related exchange traded funds as the market remains near historic lows. However, coal remains depressed for a reason.

Over the past three months, the Market Vectors-Coal ETF (NYSEArca: KOL), which tracks the coal industry, has declined 6.9%. Additionally, the recently launched GreenHaven Coal Fund (NYSEArca:TONS), which is designed to offer investors with exposure to daily changes in the price of coal futures contracts, has decreased 3.6%.

Some may be tempted to catch the falling knife as the economy still depends on coal to meet growing electricity needs. However, the other fundamental factors may weigh on the space.

To continue reading about these coal ETFs bleak outlook, click here

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Billion Dollar ETF Stocks Up On Health Care

MarketsMuse blog update profiles the rebalancing that the Direxion iBillionaire Index ETF has been doing and this time investing much of its energy in health care. This MarketsMuse update is courtesy of Benzinga’s article, “Billionaire-Tracking ETF Just Bulked Up On Health Car“. An excerpt of the article highlighting the rebalance is below.

Investing in some of the world’s top hedge funds may not be feasible for the majority of investors, yet that doesn’t mean they can’t participate in many of their best ideas.

The Direxion iBillionaire Index ETF (IBLN 0.15%) is one example of an ETF that seeks to harvest the top holdings from a select group of billionaire investors. These famed strategists are required to report their largest positions on SEC Form 13F filings — publicly-available information from which an index can be constructed.

IBLN selects 30 large-cap stocks from a pool of up to 10 billionaires and equal weights them across its portfolio. According to the fund company’s website, “IBLN is designed to help long term-investors pursue a better portfolio outcome by seeking excess returns relative to the S&P 500 Index.”

The latest IBLN rebalancing led to some interesting changes across the spectrum of holdings that reduced exposure to technology companies and bulked up on health care names.

It subsequently added the following new positions:

  • American Airlines Group Inc AAL 0.33% – Industrials
  • Applied Materials, Inc. AMAT 0.05% – Technology
  • DirecTV DTV 0.63% – Consumer Discretionary
  • Endo International ENDP 0.09% – Health Care
  • Humana Inc HUM 0.13% – Health Care
  • McKesson Corporation MCK 0.49% – Health Care

To continue reading about Direxion iBillionaire Index ETF‘s rebalance shifting to health care, click here.

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Investors Brace For Bumpy Ride As Airline ETFs Hit A Rough Patch

After a hot take off for the ETF, JETS, MarketsMuse blog update profiles the plunge airline stocks and ETFs have seen in the recent weeks ahead the summer season, which will then hopefully bring another boost to the stocks and ETFs. This blog update is courtesy of Zacks Research article, “Air Stocks and ETF Plunge: Warming Up for Summer?”, with an excerpt below. 

The airline stocks that were hot and soaring over the past few years suddenly lost their altitude in Wednesday trading session as the shares of major carriers nosedived as much as 10% on concerns that growth might outpace travel demand. This could result in lower fares and thinner profit margins.

This is because cheap fuel is encouraging carriers to increase the number of seats at the current fares, breaking the competitive discipline that helped the industry to earn record profits in the past.

Bright Summer Outlook

Despite the brutal plunge, airline stocks and the ETF are anticipating sunnier days in summer. This is especially true given the optimistic view from the Washington-based trade group Airlines for America.

The group expects airlines to see the busiest summer ever this year buoyed by an improving economy, accelerating job market and rising consumer confidence. The demand for U.S. air travel would hit a fresh high as 222 million travelers (or 2.4 million a day) are expected to fly from June 1 through August 31, up 4.5% year over year and much higher than a record of 217.6 million travelers seen in 2007.

To continue reading about the airline stocks and ETFs that are bracing the bumpy ride, click here

 

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As Predicted, The Sun Has Set On The Solar ETF’s Rise

After months of warnings from market watchers, the Chinese solar stock, Hanergy Thin Film Power Group, started to set on a pretty powerful year so far. MarketsMuse blog update profiles the effects this Chinese stock has had on the Guggenheim ETF, which MarketsMuse has profiled before. This MarketsMuse update is courtesy of MarketWatch’s Victor Reklaitis and his article, “China solar stock implosion a reminder to look under ETF’s hood

Many market watchers have warned this year about a highflying Chinese solar stock—Hanergy Thin Film Power Group—and its leading role in popular ways to bet on solar stocks like one Guggenheim ETF.

On Wednesday, Hanergy’s 0566, -46.95% aerial routine ended with a crash, as one Wall Street Journal headline put it. And the Hong Kong-listed stock’s dive after a meteoric rise was helping to take down the Guggenheim Solar ETF TAN, -7.79%

So what’s the takeaway?

