UBS Asset Management has listed the UBS ETF (IE) MSCI USA Select Factor Mix Ucits ETF on London Stock Exchange (LSE). The alternative beta exchange-traded fund (ETF) offers investors exposure to large, mid and small-cap US equities with a range of factor tilts built in.
The UBS MSCI USA Select Factor Mix ETF aims to track the price and yield performance of the MSCI USA Select Factor Mix Index. The benchmark is an alternatively weighted index, whose constituents are weighted according to specific risk premia, also known as 'factor tilts'. These include value, quality, momentum, volatility, size and yield. This multi-factor index is based on the MSCI USA IMI Index and captures large, mid and small-cap exposure across US equity markets.
GraniteShares enters ETF market with commodity pair
GraniteShares, a new fully funded, independent 'disruptive ETF firm' has launched with the listing of two flagship funds on NYSE. With almost 50 years of collective experience, the team is led by established ETF entrepreneur William Rhind, founder and CEO. Rhind was formerly a principal at iShares and one of the original team members in Europe. He also served as head of ETF Securities in the US and CEO of the world's largest commodities fund, the SPDR Gold Shares ETF.
Benoit Autier, whose previous experience includes product management at ETF Securities, is the head of products. Kristen Winther, previously at MSCI and Horizons ETFs, is the director of product development. Jeff Klearman, coming from Rich Investment Solutions and Deutsche Bank, serves as the firm's portfolio manager.
The two flagship commodity ETFs, GraniteShares Bloomberg Commodity Broad Strategy No K-1 ETF (COMB) and GraniteShares S&P GSCI Commodity Broad Strategy No K-1 ETF (COMG) are benchmarked to the Bloomberg Commodity Index and S&P GSCI Index, respectively. The funds are structured as 40 Act funds, do not issue K-1s, and are two of the lowest cost broad commodity ETFs in the US market with total fund operating expenses of 0.25% and 0.35%, respectively.
Eurex launches first exchange-traded European equity factor index futures
Deutsche Börse Group's Eurex has introduced futures on six iStoxx Europe Factor Indices. The launch marks a major milestone, as for the first time European factor futures are listed with a tradeable order book on an exchange.
Zubin Ramdarshan, head of product R&D equity and index at Eurex said the increasing trend towards passive investing has revolutionized the style of investment approaches demanded by the market which has created a 'growing need for sophisticated and diversified index concepts' using different selection and weighting methods.
The iStoxx Europe Factors, systematic rules-based indices, is designed to isolate the return of key risk factors and earn a risk premium over time. Eurex' new offer will comprise instruments for investors that allow them to capture factor risk premia associated with the Stoxx 600 Europe benchmark. The Stoxx Europe 600 futures market has established itself as the broader benchmark for Europe with liquid futures that traded over three million contracts in the first quarter of 2017 with an average daily volume (ADV) of approximately 46,000.
The introduction of futures on iStoxx Europe Factor indices offer a tool for investors to capture different equity risk dimensions in each of the six futures: size, value, carry, low risk, momentum and quality.
Allfunds opens platform to ETFs
Allfunds is to launch a new ETF service on its platform on June 1 following as it implements a new digital strategy that involves 'continuous innovation drive and focus on wealth management shifts' post Mifid 2. The B2B platform will enable investors to enhance their ability to diversify sources of return, according to Allfunds.
Going forward the service will provide wealth managers with a single point of access, using standardised processes for all ETFs and mutual fund transactions through their existing reporting and custody frameworks. Existing funds' services will therefore be supplemented with ETF focused services relating to execution, reporting, information and research.
The services will have a wide range of features including multi broker access, multi custodian links, and connectivity via equity standards. Distribution of ETFs into the retail market will be enhanced as Allfunds will offer fractional dealing - a complex regime which opens up the ETF market to those investing smaller sums of money. Allfunds' new ETF service is fully aligned with the latest regulatory requirements which guarantee best execution, stated Allfunds.
Ireland's watchdog launches ETF consultation
Ireland's Central Bank has today published a Discussion Paper on ETFs. The consultation underpins an invitation to domestic and international stakeholders to help inform global and European discussions on ETFs. This Discussion Paper considers the 'distinctive' design features of ETFs and how they operate to deliver a product that has become highly valued by investors. It considers how those features operate in good and bad times and seeks input on investor expectations.
According to the consultation report, retail use ETFs predominantly for long term investment, asset allocation purposes and for other investment strategies; while the attraction of ETFs to the institutional investor can span from the use of ETFs as a proxy for index futures (because, for example, there is no need to manage the margin requirements and expiration dates that are associated with futures trading) to their use in hedging strategies (by taking positions in individual securities and taking an opposite position in an ETF tracking the same market sector).
ETFs are also used as 'an efficient tool' by institutions and other investment funds as a way of investing cash during periods of change (such as a change in investment manager or change in investment strategy) and as portfolio 'building blocks' (i.e. an investment fund could use ETFs to build portfolio exposure rather than accessing underlying markets directly), according to the regulator.
Gerry Cross, director of policy and risk said 'ETFs are the most important product development the investment funds industry has seen in the last 20 years - this is evident from their exponential growth.' The discussion paper sets out the results of substantial research conducted within the Central Bank of Ireland on the growth of ETFs, said Cross.
Ireland is the largest European centre for ETFs, which are the fastest growing type of investment fund globally. ETFs have experienced exponential growth since they were first established in 1990 with more than US$4tn in assets globally as at the end of April 2017.
The deadline for submissions is August 11, 2017.
Legg Mason launches active ESG ETFs with ClearBridge Investments
Legg Mason has launched two actively managed, environmental, social and governance (ESG) focused ETFs sub-advised by ClearBridge Investments.
