ETF Headlines
Our Take: Van Eck's new India Small Cap ETF is appealing since with good demographics and a growing economy exposure to the consumer sector is promising. Small Cap issues generally are dominated by consumer oriented issues. Therefore, we like the potential here.
Van Eck Launches Market Vectors India Small-Cap Index ETF (SCIF)
New York-based asset manager Van Eck Global has launched Market Vectors India Small-Cap Index ETF (NYSE Arca: SCIF), an open-end exchange-traded fund (ETF) to provide investors with exposure to small-cap stocks in India, it was announced today. The fund will seek to track the Market Vectors(TM) India Small-Cap Index, which had a large base of 122 constituents and an average market capitalization of $456M, as of July 31, 2010.
"We are very excited to add SCIF to our growing lineup of emerging market small-cap ETFs," said Jan van Eck, Principal at Van Eck Global. "It continues to be our strong belief that small-cap stocks are an excellent way to gain direct exposure to a country's domestic economy. India, in particular, has exhibited demographic and economic factors that support strong continued domestic growth for years to come."
Since undertaking economic liberalization policies in 1991, India has achieved significant economic growth and has quickly integrated into the global marketplace. The country's gross domestic product (GDP) has remained strong in recent years, with real GDP growth registering 7.3 percent in 2008 and 5.6 percent in 2009, two years in which most Asian economies contracted.
Indian small-cap stocks are supported by one of the world's largest and fastest-growing domestic consumer markets, with a demographic profile that is skewed toward the young. India's rapidly growing middle class is projected to triple in size over the next 15 years, making it twice the size of the entire U.S. population. With sustained foreign direct investment in previous years and continued decreases in unemployment, growing wealth among India's population is expected to fuel demand for discretionary goods, services and homebuilding. In addition, India's government has already invested substantial amounts in the country's much needed infrastructure build-out, which has served as a fiscal stimulus further driving the country's economic growth.
SCIF seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the Market Vectors India Small-Cap Index (Ticker: MVSCIFTR), which uses a float-adjusted modified market capitalization-weighting methodology. The top three industry weightings in the Index as of July 31, 2010 were Industrials (27%), Financials (20%) and Materials (14%). The Fund's net expense ratio is 0.85% percent and its gross expense ratio is 0.91% percent.
Like all Market Vectors indices provided by 4asset-management GmbH, MVSCIFTR's constituents and weights are publically available daily at no cost and constituents must meet minimum liquidity levels to be considered for inclusion in the index. Specifically, companies must have a market cap of at least $150 million, a three-month average daily trading volume value of at least $1 million and minimum trading volume of 250,000 shares each month over the last 6 months on a rebalancing date.
SCIF is the 27th ETF offered under Van Eck's Market Vectors(TM) brand. Other international Market Vectors ETFs include Africa Index ETF (AFK), Brazil Small-Cap ETF (BRF), Egypt Index ETF (EGPT), Gulf States Index ETF (MES), Indonesia Index ETF (IDX), Latin America Small-Cap Index ETF (LATM), Poland ETF (PLND), Russia ETF (RSX), and Vietnam ETF (VNM). Market Vectors also offers ETFs focused on hard assets, specialty investments, and fixed income. As of July 31, 2010, Van Eck was the6th largest ETF provider in the U.S. and had approximately $14.3 billion in assets under management.
About Van Eck Global
Founded in 1955, Van Eck Associates Corporation was among the first U.S. money managers helping investors achieve greater diversification through global investing. Today the firm continues this 50+ year tradition by offering global investment choices in hard assets, emerging markets, precious metals including gold, and other specialized asset classes.
Market Vectors exchange-traded products have been offered by Van Eck Global since 2006 when the firm launched the nation's first gold mining ETF. Today, Market Vectors ETFs and ETNs span several asset classes, including equities, municipal bonds and currency markets.
Van Eck Global also offers mutual funds, insurance trust funds, separate accounts and alternative investments. Designed for investors seeking innovative choices for portfolio diversification, Van Eck Global's investment products are often categorized in asset classes having returns with low correlations to those of more traditional U.S. equity and fixed income investments.