“Investors should take care to look under the hood of the ETFs in order to understand what exposure they are possibly buying into,” said Markit analyst Relte Schutte in an email to MarketWatch on Tuesday about the solar ETF and Hanergy.

Schutte had noted in a May 6 commentary that about half of the Guggenheim ETF’s year-to-date jump of 40% was due to Hanergy’s surge of 157%. The ETF was about 12% exposed to Hanergy as of Tuesday, before its big plunge, making it the largest stock in that fund. Hanergy also has been the biggest holding in two rival ETFs, the Market Vectors Solar Energy ETF KWT, -6.88% and iShares Global Clean Energy ETF ICLN, -2.57%

To continue reading about the implications the crash the Hanergy Stock has had on the solar ETFs, click here.

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One Gold ETF Looks To Be Worthy Of A First Place Finish

After a few rough years for gold as investors shifted other asset equities, things are starting to look up, especially for one ETF in particular. MarketsMuse blog update profiles Gartman Gold/Yen ETF (GYEN)  as one of the best ETFs to invest in for gold options. This update is courtesy of Zacks’ Equity Research article, “Is This the Safest Gold ETF for 2015?“, with an excerpt below explaining why GYEN could be the best gold ETF. 

Gold had one of its worst nightmares in the last two years as investors shifted to more risky asset classes like equities. This is especially true in the backdrop of the strengthening dollar and continued bullishness in the stock market, two conditions that spoilt the safe haven appeal of the yellow metal. The bleeding stretch led the metal to languish below the $1,200 an ounce level – almost near its lowest level since April 2010.

The start to 2015 was no different from the last two years as rising rate worries intensified at the beginning of the year. But the metal started to buck the trend since April. Weakness in the greenback in the wake of soft U.S. GDP in Q1 was the major driving force behind this uptrend.

What Are the Best Gold ETF Bets if Dollar Rises?

In most cases, gold investments are made via the U.S. dollar (which is presently at a roller coaster ride). So, it would be wise to look at the gold ETFs which are not linked to the greenback. Two such lucrative options are Gartman Gold/Yen ETF (GYEN) and Gartman Gold/Euro ETF (GEUR). While GYEN provides positive returns by using the yen for investing its assets in the gold market, GEUR does so with the euro.

Is GYEN the Best Option? 

After a nice show in 2013, the Japanese economy has been struggling since the second half of 2014. Japan’s growth in Q1 of 2015 has also been restrained by soft consumption. This ensures that the life of Japanese stimulus will be long as the economy is yet to stand on its own feet.

To continue reading about gold ETF option, GYEN, click here

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Nuveen Investments Has Returned To ETFs…Quietly

MarketsMuse blog update profiles asset manager Nuveen Investments quietly returning to the world of ETFs.  This MarketsMuse blog update is courtesy of ETFTrends Tom Lydon’s article, “Nuveen Tiptoes Back Into ETFs“, with an excerpt below. 

After departing the exchange traded funds business in 2002, Nuveen Investments has returned in quiet fashion. The Chicago-based firm said Monday shareholders of the Nuveen Long/Short Commodity Total Return Fund (NYSEArca: CTF), have approved the plan to convert the fund into open-ended exchange-traded fund (ETF). The conversion plan is also contingent on customary regulatory approvals, according to a statement. “The Annual Meeting of Shareholders for the Nuveen Diversified Commodity Fund (NYSE: CFD) has been adjourned to June 15, 2015, to allow additional solicitation of votes on the proposed plan to convert the fund into an ETF,” according to Nuveen. Nuveen said in December it was planning to convert CTF and CFD into ETFs. CFD invests in an array of commodity futures and forward contracts. As of the end of November, the mutual fund allocated a combined 26.5% of its weight to oil and gold,according to issuer data.

The fund’s annual expenses total 1.75%. To continue reading about Nuveen’s quiet return, click here.

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New Normal: Big Institutions Looking To ETFs Over Bonds

MarketsMuse ETF and Fixed Income departments merge to profile trend on part of fixed-income focused hedge funds and institutional fund managers to use ETFs to express their bets on corporate bonds. This MarketsMuse blog update is courtesy of Bloomberg’s Lisa Abramowicz and her article, “A $200 Million Hedge-Fund Trade in Your Bond ETF Is Normal Now”. An excerpt from this article is below. 

Don’t be surprised if you see a huge chunk of cash simply evaporate one day from your exchange-traded bond fund. There’s a good chance it’s just a hedge fund cashing in on a bet.

An example of this can be found in BlackRock Inc.’s $5.1 billion long-term U.S. Treasuries ETF, which saw the greatest volume of withdrawals this year among similar funds. Among investors yanking cash was Passport Capital, the $4 billion hedge-fund firm run by John Burbank.

The firm sold its entire $217 million stake in the ETF in the period ended March 31, about three months after purchasing the shares, according to data compiled by Bloomberg.

