Alex Vynokur

BetaShares, a provider of Australian exchange traded products (ETPs), yesterday announced the launch of a new ASX-traded fund, aimed at boosting income over a portfolio of US equities.

The BetaShares S&P 500 Yield Maximiser Fund (managed fund) will trade under the ASX code UMAX and aims to provide investors with exposure to the stocks comprising the benchmark US Index, the S&P 500 Index, while providing regular income that exceeds the  dividend yield of the stocks alone. It also aims to provide lower overall volatility than the Index.

The Fund’s investment approach is to hold an investment portfolio providing exposure to the S&P 500 Index and at the same time, to sell some of the upside share price potential of the Index in return for additional income.  The Fund does not aim to track the Index.

The launch of the Fund comes after the success of BetaShares’ yield-focused Australian equities product, the BetaShares Australian Top 20 Equity Yield Maximiser Fund (managed fund) (YMAX), which employs a similar strategy and has attracted more inflows than any other equities exchange traded product on ASX in 2014.

The launch of the Fund comes at a time of increasing demand from ETP investors for international equities-focused funds, with around 40% of the ETF industry’s $12.4 billion in funds under management currently allocated to global equities products.

BetaShares Managing Director, Alex Vynokur, said the launch of UMAX would provide investors with further potential to enhance portfolio yields, as well as offering the additional diversification benefits of exposure to an overseas market.

“After such a strong response to the equity income strategy BetaShares introduced with YMAX, we believe there is great appetite for investors looking for a similar approach over US equities.

“This fund may suit not only SMSFs and investors who are seeking increased yield and reduced volatility over their share portfolio, but also those looking for exposure to the US market as a potential way to diversify out of Australian shares,” said Mr Vynokur.

The Fund will be the first Australian-domiciled ETP on the ASX to provide US-specific equity exposure, offering significant administrative benefits for Australian investors.

“Recent research conducted by Investment Trends indicated that the number one problem associated with exchange traded products that offer exposure to international equities, as identified by investors and their advisers, was the need to fill out US tax forms, known as W-8BEN forms, in order to qualify for reduced withholding tax on distributions received. UMAX has been designed to solve this problem. Because it’s an Australian domiciled fund, investors don’t have to worry about this paperwork as the forms are completed at the Fund level. They also have no need to be concerned about any potential US estate tax implications that may arise when investing in US-listed products.”

“UMAX fills a gap for investors looking for US shares exposure that comes with the potential for greater yield, lower volatility and reduced downside risk compared to an investment in the shares alone. For BetaShares, it also represents our first international equity offering and our 15th product overall,” Mr Vynokur concluded.

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Alex Vynokur

BetaShares has announced a strategic alliance with WisdomTree Investments, Inc. a leading exchange-traded product sponsor and asset manager.

Under the terms of the agreement, BetaShares has been granted exclusive rights to market the full range of WisdomTree US listed ETFs in Australia and New Zealand to institutional investors.

In addition, BetaShares and WisdomTree will explore the development of products on the Australian Securities Exchange (“ASX”) with the aim of providing investors in Australia and New Zealand access to some of the innovative investment strategies pioneered by WisdomTree.

Alex Vynokur, Managing Director of BetaShares said: “Our collaboration with WisdomTree is an important milestone, opening up a large range of innovative investment solutions for investors in Australia and New Zealand.”

WisdomTree is the fifth largest ETF provider in the US, with funds under management of approximately US$35B and over 65 ETFs listed in the US covering a broad range of asset classes and exposures. WisdomTree is a leader in active ETFs and fundamentally weighted ETFs through products including the US-listed Emerging Markets Local Debt Fund, Japan Hedged Equity Fund and the Global Equity Income Fund.

Commenting on the relationship, Jonathan Steinberg, CEO and President of WisdomTree said: “As ETF adoption increases in Australia and New Zealand, we look forward to working with BetaShares to serve this growing ETF market with new investment solutions.”

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The Asia Pacific (ex-Japan) ETF/ETP industry had 543 ETFs/ETPs, with 676 listings, from 97 providers listed on 15 exchanges, according to preliminary data from ETFGI’s end July 2014 Global ETF and ETP industry insights report.
The ETF/ETP industries in Europe, in Japan and globally have gathered record levels of YTD NNA at US$42.7 Bn, US$14.9 Bn and US$160.5 Bn, respectively.

New record highs in assets were reached at the end of July by ETF/ETP industries in Canada with US$66 Bn, Asia Pacific (ex-Japan) with US$103 Bn and Japan with US$91.5 Bn.

