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Ron Ryan says there’s a problem with bond indexes that are tracked by exchange traded funds (ETFs). In fact, the CEO of Ryan ALM says that there are several problems and he’s out to fix them.
Continue reading "Bond Indexes Are Broke, and He Says His ETFs Can Fix It" »
With its new line of exchange traded funds (ETFs), Northern Trust opted to stay true to their principles while traveling around the world.
Is it a sign that ETFs are slowly entering the mainstream and gaining acceptance as more than just a passing fad? An institution as old and well-known as Northern Trust entering the market could be a sign.
"We know who we are. We knew what we needed to bring to the market, something that was consistent with our notions of asset management overall," says Peter Ewing, the managing director of Northern Trust's ETF group.
The first batch of funds, the first to track major foreign market indexes, were a year in the making. Ideas were kicked around as the world's third-largest asset manager of institutional index-based assets felt it needed to seriously consider an ETF product line. In 2007, the management committee gave the go-ahead and they filed with the Securities & Exchange Commission (SEC).
"Our opening salvo is traditional," Ewing says. But the provider isn't averse to more inventive ETFs and strategies. But for now, "We want to stay true to our principles."
Northern Trust's ETFs, which all have an expense ratio of 0.47%, are:
At a later date, there will be funds issued that cover Belgium, Ireland, Portugal, South Africa and more.
Michael Krause has ESP for ETFs (exchange traded funds).
Instead of using a crystal ball, though, the president of AltaVista Independent Research looks at the fundamentals of every one of an ETF's constituents.
Continue reading "ETF Holdings' Fundamentals Go Under the Microscope" »
Commodity
exchange traded funds (ETFs) and exchange traded notes (ETNs) have come
a long way since Nov. 18, 2004. That's when the first single-commodity
ETF - streetTRACKS Gold Shares (GLD) - was launched.
Continue reading "Energy-Focused ETFs Capitalize on a Booming Sector" »
Exchange traded fund (ETF) provider iShares recently conducted a survey of affluent investors and found that, overall, they're none too pleased with the fund industry. That's lead to low levels of trust.
But ETFs come out of the survey smelling like a rose. iShares reports that ETF users have significantly higher confidence scores than non-ETF users when it comes to understanding the impact of fees and the tax implications of funds they own.
The survey targeted individuals who had at least $500K in assets (excluding employer-sponsored retirement plans and real estate), have mutual funds in their portfolios and are at least 22 years of age.
Some of the findings:
Among the 16% of survey respondents who use ETFs:
Could it be that the strong numbers here are a result of the many benefits ETFs have over the old school mutual funds? Namely, instant diversification, transparency, lower fees and ease of use.
Among the 84% of respondents who don't use ETFs, there was a lower level of understanding how the financial markets work, less love for managing investments, less understanding of fees and less attention paid to diversification.
The survey affirms what we discovered when we conducted our own survey: smart people like ETFs. 42.4% of our readers have graduate degrees, and 38% possess bachelor's degrees.
ETF Trends' readers love ETFs, too: 55.1% have at least 25% of their portfolios dedicated to ETFs. 83.8% plan to use ETFs even more in 2008 than they currently do.
Everyone knows about short and leveraged exchange traded funds (ETFs), but some might be wondering "How do they do that?"
Michael Sapir, CEO of ProFunds, gave us a call and explained it. "The best way to understand how a [short or leveraged] fund works is to compare how an S&P fund works."
Continue reading "The Long and Short of Long and Short ETFs" »
While there are several clean energy exchange traded funds (ETFs) out there, none of them have focused solely on one aspect of the sector until now.
Claymore this morning launched the Claymore/MAC Global Solar Energy Index (TAN) on the NYSE Arca. Claymore President Christian Magoon told us the potential for growth in the solar industry is huge. Currently, it accounts for less than 1% of global electricity.
Continue reading "Just In Time for Warm Weather, Claymore Launches Solar ETF" »
It's an event like Halley's Comet, although with a little more frequency: municipal bond yields are higher than those of treasury bonds. For that reason, it makes more sense than ever to grab exchange traded funds (ETFs) that hold them.