Our Take: Folding issues with little assets under management making them unprofitable to manage. They just never caught on given their eclectic focus.
Claymore Announces Product Lineup Changes
Sept. 10, 2010, will be the last day of trading on the NYSE Arca for:
- Claymore/Zacks Dividend Rotation ETF (NYSE Arca: IRO)
- Claymore/Zacks Country Rotation ETF (NYSE Arca: CRO)
- Claymore/Beacon Global Exchanges, Brokers & Asset Managers Index ETF (NYSE Arca: EXB)
- Claymore/Robb Report Global Luxury Index ETF (NYSE Arca: ROB)
Shareholders may sell their fund shares prior to the market close on Sept. 10, 2010. Effective after the market close on Sept. 10, 2010, the funds will no longer accept creation or redemption orders for fund shares. It is anticipated that transactions executed prior to Sept. 10, 2010, will be subject to fees normally assessed by broker-dealers for such transactions. From Sept. 13, 2010, through Sept. 17, 2010, shareholders may be able to sell their shares to certain broker-dealers, but there can be no assurance that there will be a market for the funds. All shareholders remaining on Sept. 17, 2010, will receive a cash distribution into their brokerage account representing the value of their shares as of that date, which will also include any capital gains and dividends.
For additional information, shareholders in these ETFs may call their financial advisor or Claymore at 800-345-7999.
Our Take: There’s an ongoing panic for yield and EM bonds yield nearly 6% overall. If the dollar is a worry then perhaps it’s possible to gain on currency conversion along with the income. Naturally, things could go just the opposite for investors and yields rise causing erosion in principal while currencies depreciate.
Van Eck Launches Market Vectors EMs Local Currency Bond ETF
New York-based asset manager Van Eck Global has launched Market Vectors Emerging Markets Local Currency Bond ETF (NYSE Arca: EMLC), the first U.S.-listed exchange-traded fund (ETF) designed to provide investors with exposure to an index that tracks a basket of bonds issued in local currencies by emerging market governments. The Fund has a gross expense ratio of 0.60 percent and net expense ratio of 0.49 percent.
EMLC seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of J.P. Morgan Government Bond Index-Emerging Markets Global Core Index (ticker: GBIEMCOR). J. P. Morgan is a major provider of innovative emerging market indexes, with approximately $80 billion benchmarked to its GBI-EM index family as of June 23, 2010. GBIEMCOR currently has 171 constituents with maturities ranging from one to 30 years, and an average yield-to-maturity of 6.8 percent as of July 1, 2010.
The Index currently tracks a selection of bonds issued in local currencies by thirteen emerging market countries representing Latin America, Eastern Europe, Africa, and Asia: Brazil, Colombia, Egypt, Hungary, Indonesia, Malaysia, Mexico, Peru, Poland, Russia, South Africa, Thailand, Turkey. GBIEMCOR is market-cap weighted, with individual country exposures capped at 10 percent to provide more diversification among countries within the index. As of July 1, 2010 six countries met the 10 percent threshold, including Brazil, Malaysia, Mexico, Poland, South Africa and Thailand. Index rebalancing occurs monthly.
"With EMLC, we've created an ETF that allows investors to participate in the dynamics of the local emerging market economies, which include potential for currency appreciation and higher yields, relative to their developed market counterparts," said Jan van Eck, Principal at Van Eck Global. "We're very excited to be able to provide a means for tracking an index from the popular J.P. Morgan local currency bond index family, particularly at a time when the global markets are witnessing the growing importance of new economic leaders in regions such as Asia and Latin America."
"Over the last few years emerging markets have demonstrated resilience as much of the developed world has experienced massive fiscal deterioration and skyrocketing debt levels," said Joyce Chang, Head of Global Emerging Markets and Credit Research with J.P. Morgan. "EM countries have driven global growth in recent years and have become one of the fastest growing asset classes, providing an important source of diversification for investors."
