Category Archives: ETF Securities

Gold Could Rally If We Go Over Fiscal Cliff

Gold is definitely not in a bubble, said Nicholas Brooks, ETF Securities’ head of research and investment strategy, recently. The yellow metal hasn’t experienced the typical exponential rise seen in the run up to the collapse of previous asset price bubbles. As long as countries have to tackle economic problems over the next year, Brooks predicts the price of gold will do well.

“Gold could rally if we go over the fiscal cliff,” said Brooks at the ETF Securities Annual Precious Metals Conference in New York. “There seems to be a growing view that gold may be one of the better hedges against the risk that a policy mistake is made and we go off the fiscal cliff.”

The fiscal cliff is the name given to the dramatic spending cuts across the federal budget that will go into effect January 1, 2013. This is the same day Bush era tax cuts expire, causing tax across the board to increase to the rates seen during the Clinton Administration. The big fear is that spending cuts and higher taxes will hurt the economy so much the U.S. will fall back into a recession. This could also spark another downgrade of U.S. debt by the debt rating agencies. While not good for the economy, such a situation would be good for the price of gold, he said.

Brooks said structural factors continue to support the gold price, especially behavioral changes among the world’s central banks. Prior to the second quarter of 2009, central banks were large net sellers of gold, selling between 10% and 15% of their supply. But in 2009 they became net buyers. Now between 10% and 15% of the annual supply of gold is being bought by central banks, a switch of 30 percentage points which is a net positive for the precious metal, he said.

He also pointed to central banks around the world, including the U.S. Federal Reserve, saying they will continue to increase liquidity until their economies recover.

“Low real interest rates and a decline in the real return on cash are enormously good for gold,” said Brooks. And if later in the year, “European sovereign risk concerns rise again, a relatively high probability scenario, the gold price has the potential to rally strongly, as it did last summer when Spain saw its bond yields rise sharply on growing fears it would not be able to finance its debt payments.”

The British-based ETF Securities says it launched the first exchange-traded commodity (ETC) in the world when it listed the Gold Bullion Securities in Australia and London in 2003. When the SPDR Gold Shares (GLD) launched in 2004, it was the first U.S.-listed ETC. Today, GLD, with $73.5 billion in assets, is one of the largest ETP’s in the world.

ETF Securities manages seven precious metal exchange-traded products in the U.S. The ETFS Physical Swiss Gold Shares (SGOL) and the ETFS Physical Asian Gold Shares (AGOL) each charge an expense ratio of 0.39%, one basis point less than the SPDR Gold Shares. ETF Securities’ other products track silver, platinum and palladium.

Currency Hedge ETFs Win Big at Global ETF Awards

Deutsche Bank’s family of Currency Hedge ETFs won the award for the Most Innovative ETF in the Americas for 2011 at the 8th Annual Global ETF Awards. The awards are given to industry participants for outstanding achievements in the marketplace. In Europe Deutsche Bank tied with the Nomura Voltage Mid-Term Source ETF for the top prize, while the Motilal Oswal Most Shares NASDAQ-100 ETF was named most innovative in the Asia-Pacific region.

The five ETFs under the Currency Hedge banner:
db-X MSCI Brazil Currency-Hedged Equity Fund (DBBR)
db-X MSCI Canada Currency-Hedged Equity Fund (DBCN)
db-X MSCI EAFE Currency-Hedged Equity Fund (DBEF)
db-X MSCI Emerging Markets Currency-Hedged Equity Fund (DBEM)
db-X MSCI Japan Currency-Hedged Equity Fund (DBJP)

The Most Innovative Exchange Traded Product (ETP) in the Americas went to the iPath S&P 500 Dynamic VIX ETN (XVZ), while the db Physical Gold SGD Hedged ETC won in Europe.

Held at the Grand Hyatt Hotel in New York last Thursday, the Global ETF Awards provide a window on how the global ETF industry views itself. Unlike the Capital Link awards, where a small committee of analysts and industry insiders choose the winners, the Global Awards is voted on by the entire ETF industry. Here 520 organizations from around the world voted on who they think are the industry’s leaders and innovators. The awards and ceremony were created and run by the operators of exchangetradedfunds.com.

The evening began with a new prize, the Nate Most Award. Named after the man who invented the SPDR, the first ETF, it’s awarded to the individual who has made the greatest contribution to the ETF Market.

“We honored to be able to celebrate Nate’s place as the father of the ETF and to honor achievements in the ETF industry,” said Arlene C. Reyes, chief operating officer of exchangetradedfunds.com.