"It's something that doesn't happen very often," says Glenn Smith, associate of ETF sales at Van Eck. "Maybe once every 7-10 years or so."
Continue reading "It's Bond ETF Time - Munis Are Yielding More Than Treasuries" »
Logically, exchange traded funds (ETFs) should have minimal tracking error. That's because they track an index, and in theory, if the index zigs, so does the ETF - and vice versa. It's not always the case, though, and tracking error does occur.
Continue reading "ETF Tracking Error Is Sometimes a Necessary Evil" »
One year ago, there were no major committees to explore and address the unique issues of the rapidly growing exchange traded fund (ETF) market. Now there are two.
The Security Traders Association of New York (STANY) has established a committee to address all aspects of exchange traded funds (ETFs), to be chaired by XShares' CEO Anthony Dudzinski.
Dudzinski, who worked as a market making trader for about 20 years, told us that he first broached the idea of a committee to STANY a year ago. "I said 'This is a growing business...there will be more products like this trading and you should pay attention.' " He's been a standing member of the organization for 18 years.
While STANY's committee was in the works, Dudzinski got the call from the Investment Company Institute (ICI): would he be on their new ETF committee, too? Sure, he said.
While both committees are going to represent the interests of ETFs, they'll focus on different aspects. While the ICI is a group of managers concerned with issues surrounding the 40 Act and the packaged product business, STANY's group will focus on market structure issues that may not be familiar to the ICI and its core constituents.
The overall hope is that the ETF industry will be better served with more voices, more research and more informed opinions behind it.
"As with every industry, there are different constituents focused on different things and don't always have the same opinions," Dudzinski says. "The purpose of a group is to sort, commingle, put in a blender and come out with some kind of commonality."
Yesterday, the markets delivered outstanding performance and some exchange traded funds (ETFs) finished up in the double digits.
But one good day doesn't mean we're out of the slump yet. It's still time to take a defensive stance with your portfolio and make sure you've got that exit strategy firmly in place. But while it seems as though everything is in a downward spiral, but there are still some buying opportunities, believe it or not.
At our asset management firm, we track a list of about 100 ETFs and review it daily to see how things are performing and if there are any trends emerging. Of particular interest to us is which funds are above their 200-day moving averages. We never buy something sitting below that line.
Once we own an ETF, we keep an eye on it to make sure it's still above that line and continuing to perform. Once it dips below the trend line or falls 8% off its high, we sell. No ifs, ands or buts. A sell strategy from which emotions are entirely removed is the only kind that will benefit any investor.
It can be hard to let go of a little mover and shaker you've always had that soft spot for, but if you want to protect your money, you have to. It's like your parents always said when they were grounding you every other week: "This hurts me more than it hurts you." But sometimes it has to be done for everyone's good.
There are no guarantees that when you let a fund go, it's not going to turn around and deliver the numbers again. But that doesn't mean it won't, either. It's exactly why you have to remain as stoic as possible and stick to the plan and rationalize nothing.
There are a number of ETFs sitting well above their trend lines. Take a look at them, keep an eye on them and if they fit into your overall portfolio and are moving in an overall upward direction, they could be well worth considering:
For full disclosure, some of Tom Lydon's clients own shares of EWT, IEO, DBB and DBA.
Read the disclosure, as Tom Lydon is a board member of Rydex Funds.
Yes, investors are flocking to gold exchange traded funds (ETFs) as the dollar weakens.
Case in point is streetTRACKS Gold Shares (GLD): after gold surged to a record $992 an ounce earlier this week, the fund traded nearly 11.5 million shares, reports Joanne Von Alroth for Investor's Business Daily. No one is particularly surprised, though.
What is surprising is the performance of white metals.
Platinum, in particular, has continually hit record highs. On Tuesday, it rose to $2,275 an ounce, and is up 50% year over year. The supply has also taken a hit from the continuing power supply problems in South Africa, which are interrupting mining activity. In addition to that, there has been a platinum deficit since 1999. Mining gets about 7 million ounces of platinum a year.
Why, with all of this shortage and growing investor demand, is there no platinum ETF available in the United States? We've been getting a lot of questions from our readers, so we put the question to Kevin Rich, CEO of DB Commodity Services.
