ETF 20/20 : Monthly Exchange Traded Fund Report. Published: March 2015 Report Scope: US

Transcription

1 ETF 20/20 : Monthly Exchange Traded Fund Report Published: March 2015 Report Scope: US 1

2 Key Highlights Our monthly ETF 20/20 report summarizes the most important recent Exchange Traded Fund (ETF) trends in the US. It uses data from the First Bridge global ETF database. US ETF assets rose in February 2015 to $2.094T, with the S&P 500 Index having its best monthly gain since October The CAPE (or Shiller P/E) ratio ended February 2015 at 27.81, though likely more as a consequence of excess global liquidity than irrational exuberance. The Wisdom Tree Europe Hedged ETF (HEDJ) took in over $5Bn in net inflows in the first two months of 2015, significantly outpacing unhedged Europe equity ETFs. State Street (SPDR) announced expense ratio fee cuts on 41 ETFs in the US. It is likely a competitive reaction to the asset gathering success of Vanguard, which tends to be at the lower end of the cost spectrum, and Blackrock s ishares core initiative. 22 ETFs were launched in the US in Indian small cap and China A- shares ETFs were the best performing ETF categories in the trailing 12 months through February 2015, underscoring the contrasting fortunes of the different BRIC markets. About Us This report is co-authored by Aniket Ullal and Sudhanshu Malik. First Bridge provides ETF data and analytics to reputed institutional clients. Our ETF data sets include daily ETF holdings, global ETF product classifications, historical distributions and risk metrics. Our clients include asset managers, financial software providers and research firms that use ETF data as a critical input into their system & workflow. We often provide high touch services to our clients in the form of ETF data sets customized to their needs with related support. The First Bridge team combines deep expertise in the Indexing & ETF domain with skills in statistical programming and data visualization. support@firstbridgedata.com Phone: (650) Web: 2

3 ETF Landscape Snapshot US ETF * assets rose in February 2015 to $2.094T. As of February month end, there were 1,667 ETFs listed in the US. A complete updated ETF product list is available here: ETF / ETP Type Number of ETPs 3 Assets ($M) Change in Assets from Jan ($M) 1. Bonds 1.1 Broad Market ,839 1, Corporate 82 97,654 6, Municipal 33 16, Treasury / Sovereign 60 61,957 2, Inflation Protected 16 20,332 (9) 1.6 Specialty / Other 27 15, Commodities & Metals 2.1 Diversified Commodities 23 8, Agricultural 25 1,379 (17) 2.3 Energy 22 4, Gold & Metals 44 45,361 (950) 2.5 Other 4 34 (3) 3. US Equities 3.1 Broad Market & Size ,324 34, Dividend & Fundamental 53 72,936 2, Factor & Thematic 35 20,422 1, Sector & Industry ,374 4, Growth / Value ,115 12, Quant Strategy & Other 57 12,236 1, Global Equities 4.1 Broad Market & Regional ,122 25, Country Specific ,658 6, Dividend & Fundamental 55 58,686 3, Factor & Thematic 76 17,470 1, Sector & Industry 90 35,229 1, Quant Strategy & Other 19 2, Currency 27 2,835 (3) 6. Multi- Asset / Other 88 46,562 1, Inverse / Leveraged ,666 1,411 All US Listed ETPs 1,667 2,094, ,927 Source: First Bridge Data and individual ETF Sponsors; ETF data as of February 28, 2015 * Since ETF is a widely used acronym, we may sometimes use it to refer to all exchange traded 40 Act and 33 Act instruments (including ETNs) that collectively fall into the ETP category. ** The Global Equities category includes both International (ex-us) and Global (US + International)

4 Investing Environment & Performance of Major Asset Classes The CAPE (or Shiller P/E) ratio ended February 2015 at 27.81, well above its historical mean value of While this is likely more a consequence of excess global liquidity than irrational exuberance, it may signal single digit US equity returns (at best) in the near term. Developed equity markets and US small caps were the best performing of the ETFs representing major asset classes in February, while Gold (GLD) declined by 5.9%. 4

5 The Growth in Europe Currency Hedged ETFs The Wisdom Tree Europe Hedged ETF (HEDJ) has taken in new assets at a very rapid pace this year, compared to its unhedged peers. This reflects the outperformance from currency hedging (see second chart below), driven by a stronger dollar. The anticipated divergence in monetary policy in the US and Europe is likely to sustain interest in currency hedging. 6,000 "Net New InNlows (2015 YTD; $MM)" 5,000 4,000 3,000 2,000 1,000 - WisdomTree Europe Hedged (HEDJ) Vanguard FTSE Europe (VGK) ishares MSCI EMU (EZU) 5