On one hand, this is a remarkable amount of money, equal to about 4 percent of the fund at its current size. It’s also notable because ETFs have traditionally been marketed to individuals as a quick, easy way to invest in debt.

But that’s changing. These funds are increasingly being used by and advertised to big institutions, which are looking for the same efficiency as smaller investors at a time when it’s getting more difficult to execute big trades.

To continue reading about this new normal for both small and big investors, click here, for the article from Bloomberg’s Lisa Abramowicz and her article, “A $200 Million Hedge-Fund Trade in Your Bond ETF Is Normal Now”.

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ETF-in-a-Box: You Too Can Launch An ETF for Peanuts

The barrier to entry for issuers of ETFs keeps getting lower. What used to cost anywhere between $1mil-$5mil and many months of filing paper work to create and finally launch a new ETF, now, for just only $100k (before marketing/advertising costs), you too can launch an exchange-traded fund in under three months and maybe even become the next iShares or Wisdom Tree. At least that is the premise profiled by Lara Crigger’s post at ETF.com in her coverage of J. Garrett Stevens and his white-label ETF maker, Exchange Traded Concepts LLC, aka “ETC”.

Below is extracted from Crigger’s coverage…

Garret Stevens, President of ETC
Garret Stevens, President of ETC

Six years ago, J. Garrett Stevens, CEO of FaithShares, had just launched his first ETFs. He and his partners sat back, counted their victories, and eagerly waited for investors to bang down the door to buy up the funds.

They never did.

The rest of the story is all too familiar. Stevens and his partners had spent far more than they anticipated on getting their funds to market, with little left over to make sure investors actually knew the funds existed. As a result, the five FaithShares ETFs, despite solid performance, failed to accrue enough assets to survive. FaithShares shuttered its doors in 2011.

But a funny thing happened on the way to dissolution.

“People started calling, wanting to know if they could buy our exemptive relief,” said Stevens. “Or they wanted to know if we could consult and help them launch their own funds, since we’d already been down that road.”

That gave Stevens an idea: a white-label service that would shoulder the burden for would-be ETF providers looking to launch their very own funds. Thus was Exchange-Traded Concept (ETC) born.

To continue reading about Garett Stevens and his new company, the Exchange Traded Concept (ETC), click here

 

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ETFs-Know When To Hold ‘Em and When to Fold ‘Em-MarketsMuse

MarketsMuse ETF update profiles the risks associated with tact-strategists over-trading exchange-traded products and the costs associated with using ETFs as trading products vs. investment products. Below extract is courtesy of Jason Zweig WSJ Weekend edition.

When hiring people who call themselves strategists, be aware that some act more like tacticians instead.

That is one lesson from several recent setbacks among ETF strategists, asset managers who specialize in picking exchange-traded funds—those popular investment baskets that mimic market benchmarks like the S&P 500-stock index or the Barclays U.S. Aggregate bond index.

Until recently, ETF strategists have been sizzling hot. By March 2014, they had garnered $103 billion in assets, up from $44 billion at the end of 2011. But assets slid to $91 billion at year-end 2014 and likely dropped further in the first quarter as disappointed investors pulled money out, says Ling-Wei Hew, an analyst at Morningstar, the investment-research firm.

Some strategists, such as Vanguard Advisers, a unit of the giant Vanguard Group, and Ibbotson Associates MORN -0.43%, a subsidiary of Morningstar, bundle ETFs into highly diversified portfolios that they patiently hold.

Yet other strategists rapidly trade from one ETF to another, from ETFs to cash or from cash to ETFs. That is more tactical than strategic. When they think a market is about to go down, these tacti-strategists will move to cash; if they are bullish, they will get out of cash and back into ETFs. While such trading could limit your losses during bad markets, it often comes at a high price in the form of annual management fees and other costs that can exceed 2%.

Such strategists may manage bundles of ETFs in separate accounts, advise mutual funds or even just sell their recommendations of when to trade which funds to financial advisers.

“Financial advisers have a real appetite for this kind of product right now, since it enables them to spend less time managing portfolios and more time managing the relationship with their clients,” says Jennifer Muzerall, a senior ETF analyst at Cerulli Associates, a financial-research firm based in Boston.

But can anyone reliably beat the market with funds that are designed only to match the market?

This past week, Hartford, Conn.-based Virtus Investment Partners VRTS -0.32%, which manages $55 billion in mutual funds and other assets, removed ETF strategist F-Squared Investments as an adviser to five Virtus funds.

The largest of them, now known as the Virtus Equity Trend Fund, underperformed the S&P 500 by at least two percentage points annually the past four years in a row; last year, it lagged behind the market by 11.9 points.

To continue reading the entire column by Jason Zweig, please click here