Talking About ProShares Gabe Wisdom

Here is a podcast of my Oct. 15 interview with Gabe Wisdom on Business Talk Radio Network’s Gabe Wisdom Show. A large part of this interview is devoted to the ProShares short and double short ETFs, like SKF.

Xshares to Liquidate Last Four HealthShares

XShares Advisors announced on Wednesday that it plans to liquidate the four remaining HealthShares ETFs at the end of the year and subsequently dissolve the HealthShares registered investment company.

The four ETFs are the HealthShares Cancer Exchange Traded Fund (HHK), HealthShares European Drugs ETF (HRJ), HealthShares Diagnostics ETF (HHD), HealthShares Drug Discovery Tools ETF.(HHV).

The funds’ board of directors decided to take the action in light of the current market conditions. Since their inception the HealthShares funds had been unable to attract significant market interest. Launched in January 2007 as a family of 19 funds, HealthShares offered portfolios that tracked extremely narrow, highly specialized areas of the health-care industry, such as cardiology, orthopedics and dermatology.

In August, with only a total of $100 million in assets under management, Xshares, the investment advisor to the fund, closed 15 of the 19 ETFs. The four remaining funds held about half the total assets. Then in October, the benchmark indexes for the surviving four were redesigned to hold between 28 and 35 stocks, up from the 22 with which they originally launched. All four also lowered their expense ratios to 0.60%, except for European Drugs, which charged 0.72%. This move came on the heels of Xshares closing its AdelanteShares family of seven real estate ETFs in June. In their nine months of existence they accumulated only $17 million of assets under management. Also in June, Xshares sued its chairman, founders, current and former CEOs and others for fraud and other charges.

The HealthShares board on Wednesday said the funds’ future viability and prospects for growth in assets in the foreseeable future were not encouraging. Thus, the board determined that it was in the best interests of the funds and their shareholders to liquidate
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“We continue to believe in the fundamentals of the healthcare industry. Unfortunately under these tough market conditions, the Funds were unable to achieve meaningful investor traction,” said Joseph L. Schocken, chairman and chief executive officer of XShares Group, parent company of Xshares, in a written statement. “We remain strongly committed to bringing our products now under review to market. In 2009, we expect to launch additional products related to the environment and infrastructure.”

The TDAX series of lifecycle ETFs that XShares launched in partnership with TD Ameritrade continue to trade.

The HealthShares last day of trading on the NYSE Arca and the last day share may be purchased or redeemed will be Dec. 23. Trading will halt before the open Dec. 24. From Dec. 24, through Dec. 31, shareholders may sell their Shares to certain broker-dealers who may determine to continue to purchase such shares, but there can be no assurance that any broker-dealer will be willing to purchase the shares or that there will be a market for the shares. All shareholders remaining on Dec. 31, 2008 will receive cash equal to the amount of the net asset value of their shares that day.

For additional information about the liquidation, shareholders may call XShares at 1-800-925-2870.

Commodity, Currency Short Funds Launched

ProShares Funds, the creator of inverse and leveraged ETFs, launched eight new funds on the NYSE Arca Tuesday.

ProShares Ultra DJ-AIG Commodity (UCD)
ProShares UltraShort DJ-AIG Commodity (CMD)
ProShares Ultra DJ-AIG Crude Oil (UCO)
ProShares UltraShort DJ-AIG Crude Oil (SCO)
ProShares Ultra Euro (ULE)
ProShares UltraShort Euro (EUO)
ProShares Ultra Yen (YCL)
ProShares UltraShort Yen (YCS)

ProShares offers 64 ETFs that provide investors with short and leveraged exposure to a wide variety of stock and bond indexes.

Northern Trust Launches 17th Fund

Northern Trust launched its 17th addition to its ETF family, the Northern Exchange Trades Shares, or NETS, last week with the NETS FTSE CNBC Global 300 Index Fund ETF (MYG). The ETF seeks to return the price and yield of publicly traded securities in the aggregate global market as represented by the FTSE CNBC Global 300 Index. The index comprises the largest 15 stocks by market capitalization from each of the FTSE”s 18 industry classification benchmark supersectors. It also takes the 30 largest emerging makret stocks from the FTSE Emerging All Cap Index.

