Tag Archives: Reuters

Oil ETF Investors Race For The Exits

April 14, 2015 MarketsMuse Staff Reporter Leave a comment

After pouring more than $6 billion into oil ETFs, investors are looking for a quick exit for two reasons: 1) the oil rebound might take much longer than originally expected and 2) the contango market is becoming an even bigger factor. This MarketsMuse blog update is courtesy of Reuters’ article “Look out OPEC! Oil ETF investors head for exit, risking new slump” with an excerpt below.

Oil investors who amassed a $6 billion long position in exchange traded funds, occupying as much as a third of the U.S. futures market, are now racing for the exit at a near record pace.

Outflows from four of the largest oil-specific exchange traded funds, including the largest U.S. Oil Fund (USO), reached $338 million in two weeks to April 8, according to data from ThomsonReuters Lipper. That is the first two-week outflow since September and the biggest since early 2014, marking a turnaround from heavy inflows in December and January on bets that oil prices would quickly rebound from six-year lows.

If the exodus gathers pace it could signal new pressure on crude oil prices that had begun to stabilize at around $50 a barrel this year following their 60 percent plunge, says John Kilduff, a partner at energy fund Again Capital LLC in New York.

Retail investors may have been “trying to bottom fish and got washed out with the recent new low,” he said.

To continue reading about the possibility of a new oil slump from Reuters, click here

ETF News, Global Macro Strategy

Guggenheim Investments Eyes Currency Hedged ETFs

February 2, 2015 MarketsMuse Staff Reporter Leave a comment

MarketMuse update is courtesy of Reuters.

Guggenheim Investments, the seventh-largest ETF issuer in the United States, is considering trying on currency hedged ETFs for size.

Guggenheim Investments is considering launching one or more currency hedged exchange-traded funds, one of the hottest and most sought-after financial products the last few months.

“I will confirm that we’re interested in this space,” Bill Belden, Guggenheim’s managing director of product development in Chicago told Reuters on Friday. “We’re very familiar with the currency space and we’re always interested in providing new products whether they’re hedged or not.”

A currency-hedged ETF removes the foreign currency return of a given fund by buying a forward contract in the currency, and rolling it typically on a monthly basis.

Currency-hedged ETF assets grew 48 percent in 2014 to roughly $20.8 billion, and have grown 1,519 percent over the past two years, according to Deutsche Bank AG, a major player in the space.

In contrast, unhedged European equity ETFs have seen six straight months of outflows since June 2014, with an aggregate $8.9 billion in outflows, Deutsche Bank data shows. On the other hand, hedged European equity ETFs have seen consistent inflows over the same period, taking in $4.5 billion.

A strong dollar is prompting U.S. investors to buy hedged ETFs. Typically, currency-hedged ETFs protects the underlying international equity exposure against a falling foreign currency such as the euro or yen.

BlackRock Inc, WisdomTree Investments Inc and Deutsche Bank are the three major players in the currency-hedged ETF space. WisdomTree, which was the first to this ETF sector, is the largest of the three, with about 80 percent of the roughly $20 billion allocated to currency-hedged ETFs.

WisdomTree in January alone attracted $1.6 billion in inflows, according to Luciano Siracusano, WisdomTree’s chief investment strategist.

But Guggenheim’s Belden said there’s room for more players in the industry. Guggenheim has about $28.8 billion in ETF assets and roughly $220 billion overall.

“The hedged ETF you have seen basically captures an exposure to an international market that hedges against a local currency’s falling value,” said Belden.

“But we know that local currencies don’t fall perpetually. It has been a pretty consistent trend in the past but we don’t know what’s going to happen to those strategies, if any particular currency goes the other way.”

Guggenheim has a suite of nine currency ETFs, totaling about $1.1 billion. Of the nine ETFs, two have shown positive returns. CurrencyShares Japanese Yen Trust is up 1.5 percent so far this month, and the CurrencyShares Swiss Franc Trust is up 8 percent.

