Tag Archives: Deutsche Bank

First “Hedge Fund” ETF Launches in U.S.

The first ETF based on a hedge fund strategy launched in the U.S. today.

The IQ Hedge Multi-Strategy Tracker ETF (QAI) launched Wednesday on the NYSE Arca. It’s the first ETF out of IndexIQ, a provider of indexes for other ETF firms. The fund’s expense ratio will be 0.75%.

The IQ Hedge Multi-Strategy Index seeks to capture the risk-adjusted return characteristics of the collective hedge fund universe using multiple hedge fund investment styles, including long/short equity, global macro, market neutral, event-driven, fixed income arbitrage, and emerging markets. The ETF does not invest in hedge funds. Instead its portfolio is a fund of funds comprised of ETFs currently in the market.

This is not the first ETF based on a hedge fund strategy. Two weeks ago, Deutsche Bank launched the first hedge fund ETF in Germany. It does not trade in the U.S.

An ETF trying to replicate a hedge fund strategy offers many advantages over a true hedge fund. These include intra-day liquidity, portfolio transparency, lower fees than the typical hedge fund, the elimination of manager-specific risk, and real-time pricing.

IndexIQ sayts its unique “Rules-Based Alpha” philosophy combines the benefits of traditional indexing with the risk-adjusted return potential sought by the best active managers. Unlike traditional market indexes, which track the performance of a market or industry sector, the IndexIQ index tries to track the returns of distinct hedge fund investing styles.

Isn’t the appeal of a hedge fund 1) the manager’s skill at beating the market and 2) the ability to make any kind of transaction in the market, long and short. Not quite sure how this fund accomplishes that.

Elements to Delist 3 More ETNs

Credit Suisse Securities plans to kill three of its four Elements-branded exchange-traded notes. The firm said last week that due to trading volumes insufficient to support an exchange-traded product, the three ETNs would be delisted from the NYSE Arca by April 3.

The three ETNs, the Elements MLCX Gold Index ETN (GOE), the Elements MLCX Livestock Index ETN (LSO) and the Elements MLCX Precious Metals Plus Index (PMY) may continue to trade on an over-the-counter basis. This might be the first time an exchange-traded product trades this way. If this occurs, the intraday indicative values for the securities will no longer be published, but the daily NAV would be after the closing bell.

Credit Suisse has no plans to delist the fourth ETN, the Elements Credit Suisse Global Warming ETN (GWO).

“However, there is no assurance that the GWO ETNs will continue to be listed on NYSE Arca or another securities exchange,” the statement added. “In addition, from time to time Credit Suisse may decide, at its sole discretion, to issue additional units of the GWO ETNs.”

IndexUniverse reports that the Securities and Exchange Commission had contacted Credit Suisse in late February regarding “extraordinary” trading and price movements linked to GOE. At the same time, Credit Suisse said it didn’t plan on issuing any new shares of the ETN and that there was no lead market maker on the NYSE assigned to make a market for the fund.

Elements is the brand name for a consortium made up of issuers and distributors. In addition to Credit Suisse, Deutsche Bank and Swedish Export Credit have issued under the Elements name. Merrill Lynch and Nuveen Investments are the consortium’s distributors. Five other Elements ETNs have been delisted for lack of assets. In October, nine months after they launched, Deutsch Bank closed five currency ETNs it had issued under the Elements brand.

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.”