“In July investors invested the majority of new money into equity exposures as investor confidence was positive through most of month. The S&P 500 hit an all-time high during July but ended the month down 1% as market were rattled at the very end of the month by the situations in the Ukraine and Gaza and a poor start to the U.S. earnings season.

Developed markets outside the US ended the month down 2%, while emerging markets gained 2%, Asia was up 5% and frontier markets were up 4% in July.” according to Deborah Fuhr, Managing Partner at ETFGI.

In July 2014 in Asia Pacific (ex-Japan) ETFs/ETPs saw net inflows of US$1.21 Bn. Equity ETFs/ETPs gathered the largest net inflows with US$1.42 Bn, followed by commodity ETFs/ETPs with net inflows of US$3 Mn, while fixed income ETFs/ETPs saw net outflows of US$41 Mn.

CSOP/China Southern gathered the largest net ETF/ETP inflows in July with US$885 Mn, followed by Bosera AM with US$356 Mn and iShares with US$355 Mn net inflows.

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ETFs and ETPs reach a record high in April.

ETFs and ETPs listed globally gathered US$34.0 billion in net new assets in April which, when combined with a small positive market performance in the month, pushed assets in the global ETF/ETP industry to a new record high of US$2.49 trillion, according to preliminary data from ETFGI’s April 2014 Global ETF and ETP industry insights report.

At the end of April 2014 there were 5,241 ETFs/ETPs, with 10,238 listings, from 221 providers listed on 59 exchanges around the world.

The ETF/ETP industry in many countries and regions also hit record highs in assets at the end of April 2014 including: the United States at US$1.76 Trn, Europe at US$449.7 Bn, Japan at US$82.4 Bn, Canada at US$61.1 Bn, and the Middle East/Africa at US$41.4 Bn.

“In April, as was the case in March, investors continued to show a strong preference to equity allocations. Equity markets were again choppy in April – the S&P 500 closed at an all-time high on April 2nd but ended the month up less than 1%. The DJIA closed the month at an all-time high of 16,581. Outside the U.S., developed markets improved slightly, European equities continued to strengthen, while emerging markets remained flat for the month.” according to Deborah Fuhr, Managing Partner at ETFGI.

In April 2014, ETFs/ETPs globally gathered net inflows of US$34.0 Bn. Equity ETFs/ETPs gathered the largest net inflows with US$27.5 Bn, followed by fixed income ETFs/ETPs with US$6.3 Bn, while commodity ETFs/ETPs experienced net outflows of US$920 Mn.

YTD through end of April 2014, ETFs/ETPs have seen net inflows of US$68.9 Bn which is less than the US$83.1 Bn of net inflows gathered at this time last year. Equity ETFs/ETPs have gathered the largest net inflows YTD with US$37.4 Bn, followed by fixed income ETFs/ETPs with US$24.5 Bn, while commodity ETFs/ETPs have experienced net outflows of US$1.2 Bn YTD.

In April 2014, iShares gathered the largest net ETF/ETP inflows with US$10.7 Bn, followed by Vanguard with US$6.2 Bn in net inflows, and SPDR ETFs with US$4.6 Bn in net inflows.

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Flows into ETFs and ETPs listed globally rebounded in February gathering net inflows of US$29.0 billion which, when combined with the positive market performance in the month, pushed assets in the global ETF/ETP industry to a new record high of US$2.44 trillion, according to preliminary findings from ETFGI’s February Global ETF and ETP industry insights report.

The Global ETF/ETP industry has 5,183 ETFs/ETPs, with 10,210 listings, from 219 providers on 59 exchanges.

“Positive comments from the Fed indicating that the US economy continues to brighten, the S&P 500 ending February with a record close of 1859 and signs of a wider global recovery in equities seems to have caused investors to come out of their winter hibernation after the winter storms and put net inflows of US$29.0 billion into ETFs/ETPs in February.” according to Deborah Fuhr, Managing Partner at ETFGI.

Dissecting the overall net inflows we find that fixed income ETFs/ETPs gathered US$16.8 Bn – the largest net inflows – followed by equity ETFs/ETPs with US$10.2 Bn. Commodity ETFs/ETPs saw net inflows of US$870 Mn.

The competition to gather assets remains high. The top 100 ETFs/ETPs – less than 2% of the 5,183 ETFs/ETPs – account for more than half (57%) of global assets. Only 7% of ETFs/ETPs hold more than US$1 Bn in assets, while 69% have less than US$100 Mn in assets, 59% have less than US$50 Mn in assets and nearly a third of all products have less than US$10 Mn in assets.

In the first two months of 2014 Vanguard has gathered the largest net ETF/ETP inflows with US$9.4 Bn, followed by iShares with US$7.1 Bn, Nomura AM with US$4.2 Bn, First Trust with US$2.5 Bn and Guggenheim with US$2.0 Bn in net inflows.

