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

Transcription

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

2 Key Highlights Our monthly ETF 20/20 report summarizes recent Exchange Traded Fund (ETF) trends in the US. It uses data from the First Bridge ETF database that includes all ETFs listed globally. Assets for ETFs listed in the US increased by 0.7% in November 2015 to $2.152T. US small cap equities (IWM) outperformed ETFs representing the other major asset classes in November Gold (GLD) declined by 6.7% in the month. MSCI confirmed that it would include stocks traded outside their country of classification in their regional benchmarks. The most significant impact of this was the addition of Chinese ADRs to its benchmark EM index that is tracked by EEM. The dollar gained 14.5% against the Euro in 2015 through end November, with the US and Eurozone monetary policies expected to diverge next year. The IMF added the Yuan as a reserve currency (i.e. in its SDR basket) effective Oct new ETPs were launched in the US in November Blackrock announced fee cuts on 7 of its core ETFs, and Schwab responded with fee cuts on 4 of its ETFs. Low volatility (SPLV) outperformed traditional cap weighting (SPY) in November, after underperforming in October. About Us First Bridge provides ETF data and analytics to reputed institutional clients. Our ETF data sets include daily ETF holdings, global ETF product & smart beta 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 systems & 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 Assets for ETFs * listed in the US increased by 0.7% in November 2015 to $2.152T. At November month end, the number of ETPs listed in the US was 1,825. A regularly updated ETF product list is available here: ETF / ETP Type Number of ETPs Assets ($M) Change in Assets from Oct '15 ($M) 1. Bonds 1.1 Broad Market ,333 3, Corporate 90 97,198-2, Municipal 35 18, Treasury / Sovereign 58 68,672-3, Inflation Protected 16 21, Specialty / Other 31 15, Commodities & Metals 2.1 Diversified Commodities 23 6, Agricultural 24 1, Energy 20 5, Gold & Metals 39 34,704-4, Other US Equities 3.1 Broad Market & Size ,377 13, Dividend & Fundamental 54 67, Factor & Thematic 65 23, Sector & Industry ,210 5, Growth / Value ,916 5, Quant Strategy & Other 60 10, Global Equities 4.1 Broad Market & Regional , Country Specific ,019-2, Dividend & Fundamental 72 56, Factor & Thematic , Sector & Industry 88 30, Quant Strategy & Other 21 2, Currency 26 3, Multi- Asset / Other 93 44, Inverse / Leveraged , All US Listed ETPs 1,825 2,152,405 15,532 Source: First Bridge Data and individual ETF Sponsors; ETF data as of November 30, 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) 3

4 Investing Environment & Performance of Major Asset Classes US small cap equities ( IWM ) outperformed ETFs representing the other major asset classes in November Gold ( GLD ) declined by 6.7% in the month. ETF Data: First Bridge Data; Data as of November 30, 2015 month end (11/30/15) The dollar gained 14.5% against the Euro in 2015 through end November, with the US and Eurozone monetary policies expected to diverge next year. The IMF added the Yuan as a reserve currency (i.e. in its Special Drawing Rights basket) effective Oct Forex Data: Data as of November 30,

5 MSCI Index Review: Impact on EEM At its semi- annual index review on November 12, MSCI confirmed that it would include stocks traded outside their country of classification in their regional benchmarks. While this impacted multiple ETFs, the most significant impact was to ETFs that track the MSCI Emerging markets Index, since the inclusion of China ADRs increases China s weight in the index. US listed ETFs that track this index are: EEM, EEV, EUM, EDC, EDZ and EET. Some important points to note regarding this change: MSCI is implementing this change in a phased manner i.e. the foreign listed firms were included in the Nov 30 rebalance at half their float market capitalization. As of Dec 1, 2015, EEM had a 26% weight in China, compared to ~ 23% before this change. MSCI will include the remaining float market cap for these stocks at the May 2016 review. Adding Chinese ADRs to the MSCI EM index reduces the relative weight away from Chinese financials and towards Chinese consumer and technology sectors. A more significant (though unrelated) change regarding China exposure in MSCI s EM index, is the anticipated inclusion of A shares (mainland listed stocks). This change is being made in response to the opening up of A- Shares access to investors outside China through quota increases and relaxation of eligibility norms in the QFII and RQFII programs. In its June 2015 consultation, MSCI announced that China A- Shares would eventually be added to its Emerging Markets indices as well, subject to China making adequate progress on the quota allocation process, capital mobility restrictions and providing clarifications on beneficial ownership of investments. By contrast, Vanguard s VWO, which now tracks the FTSE Emerging Markets All Cap China A Inclusion Index, has already been adding China A Shares in a phased manner. As a result, both EEM and VWO have seen increases in 2015 in their China weighting, albeit for different reasons the former due the recent addition of ADRs and the latter by phasing in A Shares. Finally, it is important to note that even though MSCI s standard EM benchmark does not include A- Shares, there are several ETFs that track indices from MSCI and other index providers that include A- Shares. There are 10 ETFs listed in the US that currently provide targeted exposure to China A- Shares. In addition, others provide broad exposure to the Chinese equity universe inclusive of A- Shares. On November , Deutsche Bank announced that it was switching its benchmark for its Deutsche X- trackers MSCI All China Equity ETF ( CN ) to the MSCI China All Shares Index, which includes A Shares. 5