Mazzilli to Leave Morgan Stanley

In an update of my previous post, Murray Coleman of IndexUniverse reports that Paul Mazzilli, Morgan Stanley’s top ETF analyst is expected to soon leave the firm, his home for the last 33 years. It’s unknown whether Mazzilli was downsized or decided to take a buyout, but the move comes just months after London-based Deborah Fuhr left Morgan. Together, Mazzilli and Fuhr were considered the top two ETF analysts on Wall Street. Fuhr recently joined Barclays Global Investors as global head of ETF research and implementation strategy.

iShares Market Share Falls to 47% as SPDR Pulls in $28.6 billion in Assets

Morgan Stanley provides some of the best ETF research on all of Wall Street. Analysts Paul Mazzilli and Dominic Maister have been covering the industry for years. In light of the recent market turmoil and negative effects it has had on the ETF industry, as well as the rest of the economy, it’s worth perusing Morgan’s ETF report on the third quarter. All the data in this entry is from Morgan Stanley’s Nov. 14 report ETF Net Cash Inflows and Listings Growth Continues.

There are currently 724 ETFs or exchange-traded products trading in the U.S. This number does not include exchange-traded notes (ETNs). Currently, 408 ETFs provide exposure to the U.S. equity market; 224 provide exposure to international and global equity markets.

There are 56 ETFs that offer fixed-income exposure. They track indices for U.S. Treasury and agency bonds, investment grade debt, mortgage-backed securities, high-yield bonds, preferred stock, national and single state municipal bonds and foreign sovereign and emerging market debt.

There are 36 exchange-traded products (ETPs) that provide exposure to alternative asset classes including commodities and currencies. Three commodity ETPs hold physical gold or silver, while 15 other ETPs utilize futures for exposure to individual or baskets of commodities. There are 18 currency ETPs that invest in foreign time deposits, short-term securities or currency futures. Commodity and currency ETPs are not ETFs because strictly speaking they are not funds registered under the U.S. Investment Company Act of 1940.

Barclays Global Investors (BGI) family of ETFs, the iShares, remains the market leader with 164 U.S.-listed ETFs and $208 billion in assets under management. The company holds 47.3% of the market, down from 50.9% last quarter. The firm saw net cash inflows of $23.9 billion this quarter, the second highest in the industry.

With 80 ETFs and $116 billion in assets in the U.S., State Street Global Advisors, which runs the SPDR family, is the second largest ETF provider. It has a market share of 26.5% up from 23% in the second quarter. State Street garnered the most net cash inflows this past quarter with $41.8 billion, with $28.6 billion of that going into the SPDR (SPY). SSGA launched 10 new funds during the quarter.

I will list the rest in terms of size as measured by assets under management.

3) Vanguard is the third largest with 38 U.S.-listed ETFs and $35.8 billion in assets. That equals an 8.1% share. In the third quarter Vanguard had $5.5 billion in net cash inflows, but no new funds.

4) PowerShares Capital Management has 123 U.S.-listed ETFs with $21.4 billion in assets, or a 4.9% share. Net cash inflows equaled $4.6 billion; with $4.3 billion going into the PowerShares QQQ (QQQQ). PowerShares launched 8 new funds this past quarter. PowerShares active ETFs in April have not yet generated significant investor interest.

5) ProShares has 64 U.S.-listed ETFs with more than $19 billion in assets, or a 4.4% market share. Following a strong first half of the year, last quarter ProShares saw net cash outflows of $0.7 billion, largely from their leveraged funds that provide minus 200% daily returns.

6) World Gold Trust Services is the sixth largest ETF provider with only one ETF, the SPDR Gold Trust (GLD). That has $17.5 billion in assets and is the fourth largest US-listed ETF. GLD had net inflows this past quarter of $3.2 billion and has had the fourth largest net inflows of any ETF this year.

7) Even though HOLDRs are not funds, Morgan calls Merrill Lynch the seventh largest ETF provider. HOLDRs are grantor trusts with different tax structures than ETFs. Merrill’s 17 HOLDRs have assets of $4.5 billion and had net inflows of $2.9 billion this past quarter. Surprisingly, several HOLDRs continue to represent the largest or most liquid ETF-type product by which investors can access a given industry. HOLDRs haven’t released a new product since 2001,

8 ) Rydex Investments has 0.9% market share with 39 U.S.-listed ETFs and $4.1 billion in assets. It experienced net cash outflows of $0.6 billion this quarter, primarily because of its CurrencyShares Euro Trust, which tracks the performance of the euro versus the US dollar.

9) DB (Deutsche Bank) Commodity Services has 11 U.S.-listed ETFs with $3.5 billion in assets, or a 0.8% share. It saw net outflows of $1.2 billion in the third quarter, with half of that coming out of the PowerShares DB Agriculture Fund (DBA). DBCS did not launch any ETFs this past quarter.

10) WisdomTree Asset Management is the tenth largest ETF provider. It has a 0.7% market share with $3.0 billion in 49 U.S.-listed ETFs. It launched one new ETF last quarter, and the firm saw net cash outflows of $12 million.

11) Van Eck Associates’ Market Vectors family has 16 U.S.-listed ETFs with $2.6 billion in assets, or a 0.6% share. It launched 3 new funds last quarter and saw a total of $34 million in net inflows.