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Net inflows for Europe.

ETFs and ETPs listed in Europe received net inflows of US$5.4 billion in January 2014, according to findings from ETFGI’s January 2014 Global ETF and ETP industry insights report.

The pattern for net flows in January was very different for ETFs and ETPs listed in the United States which suffered net outflows of US$15.5 billion with Equity ETFs/ETPs having the largest net outflows of US$15.9 Bn, followed by commodity ETF/ETP net outflows of US$1.2 Bn, while fixed income ETFs/ETPs gathered net inflows with US$566 Mn.

European listed ETFs and ETPs net inflows of US$5.4 billion in January were composed of Equity ETFs/ETPs gathering net inflows of US$4.0 Bn, followed by fixed income ETFs/ETPs with net inflows of US$2.1 Bn, while commodity ETFs/ETPs experienced net outflows of US$705 Mn.

“The buying patterns of European based investors indicates that they are more confident about developed markets including the US than investors based in the US in January 2014.” according to Deborah Fuhr, Managing Partner at ETFGI.

Equity ETFs/ETPs experienced the largest net outflows with US$11.8 billion, followed by commodity ETFs/ETPs with US$1.9 billion, while fixed income ETFs/ETPs gathered the largest net inflows with US$2.9 billion.

Providers in Europe

In January, UBS gathered the largest net ETF/ETP inflows US$1.8 Bn, followed by iShares with US$1.3 Bn and Lyxor with US$1.2 Bn net inflows while ZKB experienced the largest net ETF/ETP outflows in January with US$223 Mn, followed by Deka with US$179 Mn.

Index providers in Europe

STOXX has the largest amount of ETF assets tracking its benchmarks with US$105 Bn, reflecting 25.6% market share; MSCI is second with US$92.7 Bn and 22.6% market share, followed by S&P Dow Jones with US$43.4 Bn and 10.6% market share.

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Alex Vynokur

Over the course of 2013 the “high yield” category of ASX exchange traded products (ETPs) received an all-time record level of net inflows, approximately $500 million.

Mr Alex Vynokur, Managing Director of BetaShares said: “As an investment category, yield-oriented Australian equities ETP exposures were one of the most popular in 2013, as investors continued their search for yield as low interest rates eroded investor returns on cash holdings.

“Investors are finding it increasingly difficult to rely upon traditional exposures to cash and bonds to deliver income streams. ETP flows suggest investors are seeking other asset classes in search of yield and returns.”

All of the ASX-quoted high yield products outperformed the broad domestic market on a cash and gross yield basis during the 2013 calendar year according to analysis conducted by BetaShares.

Of the ETPs available on the ASX, BetaShares Australian Top 20 Equity Yield Maximiser Fund (managed fund) trading under the ASX Code “YMAX” recorded the highest yields of all ETPs available throughout the period, 8.2% cash yield and 9.5% when the benefits of franking credits are included (gross yield)[1]. By comparison, the S&P/ASX 200 index recorded a cash yield of 4.2% and a gross yield of 5.6% as at the end of the calendar year.

In what is a signal of the maturing ETP sector in Australia, six competing equity yield products were available for investors last year and the first new ETP of 2014 was also a yield based strategy.

“The number of competing products is a sign of maturity for the ETF industry in Australia. However, while products may appear similar, investors should be aware of the varying underlying investment strategies resulting in different performance and distribution outcomes,” Mr Vynokur said.

“During 2013, YMAX was the second most popular BetaShares product by way of inflows. We’re very pleased with the favourable distribution results that YMAX recorded in the last twelve months, and feel the high-yield sector of the Australian ETP marketplace will continue to grow strongly throughout 2014,” he concluded.

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Global ETF and ETP assets reach new heights.

US$24.5 billion net inflows in December and positive market performance pushed assets in the global ETF/ETP industry to a new record high of US$2.4 trillion at year-end 2013, according to preliminary findings from ETFGI’s global ETF and ETP industry insights report.

The global ETF/ETP industry had 5,090 ETFs/ETPs, with 10,172 listings, from 218 providers on 60 exchanges at the end of 2013.

“After spending most of 2013 wondering when and how the Fed would taper its QE scheme, investors felt a degree of positive cheer and certainty after the Fed announced in December that the US economy was strong enough for it to begin to taper by US$10 billion in January 2014” according to Deborah Fuhr, Managing Partner at ETFGI.

In December 2013, ETFs/ETPs saw net inflows of US$24.5 Bn. Equity ETFs/ETPs gathered the largest net inflows with US$28.3 Bn, followed by fixed income ETFs/ETPs with US$403 Mn, while commodity ETFs/ETPs experienced net outflows of US$5.0 Bn.