"[Platinum] is not liquid enough to support an ETF," is the simple answer. "There are not enough players transacting it."
The last thing anyone would want, Rich says, is for a fund to take money in but find that it couldn't buy the underlying asset. Platinum is scarce enough that it's possible for an investment product to take away the supply. "When you bring in an ETF, you make sure the supply and demand of the commodity are still driving the market," Rich says.
The Commodity Futures Trading Commission (CFTC) is careful to make sure that trading activity doesn't lead to a situation in which investors corner the market.
The London Stock Exchange lists a platinum ETF from ETF Securities (PHPT), and its existence is likely just a matter of different rules and regulations. "They've done things that wouldn't be as easy to do here in the U.S. from a regulatory perspective," Rich says.
The largest silver ETF, iShares Silver Trust (SLV), is up 33.7% year-to-date.
The metal could be benefiting from its versatility. Not only is it used in jewelry and some is held for profit, but it has a number of industrial applications. It's the best conductor of both heat and electricity. It's used in batteries, conductors, fuses, contacts and a water purifier.
You'd think there would be a ton of the stuff lying around, but it isn't the case: the price bottomed in 1980, much of the existing stockpile was melted down and mining slowed down.
Metals, like any commodity, are volatile. They're doing great now, but be wary of sudden dips and watch the trends closely so you know when it's time to jump ship.
The exchange traded fund (ETF) approval process could become streamlined, thanks to moves by the Securities and Exchange Commission (SEC).
We caught up with John McGuire, partner at Morgan, Lewis & Bockius LLP, and he weighed in with his thoughts about the changes.
The SEC is making these changes largely because of demand from ETF sponsors to speed up the process and as the funds become increasingly popular. Typically, the ETF approval process involved staff at the SEC subjecting a fund to a review, resulting in approvals on a case-by-case basis, report Kara Scannell and Diya Gullapalli for the Wall Street Journal. The new rule would eliminate the need to obtain specific relief.
"The ultimate short cut is to adopt a rule that permits ETFs without the need for obtaining and SEC exemptive order," McGuire says. "I do think that the success of ETFs has led to a large backlog of exemptive orders."
The changes don't necessarily mean that ETFs won't go through less scrutiny before they land in the marketplace. But McGuire says that "ETF sponsors won't have to go through this exemptive process, but there will still be scrutiny as the ETFs go through the registration process."
The changes aren't in place yet, though, and any changes may not be immediately apparent. After the SEC makes its proposal, there will be a period for public comment. The Commission will then analyze that input and make a decision based on that. "The new rule will likely impact those sponsors seeking to get in the ETF business in 2009 or later," says McGuire. It could also affect providers already in the business who are looking to add to their ETF lineups.
If the new rules go into effect, McGuire says it could free up staff to focus on new products that don't fit the current models, and it will also make it easier for fund groups to enter the ETF business. "Either of these things could lead to more, and more innovative, ETFs."
The meeting at which the SEC will make its recommendations for the new rules will take place next Tuesday.
Actively managed exchange traded funds (ETFs) are just about here, as the Securities and Exchange Commission (SEC) granted exemptive relief to PowerShares, the first fund provider to receive it.
And PowerShares President Bruce Bonds believes that they'll catch on with investors. There has been criticism of actively managed funds - they defeat the purpose of ETFs, they might not be as cost-effective as ETFs, and so on. But Bonds says that when investors finally sit down to compare actively managed funds with mutual funds, the transparency of the active ETFs, their liquidity and tax efficiency will ultimately win them over.
Will they someday take the place of mutual funds? Not quite, Bonds says, but he believes that they will certainly give mutual funds a run for their money. Mutual funds will continue to pull in assets, but ETFs will remain a strong challenger.
The funds may or may not change their holdings each day, depending on what the markets are doing. Whether they do or not, whatever holdings there are will be disclosed each evening. Bonds says this is an effort to preserve transparency, and was a condition of the SEC's granting of the relief. By disclosing holdings at the end of the day, any possible front-running that might take place will be discouraged.
The four funds are:
Now that they've gotten the go-ahead, the waiting game begins. Bonds says that PowerShares is aiming for an April launch.