12) United States Commodity Funds (USCF), which products the U.S. Oil (USO) fund, has a market share of 0.4% with five U.S.-listed ETFs with $1.7 billion in assets. It saw net cash inflows in the second quarter of $2.3 billion.

13) First Trust Advisors lists 38 ETFs in the U.S. and holds $1.0 billion in assets, for a 0.2% share. This past quarter, it saw net cash inflows of $0.3 billion.

14) Claymore Advisors has $0.8 billion in assets in 33 U.S.-listed ETFs, for a 0.2% market share. It saw net cash outflows last quarter of $0.2 million.

Morgan says “nine other ETF providers have 38 ETFs combined with assets totaling roughly $319 million. Most of the ETFs issued by these ten firms have yet to gain meaningful traction.”

RevenueShares Launches 5th Fund

RevenueShares Investor Services launched its fifth ETF under the family name RevenuesShares. The RevenueShares ADR Fund ETF (RTR) tracks the RevenueShares ADR Index which holds the same securities as the S&P ADR Index, but re-weights the constituent securities according to the revenue earned by the companies. ADRs, or American depositary receipts, trade in the U.S. but represent shares of stocks that list in foreign markets.

The ETF provider, which launched its first three ETFs in February, uses an innovative index strategy, that, not surprisingly, weight indexes by revenue instead of market capitalization. This follows last week’s launch of the RevenueShares Financials Sector Fund (RWW). That ETF tracks the the S&P 500 Financials Index, but rebalances it according to revenues.

“Rebalancing by revenue offers less exposure to the impact of inefficiencies that occur in a market capitalization-weighted index, while adding the potential for excess returns,” said Sean O’Hara, president of RevenueShares Investor Services, in a press release. “We believe strongly in the buy low, sell high philosophy and RWW is coming out at a time when we believe the sector is near all-time lows. It is contrary to what many other fund companies might offer at this time.”

RevenueShares follows a trend in the ETF industry in which new fund providers must created innovative indexes with the goal of beating market benchmarks in order to garner investor interest and assets. The RevenueShares aren’t the first ETF sponsor to use revenues, or any fundamental metric, as a basis for index weightings. Research Affiliates created the first fundamentally-based index, the Research Affiliates Fundamental Index, or RAFI, in 2005. It’s based on four fundamental factors, of which one is revenue. PowerShares launched the first RAFI-based ETF, the FTSE RAFI US 1000 Portfolio (PRF), which tracks 1000 large-cap stocks, the same year. There are now 22 FTSE RAFI ETFs. WisdomTree also uses fundamentals as the basis for its indexes, but these are weighted according to dividends. Spa’s MarketGrader ETFs chooses index constituents based on fundamental metrics, but uses an equal weighting instead.

Since their February 22 inceptions, the net asset values of the RevenueShares Large Cap Fund (RWL) has fallen 10.6%, the RevenueShares Mid Cap Fund (RWK) has dropped 10.2%, and the RevenueShares Small Cap Fund (RWJ) is down 4%.

Including today’s listings, NYSE Arca has 641 primary ETF listings, 84 ETNs and 25 certificates. Total exchange traded products listed on NYSE Arca represent 61% of ETF and ETN assets under management in the U.S., or nearly $304 billion.

Nasdaq ETF Volume Surges 240%

According the the NASDAQ Stock Market, its average daily matched share volume of U.S. ETFs in October 2008 soared 240% year-over-year to a record 1.0 billion shares. Nasdaq says that’s more than any other U.S. exchange. It was also a 27% increase from September 2008. For October, NASDAQ’ s matched volume in U.S. ETFs reached a record 23.0 billion shares and matched market share in U.S. ETFs grew 2.3% from September to 38.5%.

Buffalo Gets Turned On to ETFs

The Buffalo News in Buffalo, N.Y. gave “ETFs for the Long Run” and myself a nice writeup in advance of tomorrow’s talk at the University of Buffalo. (In the photo, I’m in the blue shirt.) The News asks “Are exchange traded funds the future of investing?” on top of the fold of the paper’s business section.

I will be in Buffalo signing books; speaking at UB

I will be signing copies of my book, ETFs for the Long Run, today, Friday, Nov. 14, from 6 p.m. to 8 p.m., at the Barnes & Noble bookstore at 4401 Transit Road in Clarence, 716-634-1011. Then on Monday, Nov. 17, I will be giving a lecture at the University of Buffalo Amherst campus about why ETFs are the best investment vehicle available for individual investors. The lecture will be held at the School of Management complex in Room 122 of Jacobs Hall at 5:30 p.m. There will be a reception afterward where he will be signing books. Both events are open to the public and are free.