6 November 2015 ETF Launches 17 new ETPs were launched in the US in November of the 9 new equity ETFs are smart beta ETFs that either provide exposure to targeted investment factors (low beta, multi- factor etc.) or themes (e.g. socially responsible investing). Table: November 2015 ETP Launches in the US Type of Exposure Sponsor Tickers Expense Ratios (in bps) Indexed US Equity US Large Cap Low Beta Invesco PowerShares USLB 35 US Large Cap Multi- Factor Deutsche Bank DEUS 25 S&P 500 Fossil Fuel Free State Street SPYX 20 Indexed Global Equity Israel Technology ETF Managers Group ITEQ 75 Developed Ex- US Low Beta Invesco PowerShares IDLB 45 Developed Ex- US Multi- Factor Goldman Sachs GSIE 35 Deutsche Bank DEEF 35 Ex- US Currency Hedged FlexShares TLDH, TLEH Factor Tilt (small cap & value) Global Small Cap Dividend Wisdom Tree HGSD, GSD 43 (Currency Hedged & Unhedged) Environment & Socially ETF Managers Group ETHO 75 Responsible Indexed - Bonds Non- USD Denominated Blackrock IAGG 15 Investment Grade Bonds Active (Non- Indexed) Convertible Debt First Trust FCVT 95 Global Public Prime Real First Trust PRME 95 Estate Indexed - Alternative Ex- US Hedge Fund Replication Alpha Clone ALFI 95 Real Assets FlexShares ASET 57 ETF Data: First Bridge Data; Data as of November 30,

7 ETF Fee Reductions November saw two large ETF sponsors announce reductions in net expense ratios for some of their ETFs. This reinforces a trend towards lower fees on ETFs that make up core holdings in portfolios, which benefits investors. First, Blackrock announced fee reductions on the following 7 ETFs: ishares Core S&P Total US Stock Market ETF (ITOT) from 7 to 3 basis points; ishares US Growth & Value (IUSG and IUSV respectively) from 9 to 7bp; ishares Core Emerging Markets (IEMG) from 18 to 16 bps, ishares Core Europe & Core Pacific (IEUR and IPAC respectively) from 14 to 12 bps and ishares Core Total USD Bond (IUSB) from 15 to 12 bps. Schwab responded by lowering fees on 4 ETFs: Schwab US Large Cap & US Broad Market (SCHX and SCHB respectively) from 4 to 3 bps; and Schwab US Large Cap Value & Growth (SCHV and SCHG respectively) from 7 to 6 basis points. This fee reduction must be seen in the context of Vanguard s success in growing ETF assets as a low cost provider. The chart below highlights in red some of the ETFs that recently lowered fees, and compares their fees to widely used ETFs in their respective categories. Chart: Fees for 5 select ETF categories in which fees were recently lowered ETF Data: First Bridge Data; Data as of November 30,

8 US Equity Strategies Low volatility (SPLV) outperformed traditional cap weighting (SPY) in November, after underperforming in October. Value also outperformed growth in the month. ETF Data: First Bridge Data; Data as of November 30, 2015 month end (11/30/15) Low volatility was also the best performing of these strategies over the trailing 12 months. However growth outperformed value in this longer- term horizon. ETF Data: First Bridge Data; Data as of November 30, 2015 month end (11/30/15) 8

9 More First Bridge ETF Resources ETF Book - ETF Investment Strategies (McGraw- Hill): 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

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