EMLC is the 26th ETF offered under Van Eck's Market Vectors brand. Van Eck's recent product choices underscore the firm's continued commitment to emerging markets. Other international equity ETFs featured within the Market Vectors family include Africa Index ETF (AFK), Brazil Small-Cap ETF (BRF), Egypt Index ETF (EGPT), Gulf States Index ETF (MES), Indonesia Index ETF (IDX), Latin America Small-Cap Index ETF (LATM), Poland ETF (PLND), Russia ETF (RSX) and Vietnam ETF (VNM).
Van Eck Global also offers other Market Vectors ETFs focused on hard assets, specialty investments, and municipal bonds ETFs. As of June 30, 2010, Market Vectors ETFs had a total of approximately $14.5 billion in assets under management and was the 6th largest provider of ETFs in the U.S.
Our Take: Another 130/30 fund is launched which joins a ProShares similar offering which is now more established.
BlackRock Files To Offer Long-Short ETFs
BlackRock, the parent company of ETF behemoth iShares and the world’s largest asset manager, filed with the Securities and Exchange Commission today for permission to launch a so-called long-short index fund, a first for the firm.
Long-short funds take simultaneous long and short positions in an attempt to reduce correlation and smooth out returns during market swings. The strategy is the bread and butter of traditional hedge funds, and the ETF community now appears to be embracing it at a time of heightened economic uncertainty.
Last month, for instance, AdvisorShares, the Bethesda, Md.-based boutique ETF sponsor specializing in actively managed funds, launched the Mars Hill Global Relative Value ETF (NYSEArca: GRV), the first long-short ETF to trade in the U.S. The fund collected more than $38 million in its first month, as we wrote in a story titled AdvisorShares, Global X Hauling In Assets.
The new iShares fund described in BlackRock’s filing will track the MSCI USA Barra Earnings Yield Index, a long-short index that reweights the components of the MSCI USA Index based on current and historical earnings data in order to emphasize securities with “earnings momentum.”
The new fund will invest 130 percent of its net assets in long positions in its underlying index’s component securities and expose 30 percent of net assets to short positions. BlackRock, however, reserves the option to invest up to 20 percent of net assets in an array of other vehicles, including derivatives, commodity-linked notes, and cash.
The MSCI USA Index is a market-cap-weighted index designed to measure the performance of equity securities listed on U.S. stock exchanges. As of June 30, the MSCI USA Index had 593 holdings.
BlackRock did not specify a ticker symbol or expense ratio for its proposed fund in the filing.
BlackRock’s Strategy
When asked for comment about the new fund, Christine Hudacko, a spokeswoman at San Francisco-based iShares, said that this filing is in line with BlackRock’s goal of “offering solutions and packaging strategies in an ETF format” for the ever-changing needs of its clients and investors.
Asked whether this passively managed product was a sign of things to come for BlackRock, Hudacko said that in the future, BlackRock “may offer [long-short funds] in any number of forms, including active or tracking an index.
Hudacko acknowledged that the SEC registration process for new funds is a lengthy one, noting that BlackRock wanted to get its foot in the door now in order to be able to offer a long-short fund to its clients when and if it saw fit to do so.
Our Take: The data reflects the desire of individual investors to seek safety in fixed income investments vs stocks which they currently don't trust. This coincides well with 12 consecutive weeks of stock mutual fund redemptions per ICI.
SSgA: ETF client assets edge down in first half
U.S. exchange-traded funds’ total client assets slipped 0.4% to $772 billion in the first half of 2010, according to a news release from SSgA
According to SSgA, net flows into all U.S. ETFs during the first six months of the year exceeded the pace seen for the same period last year.
SSgA said the growing number of fixed-income ETF offerings helped attract net inflows of $21.2 billion for that asset segment, a 21% jump from the end of 2009.
The number of bond ETFs swelled to 105 as of June 30, out of an overall ETF universe of 897 products, according to SSgA. In 2006, investors had only six bond ETFs to choose from.
Bond ETFs held six of the top 10 spots for net cash flows during the first half of 2010.
According to SSgA, short-term bond ETFs garnered $7 billion in net flows during the six months ended June 30, while U.S. Treasury ETFs attracted $5 billion.
Gold ETF assets jumped 30.2% from the end of 2009. SSgA said its SPDR Gold Shares ETF pulled in $7.6 billion, sending its total assets past the $50 billion mark.