Keep an eye out. This new breed of ETF has been long-awaited, and it's just the beginning. Are investors going to bite?
The signs are all there that we're in a recession: many exchange traded fund (ETF) sectors have taken a hit, Congress is calling hearings, the Federal Reserve is talking about more rate cuts, housing, retail and unemployment numbers are unimpressive at best.
When will the government finally admit what we've all suspected for some time now - that the recession has already started? We can't answer that, but what we can tell you is that now is the time to start thinking about how you can protect your portfolio. The last thing you want to do is wait until it's too late.
Here are a few sectors that have been bucking the trend:
Continue reading "Five ETF Sectors To Recession-Proof Your Portfolio" »
If you were looking for a one-stop shop to get access to the U.S. capital markets via exchange traded funds (ETFs), it's here.
Today, Claymore launched a group of Capital Markets ETFs on the American Stock Exchange:
UEM is the first ETF that covers all U.S. investment-grade capital markets. "It's probably the broadest ever launched, as far as we know, in the world," says Christian Magoon, head of the ETF group at Claymore Securities.
Continue reading "New Claymore ETFs Almost Have It All - Literally" »
In troubled times, investors are on the hunt for safe havens, and one of those is bond exchange traded funds (ETFs). There is always the concern about interest rate risk, but with the possibility of further rate cuts by the Federal Reserve, short-term threats should be small.
Continue reading "High Yield Bond ETFs Inviting During Dicey Market" »
The exchange traded fund (ETF) industry is finally getting more attention from the Investment Company Institute (ICI) - something it has been wanting for some time. But it has some in the industry wondering if there aren't some ulterior motives.
ETF sponsors have often complained that the ICI doesn't do enough on their behalf, reports Brooke Southall at Investment News, and they've wondered if a separate association isn't in order. Southall's excellent article reveals that the ICI's move is seen by many as an effort to head off any possibility a new association developing. The committee is a possible precursor to a separate ETF unit in the organization, according to Jim Ross, managing director of State Street Global Advisors.
The concern on ETF providers' minds is whether the ICI, as an organization vested primarily in the interest of mutual funds, will actually do enough to meet their needs.
Carl Verboncoeur, Rydex's CEO, feels strongly that the ETF industry has a need for advocacy. As an involved member of the ICI for many years, he's looking forward to observing the committee's progress.
Bruce Bond, CEO of PowerShares, has been appointed chairman of this committee. I've known and observed Bruce for a few years now and wouldn't say that patience is one of his outstanding characteristics. Just take a look at PowerShares' expanding product line.
"The committee itself will determine the topics and issues facing the ETF industry that they want to pursue first," Bond said. He adds that between the size of the ETF industry and the ICI, they hope to use their strength to address the issues.
If this new committee's proposals aren't accepted by the ICI membership right out of the gate, I'd expect Mr. Bond will be very vocal.
I think the jury is still out as to the effectiveness of this committee. The priorities of ETF providers clearly do not align with the priorities of conventional mutual fund companies for a few important reasons:
Last week, a new exchange traded fund (ETF) covering a commodity that had many asking, "Wait, wasn't there one for that already?" began trading on the American Stock Exchange.
Market Vectors Coal (KOL), as you might guess from the name, tracks an index made up of 60 companies involved in the mining or transportation of coal, manufacture of coal mining equipment and the production of clean coal.
But with coal's ubiquity and everyday use, one has to wonder what took so long for a fund that tracks the commodity to finally appear.
MacroShares Oil Up (UCR) and MacroShares Oil Down (DCR) are "paired" exchange traded securities - not exchange traded funds (ETFs). They don't hold commodities or futures and they don't track an index. But what does all of that mean, exactly? A lot, it turns out.
Bob Tull, head of the MacroShares division, and Sam Masucci, the company's CEO, explained it to us. "We're very different than an ETF," Masucci said. "If you look at the SPDR, they manage a pool of stocks to replicate the movement of the S&P."