In 2013, global ETF/ETP assets increased by 23% based on positive market performance and net inflows of US$242.8 Bn, but did not surpass the US$265.0 Bn in net inflows in 2012. Equity ETFs/ETPs gathered a record level of net inflows in 2013 with US$240.1 Bn, followed by fixed income ETFs/ETPs with US$22.3 Bn, while commodity ETFs/ETPs experienced a record level of US$39.7 Bn in net outflows in 2013.

iShares topped the rankings based on net inflows with US$61.0 Bn in 2013, narrowly beating Vanguard with US$60.2 Bn. SPDR finished 3rd with US$18.3 Bn, PowerShares took 4th place with US$15.4 billion and WisdomTree gathered the 5th largest net inflows with US$14.4 billion.

In 2013, 611 new ETFs/ETPs were launched by 102 providers which, is slightly higher than the 595 ETFs/ETPs launched in 2012 by 104 providers. The 245 ETF/ETP closures in 2013 are higher than the 206 ETFs/ETPs that closed in 2012, and more than three times the 72 that closed in 2011.

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ETFGI’s Institutional Users of ETFs and ETPs 2012 report* examines and profiles the number and types of ETFs and ETPs being used by institutional investors globally from 2005 through 2012.

“We have seen a significant increase in the use of ETFs/ETPs by institutional investors. From 2005 to 2012 there was a 92% increase in the number of institutions that reported using ETFs/ETPs, going from 1,752 institutions globally in 2005 to 3,367 in 2012” according to Deborah Fuhr, Managing Partner at ETFGI.

The reported use of ETFs and ETPs by institutional investors has grown at 6.9% CAGR over the past five years through 2012.

The objective of the analysis in this report is to deliver a worldwide and detailed report on the trends in ETF and ETP investors by location and firm type. The purpose of this report is to provide answers to the following strategic questions:

• Who are the investors?
• What type of firms use ETFs and/or ETPs?
• What size firms use ETFs and/or ETPs?
• Where are the firms located?
• What type of ETFs and/or ETPs do they use?
• How have the trends evolved from 2005 through 2012?

These findings and more are available in the “ETFGI Institutional Users of ETFs and ETPs 2012 report”. Contact deborah.fuhr@etfgi.com if you would like to discuss subscribing to this report.

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*Data source is Thomson Reuters/Lipper share ownership database.

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There are now 4,827 ETFs and ETPs, with 9,897 listings, assets of $2.13 trillion, from 209 providers listed on 56 exchanges. ETF and ETP assets have increased by 9.1% from $1.95 trillion to $2.13 trillion.

ETFs and ETPs recorded $9.9 billion in net inflows in April 2013. Fixed income ETFs and ETPs gathered the largest net inflows with $8.0 billion, followed by equity ETFs and ETPs with $7.5 billion, and active ETFs and ETPs with $1.3 billion, while commodity ETFs and ETPs experienced net outflows with $9.4 billion.

Fixed income ETFs and ETPs net inflows of $8.0 billion in April were composed of $2.8 billion of net inflows in government bond, followed by high yield with $2.0 billion, and corporate bond with $980 million, while inflation ETFs/ETPs experienced the largest net outflows with $251 million.

Equity ETFs and ETPs saw net inflows of $7.5 billion with US/North American equity gathering $9.2 billion, the largest net inflows, followed by developed Asia Pacific equity with $4.5 billion, and global equity with $1.1 billion, while emerging market equity experienced the largest net outflows with $5.0 billion.

Commodity ETFs and ETPs saw net outflows of $9.4 billion with precious metals experiencing the largest net outflows of $9.0 billion, followed by agriculture with $335 million.

Year-to-date through the end of April 2013, ETFs and ETPs have seen net inflows of $83 billion, which is greater than the $67 billion in net flows at this time in 2012.

“April flows show investors are feeling more cautious as a result of political and economic events in Europe, the US and Asia” according to Deborah Fuhr, Managing Partner at ETFGI.

iShares is the largest ETF and ETP provider with assets of $826 billion, reflecting 38.9% market share; SPDRs is second with $360 billion and 16.9% market share, then Vanguard with $288 billion and 13.6% market share, followed by PowerShares with $72 billion and 3.4% market share. The top three ETF and ETP providers, out of 209, account for 69.4% of global ETF and ETP assets.

S&P Dow Jones has the largest amount of ETF and ETP assets tracking its benchmarks with $556 billion, reflecting 26.1% market share; MSCI is second with $368 billion and 17.3% market share, followed by Barclays with $194 billion and 9.1% market share.

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