ETF News

Egypt to Allow ETF Trading for the First Time

January 12, 2015 MarketsMuse Staff Reporter Leave a comment

MarketMuse update courtesy of Reuters.

Egypt prepares for the first ETF to be traded on their stock exchange for the first time ever on Wednesday, January 14. They hope that this will help gain more foreign investors and boost cash flow.

Egypt’s stock exchange will allow trading in Exchange Traded Funds (ETFs) for the first time on Wednesday, as part of efforts to encourage foreign investment and boost liquidity.

ETFs are typically funds that track equity indexes, though they can also track commodities and other assets, with component stocks usually represented in proportion to the size of their market capitalization.

ETFs are traded like a stock and can allow investors to diversify their risks and reduce transaction costs.

The introduction of ETFs in Egypt comes amid a flurry of takeovers and share issues on Egypt’s stock exchange, signalling resurgent interest from international investors in a market looking to restore confidence after the turmoil unleashed by a 2011 uprising which ousted leader Hosni Mubarak.

The main stock index rose about 30 percent in 2014 and trading volumes have rebounded above levels seen in 2010.

“We are working on offering new investment vehicles to investors and in the long run, these funds will help to create liquidity in the market,” Mohamed Omran, chairman of the Egyptian Exchange, told Reuters.

“The funds will help investors reduce risk by investing in the market as a whole.”

The introduction of ETFs will also allow for the emergence of market-makers in Egypt for the first time, potentially boosting liquidity.

Egypt’s Beltone Financial Holding, which specialises in brokerage, investment banking and private equity, won Egypt’s first licence to operate an ETF on the Egyptian Exchange in April.

Its ETF is being launched with an initial value of 10 million Egyptian pounds ($1.4 million), according to Alia Jumaa, head of investment for the new fund.

For the original article from Reuters, click here

ETF News

Investors’ Misuse and Abuse of ETFs

December 22, 2014 MarketsMuse Staff Reporter Leave a comment

MarketsMuse update courtesy of extract from 18 December edition of Reuters, with reporting by James Saft

Here is the thing about investing: wherever you go, there you are.

Which is another way of saying that we carry our problems, weaknesses and foibles as investors around with us, no matter how we approach the discipline or what tools we use.

While the investment world is constantly creating new, opaque and high-cost ways of separating investors from a portion of their capital, avoiding the obvious land mines is far from a guarantee of success.

Because we are human, and as such unique mixtures of such winning attributes as overconfidence, risk-blindness and hyperactivity, we have the capacity to take even great investing ideas and turn them into losers.

Take exchange-traded funds, which surely must be one of the most investor-friendly innovations of the past 20 years. ETFs, and here I am talking about those which passively track an index, are just brilliant: they facilitate diversification while providing liquidity and all at a low cost. In theory ETFs are a tool which allow investors to overcome many of their most common errors, and as an investment vehicle they have surely contributed greatly to the fall in average fees.

Like a sharp knife in the hands of a careless child, however, index ETFs as used by most investors are powerful tools which do more harm than good.

That, at least, is the conclusion of one new study, which found that not only did ETFs, as used by actual investors, not improve performance but dragged returns lower by an economically significant amount.

The paper, by Utpal Bhattacharya of Hong Kong University of Science & Technology, Benjamin Loos and Andreas Hackethal of Goethe University and Steffen Meyer of Leibniz Universität, looked at outcomes for nearly 7,000 German investors between 2005 and 2010 who used index ETFs. The upshot: the average ETF investor sees his net raw return lowered by 2.1 percentage points annually, and with a lower risk-adjusted return as well. (here)

Not only that, but the ETF users managed to use ETFs in such a way as to make their portfolios less efficient, implying that they are not getting the diversification benefit that is one of the main points of index ETF investing. So how did these investors take a good tool and use it to nail their own feet to the floor? It wasn’t even so much that the investors used the wrong ETFs, picking the wrong asset class or over-paying in fees. Instead these investors lost more by playing, badly, at being

market-timers. Their fault was that they bought and sold at the wrong time, just like the human beings they are.

For the Saft’s entire article, click here