The interest and demand for information on exchange traded funds (ETFs) continues to grow at an ever-quickening pace. This year, 2007, was no exception. It was the biggest and best year yet for ETFs. In the last year alone, the number of ETFs grew from 359 to nearly 600. Assets in them shot up from $422 billion to within earshot of $600 billion in the U.S. alone.
The trend shows no signs of slowing. To satisfy the desire investors and advisors have for a continuous stream of the latest information on ETFs, the industry has a whole slew of conferences and workshops lined up for 2008.
It was a busy, exciting year in the world of exchange traded funds (ETFs) in 2007. But it's not time to rest on our laurels just yet, because all indications are that 2008 is going to be even bigger and better. Hundreds of new ETFs are in registration, the assets continue to flow and the word of mouth is spreading.
Here are the top ten trends we see taking place next year.
Early this year, we boldly stepped forward and made our predictions for what we foresaw as the top exchange traded fund (ETF) trends of 2007.
So, how did we do?
Continue reading "Our 2007 ETF Predictions: How Did We Do?" »
With the exchange traded funds (ETFs) business booming, ETF education is more important than ever. Here are the ETF conferences scheduled for the remainder of 2007:
The 5th Annual Art of Indexing Summit will be Sept. 17-18 at the M St. Renaissance Hotel in Washington, D.C. Some of the topics that will be covered include:
Index & ETF Investments: Asia 2007 will be Sept. 17-19 at the Grand Hyatt Singapore in Singapore. It's the only index funds and ETF investment conference in Asia. More than 150 key institutional investment companies, fund management companies, exchanges and index companies from around the world will be there.
The U.S. World Series of ETFs West will be Oct. 15-16 at the Four Seasons Resort Scottsdale at Troon North Scottsdale, Ariz. Get an overview of the current ETF landscape, and find out what to expect in the near future.
The 12th Annual Super Bowl of Indexing will be Dec. 2-5 at the Hyatt Regency Scottsdale Resort & Spa at Gainey Ranch in Scottsdale, Ariz. Listen to the world's leading ETF and indexing experts share their knowledge. One of last year's guest speakers was former Secretary of State Madeleine Albright.
We get many inquires about how we manage our client portfolios using exchange traded funds (ETFs). Recently we wrote a piece for Index Universe describing our process. With the growing list of available ETFs and ever-changing trends, we are convinced more than ever that a disciplined investment strategy is required to enhance portfolio returns, diversify and reduce downside risk.
Stocks have launched an impressive recovery in the past few weeks and some exchange traded funds (ETFs) have led the pack. There isn't a lack for choice, as over 400 ETFs are available representing all asset classes, industry sectors and many global regions. The key is to hone in on those markets that have shown the most strength as this global market recovery takes shape. Here are five ETFs to keep on your radar screen:
Continue reading "Five ETFs To Watch As The Stock Market Rebounds" »
The marketplace continues to witness an increase in the number of investors who rely on exchange traded funds (ETFs) to capture equity returns. Individual investors, financial advisors and institutional investors alike have all discovered the virtues of ETFs. As a result, the demand is high for information and education on how to efficiently use ETFs to their full potential. Whether you are new to the ETF world, or you are a professional investor with a high level of understanding and sophistication, you can benefit greatly from learning more about the basics and ongoing evolution of ETFs.
Like no other year before, 2007 promises to be the biggest year for ETF-specific events. Here is a comprehensive listing of new and exciting conferences and workshops that focus exclusively on helping you invest for ETF profits.
Continue reading "Comprehensive List of 2007 ETF Conferences Offer Great Opportunities" »
As the champagne corks ushered in 2007, investors celebrated more next generation exchange traded funds (ETFs) that promise an exciting variety of targeted new offerings. All grown-up, with everywhere to go, new ETFs continue to hone their appeal for the investing public that craves reduced expenses, diversified risk and targeted investing opportunities exceeding the broad-market benchmarks.
Investors have every reason to be optimistic. The evolution of ETFs sped up significantly in the last year alone—as improving opportunities for jumping into tailor-made sectors that can pack a punch in the way of concentration, while enabling investors to diversify across a wide-array of stocks. The selection is vast and exciting. While new ETFs pop up weekly, their evolution is still just beginning. Here are ten ETF trends we expect to see in 2007.
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