The first winner of this new prize was James Rose, senior managing director of State Street Global Advisors, for his commitment to the industry and for setting a standard of excellence. In addition to running State Street’s ETF business he serves as the first chairman of the Investment Company Institute’s Exchange-Traded Funds Committee.

“Nate Most created a product that created an industry and a great product for investors,” said Ross upon receiving the award.

Here is the list of other winners:

Most Innovative ETF Index Provider

The Americas – Dow Jones Indexes
Europe – STOXX
Asia-Pacific – MSCI

Most Widely Utilized ETF Research (Statistical)
Deutsche Bank won in all three regions.

Most Widely Utilized ETF Research (Analytical)
The Americas – Bloomberg
Europe – Deutsche Bank
Asia-Pacific – Deutsche Bank

Best ETF Market Maker

The Americas – Knight
Europe – Flow Traders
Asia-Pacific – Flow Traders

Most Recognized ETF Brand

The Americas – SPDRs
Europe – (Tie) db x-trackers and iShares
Asia-Pacific – China 50 ETF

Best Service Provider
The Americas – BNY Mellon
Europe – (Tie) Northern Trust and State Street Fund Services (Ireland)
Asia-Pacific – SSgA

Most Informative Website

The Americas – SPDRS.com
Europe – etf.db.com
Asia-Pacific – hkex.com.hk

Most Informative Website – Media

The Americas – IndexUniverse.com

Palladium Shares Wins Most Innovative ETF Award

The ETFS Physical Palladium Shares (PALL) and ETF provider Global X Funds tied to win the award for the Americas’ Most Innovative ETF of 2010 at the 7th Annual Global ETF Awards banquet at New York’s Grand Hyatt Hotel recently.

Launched by ETF Securities in January 2010 with the ETFS Physical Platinum Shares (PPLT), the palladium and platinum funds were the first ETFs in the U.S. to provide investors with a cheap and convenient way to invest in these precious metals. The Palladium Shares track the price of palladium and are backed by palladium bullion plates and ingots and stored in vaults approved by the London Platinum Palladium Market. Because the Palladium ETF holds physical bullion it has minimal counterparty or credit risks and charges an expense ratio of 0.6%. Voters did not specify which Global X ETF deseved the award.

The Benchmark Hang Seng BeES was named the most innovative ETF in Asia. Europe’s most innovative ETFs came from db x-trackers and Source. The actual funds weren’t named.

Hosted and organized by exchangetradedfunds.com, the Global ETF Awards are like the Academy Awards for the ETF industry because only industry insiders are allowed to vote. Essentially, these industry insiders are asked grade their competitors to pick which denizens of ETF Land have done the best job over the past year.

The Most Innovative Exchange-Traded Product, not an ETF, in the Americas went to Barclays ETN + S&P Veqtor ETN (VQT). This exchange-traded note tracks the S&P 500 Dynamic Veqtor Total Return Index. It offers a strategy of “broad equity market exposure with an implied volatility hedge by dynamically allocating its notional investments among three components: equity, volatility and cash. The equity component is represented by the S&P 500 Total Return Index and the volatility component is represented by the S&P 500 VIX Short-Term Futures Index.” ETF Securities won in Europe for an unnamed product.

Once again, SPDRs was named the Most Recognized ETF Brand in the Americas beating out iShares, Vanguard and PowerShares. IShares shared the title with db x-trackers in Europe, while Asia’s best known brand is China 50 ETF.

“Every year this becomes more meaningful because the industry becomes more competitive every year,” said the SPDR representative.

S&P Indices won Most Innovative ETF Index Provider in the Americas, with STOXX the European winner and China Securities Index taking Asia’s prize.

IndexUniverse.com, where I am a contributing writer, was named the Americas Most Informative ETF Website, with etf.db.com and hkex.com.hk the winners in Europe and Asia, respectively.

Deborah Fuhr of BlackRock held onto her crown as the leading ETF analyst winning both Most Widely Utilized ETF Statistical Research and Most Widely Utilized Analytical Research in Europe. The latter award she was tied with Deutsche Bank, which also took both prizes in the Americas and Asia’s analytical award. Daiwa Asset Management won Asia’s statistical research award.

Other prize winners:

Best ETF Market Maker: Knight (Americas), FlowTraders (Europe), UBS Securities (Asia)

Most Proactive Exchange: NYSE Euronext (Americas), Deutsche Borse (Europe), Shanghai Stock Exchange (Asia).

Most Proactive Exchange for ETF Derivatives: International Securities Exchange (Americas), Eurex (Europe), Hong Kong Stock Exchange (Asia).

Best Service Provider: BNY Mellon (Americas), Bank of Ireland (Europe), SSgA (Asia).