Tag Archives: ETN

Vanguard Takes 4 of 5 Best for 2011

Steven Goldberg at Kiplinger.com writes a lot about ETFs. He starts out his article on the 5 best ETFs for 2011, telling you the worst ones to buy.

He doesn’t like tiny ETFs that invest in a single industry or a single country. I don’t like tiny ETFs, too much risk with an unproven idea. But single industry ETFs can be quite useful. Do you think the oil industry is going to rally this year? Buy the Energy Select Sector SPDR Fund (XLE).He doesn’t like exchange-traded notes, which are essentially debt instruments backed only by the company that issues them. These can be risky too, as in the case of Lehman ETNs. However, I think for most firms, credit risk is not an issue.

Goldberg thinks the majority of ETFs are little more than high-priced gimmicks. Definitely true for some. However, he doesn’t like the WisdomTree family of ETFs, which weights holdings based on dividends or earnings rather than on the more-traditional basis of market capitalization. I think dividend-weighted indexes have less volatility and don’t fall as much in market crashes. I do agree that actively managed ETFs aren’t ready for prime time, either.

Goldberg likes:

  • Vanguard Mega Cap 300 Growth (MGK), he says put 40% of your portfolio in this.
  • iShares MSCI EAFE Growth Index (EFG)
  • Vanguard Total Stock Market ETF (VTI)
  • Vanguard Europe Pacific (VEA)
  • Vanguard Emerging Markets Stock (VWO)
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ETF/ETN Assets Grew 10%, Inflows 17% of Total

Assets in U.S.-listed exchange-traded funds and exchange-traded notes (ETN) grew 10% in April over the previous month to $540.2 billion, according the National Stock Exchange in Jersey City, N.J. March assets totaled $489.2 billion.

Out of April’s $51 billion increase, 17%, or $8.5 billion was due to net cash inflows. The rest came from price apprecation . The NSX says year-to-date net cash inflows jumped 59% to $12.6 billion, over the same time period in 2008. In February, ETF/ETNs saw net cash outflows of $5.8 billion, but that turned positive in March with net cash inflows of $8.1 billion

At the end of April 2009, the number of listed products totaled 844, compared to 719 one year ago. Notional trading volume for ETF/ETN products totaled $1.6 trillion for April 2009, representing 33% of all U.S. equity trading volume. That fell from March, when notional trading volume was approximately $2 trillion, representing 38% of all U.S. equity trading volume.

ETFs See Cash Inflows Even as Asset Values Fall

ETFs and ETNs continue to see net cash inflows even as total assets under management fall. The conclusion is this is a function of just falling asset values.

According to the National Stock Exchange (NSX), at the end of November, total U.S. listed ETF and ETN assets fell 16.8% to $487.6 billion from $585.8 billion in November 2007. However, net cash inflows for the month were $26.4 billion, bringing the total net cash flow for the 11 months through Nov. 30 to $136.8 billion. In November, 315 ETFs saw net cash inflows, while 179 saw outflows. ETNs split at 16 each.

Notional trading volume in both ETFs and ETNs fell 33% in November from October to $2.2 trillion. Surprisingly, this represents a record 43% of all U.S. equity trading volume, up from 38% in October. That just shows how much total equity volume must have fallen off. At the end of November 2008, the number of listed products totaled 843, compared with 650 listed products one year ago and 806 in October.
According to the NSX, the only ETF firms that saw assets grow are State Street Global Advisers, ProShares, Van Eck and

Ameristock/Victoria Bay. All those firms saw net cash inflows for the year through Nov. 30 increase compared with the first 11 months of 2007. Vanguard did as well. ProShares’s assets under management rocketed 112% to $20.9 billion. SSGA’s assets grew 8.3% to $142.9 billion. This really shouldn’t be a surprise. ProShares sponsors the inverse and leveraged ETFs that have proved hugely popular in the market turmoil. SSGA sells the largest, most liquid ETF, the SPDR (SPY), which tracks the S&P 500. Many investors making a flight to safety or seeking a place to hold cash on a temporary basis will move to the S&P 500. Even as the S&P 500 sinks, the SPDR’s 2008 net cash inflows have surged 86% year-over-year through Nov. 30 to $18.23 billion.

Meanwhile, BGI’s iShares saw assets tumbled 29% to $229.3 billion.

Firms with net cash outflows in November included PowerShares, $309 million, and Merrill Lynch’s HOLDRs, which saw redemptions of $889 million. Surprisingly, the HOLDRs saw net cash outflows of $3.6 billion in 2007, but are up $1.2 billion so far this year. Other firms that experienced outflows in November were WisdomTree, FirstTrust, and SPA-ETF. Firms with net outflows year-to-date include Bank of New York, Rydex, X-Shares, Ziegler, FocusShares and BearStearns. The last two have gone out of business this year. Rydex is suffering as the strengthening dollar hurts its CurrencyShares.

As for ETNs, Barclay’s iPath family saw assets plunge 36% to $2.6 billion. In November, iPath saw outflows of $39 million. Morgan Stanley/Van Eck ETNs recorded outflows of $16 million in November. Meanwhile, Goldman Sach’s ETNs net cash outflows grew to $97 million year-to-date. Comparisons are not relevant for many of the other ETN firms as they had few funds, if any, last year.

Among the top ten ETFs and ETNs, the SPDR (SPY), iShares MSCI EAFE Index Fund (EFA), SPDR Equity Gold (GLD), iShares S&P 500 Index Fund (IVV), iShares Russell 1000 Growth Index Fund (IWF) and iShares Russell 2000 Index Fund (IWM) all saw net cash inflows in November, according the NSX. Of the 10 largest funds, these saw outflows last month: iShares MSCI Emerging Markets Index Fund (EEM), PowerShares QQQ (QQQQ), iShares Barclays Aggregate Bond Fund (AGG) and the Dow Diamonds (DIA).

The NYSE Group also releases volume data for its exchanges. Average daily matched volume for ETFs, or the total number of shares of ETFs executed on the entire NYSE Group’s exchanges surged 93.5% to 672 million shares from 347 million shares in November 2007. Total matched volume for the month totaled 12,765 million shares, a 75.1% increase. Total volume year-to-date through Nov. 30 jumped 74.7% from the same period last year to 102,583 million shares.

Handled volume, which represents the total number of shares of equity securities and ETFs internally matched on the NYSE Group’s exchanges or routed to and executed at an external market center, totaled 14,813 million shares last month, a 77.6% surge over the year-ago month. Average daily handled volume rocketed 96.3% to 780 million shares from 397 million shares a year ago. Year-to-date total volume climbed 78.1% to 117,629 million shares.

The NYSE also reported total ETF consolidated volume for the month leapt 92.1% to 45,151 million shares, while total average daily volume soared 112.3% to 2,376 million shares. Year-to-date, total consolidated ETF volume surged 119.4% over the first 11 months of 2007 to 355,133 million shares. I think those refer just to the NYSE Group.