6 State Street (SPDR) Cuts ETF Fees In February, State Street (SPDR) announced that it is cutting expense ratios on 41 ETFs. This reinforces the long- term trend towards lower fees on ETFs that provide index- based access to more traditional asset classes or strategies. This fee cut is likely a response to the asset gathering success of Vanguard, which tends to be at the lower end of the cost spectrum, and Blackrock s ishares Core initiative, which lowered fees on certain ishares ETFs that are designed for the core of investor portfolios. The SPDR fee cuts span multiple ETF categories. The chart below takes 6 of these categories, and shows the change in the expense ratio. The range in yellow represents the range of expense ratios in that category across the industry. The red represents State Street s old fee in that category, while the green represents the new lowered fee. The chart provides a quick and useful visual representation of the SPDR fee cuts in the context of the prevailing expense ratio ranges in the industry. As we can see, in some categories such as Low volatility, State Street now has the lowest expense ratio. An updated list of all ETFs in the US with expense ratios can be accessed here: Chart: Change in SPDR expense ratio for select ETF categories 6

7 February 2015 ETF Launches 22 ETFs were launched in the US in February 2015, as the pace of new product introductions showed no signs of slowing down in the near term. Some new sponsors including Lattice and Tuttle entered the ETF market. The launch of another buyback ETF gives investors more targeted options to differentiate between firms that use buybacks (vs. dividends) to return cash to shareholders. There continue to be launches in two areas that have been popular with sponsors hedging against rising interest rates and factor / fundamental oriented equity ETFs. Table: February 2015 ETP Launches in the US Type of Exposure / Strategy Sponsor Tickers Expense Ratios (in bps) Indexed Equity - Sector Real Estate Fidelity FREL 12 Leveraged & Inverse Gold Miners ProShares GDXX, GDXS, GDJJ, GDJS Indexed Equity Dividends & Buybacks Leveraged Small Cap UBS SMHD 85 Dividend S&P 500 Buyback State Street (SPDR) SPYB 35 US Consistent Dividend ProShares REGL, SMDV 40 Growers High Income Infrastructure Guggenheim GHII 45 Indexed Equity Factor & Fundamental GDP Based Global Growth Revenue Shares RGRO 70 GDP Weighted Emerging Krane Shares KEMP 68 Markets Risk- Optimized Alternative Lattice ROAM, RODM, Beta ROUS 3 Factor (Quality, Value & Momentum) Arrow Shares QVM 65 Indexed Bonds Rising Rate Hedged Floating Rate Securities Advisor Shares FLRT 110 Negative Duration ETF Managers RISE 50 Treasury Capital Active Broad Market Bonds State Street (SPDR) TOTL 55 US Core Equity Tuttle TUTT 134 Balanced Risk Bonds Blackrock (ishares) INC 25 Commodities Coal Futures Green Haven TONS 95 ETF Data: First Bridge Data; Data for February

8 Best and Worst Performing ETFs from US ETF Universe Indian small cap and China A- shares ETFs were the best performing ETF categories in the trailing 12 months, despite lowered growth projections in the latter country. It underscores the contrasting fortunes of the different BRIC markets (though Russia has rebounded in 2015, it remains to be seen if that can be sustained). This excludes inverse/leveraged ETPs and counts only one ETF within each specific category. Energy related and Greece ETPs were the worst performing ETF categories in the trailing 12 months, through February

9 More First Bridge ETF Resources ETF Book - ETF Investment Strategies (McGraw- Hill): US ETF Product List: ETF Daily Holdings: daily- holdings- and- product- list/ First Bridge also maintains a dataset of all globally listed ETFs, with key metrics. For more information, support@firstbridgedata.com 9

10 Important Disclaimers First Bridge Data LLC does not intend this guide to provide investment advice, and the information provided in this guide is not and should not be considered investment advice. First Bridge Data LLC shall not be liable for any actions or decisions made based on the information provided in this document, and the reader assumes all risk associated with any investment decision made based on information contained in this document. First Bridge Data LLC is not a registered investment advisor or broker, and does not recommend specific securities, funds, or investment strategies, nor does it advocate the purchase or sale of any individual investment vehicle. Discussion or references to specific securities or investment products in this book should not be considered endorsements or offers to buy or sell those products. The past performance of a mutual fund or exchange- traded fund (ETF), security, or investment strategy cannot guarantee its future performance. First Bridge Data LLC has no obligation to update this document or to correct any errors or omissions that might be contained in this document. First Bridge Data LLC disclaims all warranties of any kind, expressed or implied, and hereby disclaim and negate all other warranties, including without limitation implied warranties or conditions of merchantability, fitness for a particular purpose, or non- infringement of intellectual property or other violation of rights. First Bridge Data LLC does not guarantee the completeness, accuracy, or timeliness of any data in this document, including any data sourced through third- party content providers. Neither First Bridge Data LLC nor its employees, third- party content providers, nor any person through whom the First Bridge Data LLC makes this document available, shall be liable for any direct, indirect, incidental, punitive, special, or consequential damages (including, without limitation, attorneys fees), whether in an action of contract, negligence, or other tortious action, that result from the use of this book. Neither First Bridge Data LLC nor its content providers shall be liable for any punitive, special, indirect, or consequential damages arising from or relating to the foregoing, whether in contract or tort or otherwise, even if First Bridge Data LLC has been advised of the possibility of such damages. 10