The ClearBridge Large Cap Growth ESG ETF [LRGE] seeks to invest in large-capitalization companies with the potential for above-average earnings and cash flow growth and a strong commitment to ESG principles.
The ClearBridge Dividend Strategy ESG ETF [Nasdaq: YLDE] seeks to invest in high-quality companies with a strong commitment to ESG principles that can pay attractive dividends and have the potential to grow dividend payments over time.
The ClearBridge Large Cap Growth ESG ETF is managed by Peter Bourbeau, Mary Jane McQuillen and Margaret Vitrano. The managers invest for the long term in large cap growth companies that can have sustainable competitive advantages as evidenced by differentiated business models, high returns on capital, strong balance sheets, and capable management teams that aim to allocate capital in an efficient manner. The performance of the fund is benchmarked against the Russell 1000 Growth Index.
The ClearBridge Dividend Strategy ESG ETF is managed by Hersh Cohen, Michael Clarfeld, Mary Jane McQuillen and Peter Vanderlee. This veteran income team leverages fundamental analysis to seeking to select a diversified portfolio of industry-leading companies with long histories of paying and raising dividends and strong ESG characteristics. The performance of the fund is benchmarked against the S&P 500 Index.
For both ETFs, ESG evaluation is fully integrated into the fundamental research process that guides stock selection. The portfolio management teams rely on inputs from sector analysts who assign an ESG rating to every company in their coverage universe. Assessment of corporate governance practices such as board independence and diversity as well as social factors including labour/hiring practices and community involvement occur across all companies.
WisdomTree deploys 'yield enhance' Barclays play
WisdomTree has launched the WisdomTree Barclays Yield Enhanced US Short-Term Aggregate Bond Fund (SHAG), on the Bats Exchange. SHAG seeks to enhance yield by sourcing and reweighting subcomponents within the short end of the US Aggregate fixed income universe while maintaining similar risk characteristics and has a net expense ratio of 0.12%.
By sourcing opportunities within the short maturity portion of the index, the ETF seeks to enhance the income potential of a core bond portfolio, while continuing to benefit from the diversification of a multi-sector portfolio.
The Bloomberg Barclays US Short Aggregate Enhanced Yield Index is a constrained, rules-based approach that reweights the sector, maturity, and credit quality of the Barclays US Aggregate Index across various subcomponents in order to enhance yield of securities effectively maturing in one to five years. To enhance yield, the Bloomberg Barclays US Short Aggregate Enhanced Yield Index adjusts weights across 13 subcomponents of the Short Aggregate Composite, subject to tracking error, exposure and turnover constraints. The index rebalances across the 13 subcomponents, adhering to the specified constraints, on a monthly basis.
'In a market environment where every basis point counts, overweighting treasuries might not be your first stop on the road to income,' said Kevin Flanagan, senior fixed income strategist at WisdomTree. 'SHAG may serve as a powerful tool for investors seeking to navigate a potential rising rate environment.'
IndexIQ expands factor-based strategic beta range
IndexIQ has launched the IQ Chaikin US Small Cap ETF (CSML), the first domestic equity-focused addition to IndexIQ's family of factor-based investment solutions.
CSML is designed to track the price and yield performance of the Nasdaq Chaikin Power US Small Cap Index, which leverages the Chaikin Power Gauge (CPG), a proprietary 20-factor quantitative stock rating model, in the security selection process. The index is comprised of highly rated stocks derived using the CPG, and has the potential to outperform market-weighted products and active strategies. CPG was developed by Marc Chaikin, an investment strategist with 50 years of experience. Chaikin's methodology uses sophisticated market-based indicators-combining value, growth, technical and sentiment.
CSML is the latest addition to the firm's family of factor-based ETFs, including three first of their kind fixed income offerings: the IQ Enhanced Core Bond US ETF and IQ Enhanced Core Plus Bond US ETF, and the IQ S&P High Yield Low Volatility Bond ETF, the first high yield low volatility fixed income ETF, which launched in February of 2017.
Global ETF/ETP Industry is now US$847bn larger than the global hedge fund industry, ETFGI
The ETF/ETP industry with US$3.9tr in assets at the end of Q1 2017 was US$847bn US dollars larger than the global hedge fund industry which had assets of US$3tr at the end at the end of Q 2017, according to the latest report by ETFGI.
The assets invested in the global ETF/ETP industry have continued to grow faster than assets in the global hedge fund industry since the end of Q2 2015 when the assets invested in the global ETF/ETP industry first surpassed the assets in the global hedge fund. This was a significant achievement as hedge funds have existed for 67 years and ETFs for just 27 years with the first ETF being listed in Canada on March 9, 1990.
Although the assets in ETFs were larger than the assets invested in hedge funds the hedge fund industry remains larger than the ETF industry based on number of funds: 8,216 hedge funds vs 6,771 ETFs/ETPs at the end of Q1 2017 as shown in the chart below.
ETFGI's an analysis of net new asset flows show investors have preferred allocating to ETFs/ETPs over hedge funds since 2010. During 2016 and in Q1 2017 hedge funds suffered net outflows of US$70.1bn and US$5.5bn while ETFs/ETPs gathered net inflows of US$390.4bn and US$197.2bn during the same time periods.
Many investors that have invested in hedge funds with the goal of receiving higher returns have been disappointed, according to ETFGI. In Q1 2017 the performance of the HFRI Fund Weighted Composite Index at 3.09% was significantly lower than the return of the S&P 500 Index at 7.15. Since 2010 in each year the HFRI Fund Weighted Composite Index return was significantly lower than the return of the S&P 500 Index.