Kanish Chugh

The Indian economy moved past the United Kingdom’s into fifth place in the world economic rankings this month and some commentators have forecast that it could be the world’s third largest economy by 2030^[1]. This sustained economic growth is reflected in the strong relative performance of the Indian share market.

Surprisingly, India is underweight in many emerging market (EM) funds, held back by an outdated view that its infrastructure is poor, its level of poverty higher than other EM economies and that its government processes make change difficult.

ETF Securities Head of Distribution, Kanish Chugh, says this view fails to take into account the significant progress that has been made.

India’s economic performance is built on a series of structural changes, including labour reforms, changes to the country’s tax base, bankruptcy reform and the controversial “demonetisation” program of 2016 to restrict the shadow economy and the use of counterfeit cash.

Chugh says: “The implementation of these reforms had some adverse impact in the short term but now the Indian economy is primed to benefit.”

The Indian Government’s plan to develop the country as a manufacturing centre is bearing fruit, with the new Apple iPhone to be built in India and not China.

“India has moved up slowly, compared with some other emerging market economies. It is the largest democracy in the world and it does take time for change to flow through,” Chugh says.

In June, the World Bank issued its latest Global Economic Prospects report^[2], which included forecasts for Indian GDP growth of 7.1% in 2023 and 6.5% in 2024. These are the highest forecasts in the survey.

India’s leading equity market benchmark, the NSE Nifty50 Index, has performed well, returning 3.1% over the 12 months to the end of August and 14% a year over the past three years.

The MSCI Emerging Markets Index is down 21.5% over the past 12 months and up just 3.1% a year over the past three years. The MSCI Word Index is down 14.7 per cent over the past 12 months and up 9.3 per cent a year over the past three years.

ETF Securities’ ETFS-NAM Nifty 50 ETF (ASX Code: NDIA) tracks the NSE Nifty50 Index. Top stocks in the ETF include energy, retail and telecommunications conglomerate Reliance Industries, the world’s tenth largest bank HDFC Bank and global IT consultancy Infosys.

Chugh says: “NDIA invests in the 50 largest companies in India, which account for 60 per cent of the total India equity market. Forty-five per cent of that Nifty50 Index is related to consumption. You are buying India for the domestic consumption story and that is what’s going to drive the growth of the economy there.

“There are very positive signs for a number of emerging economies but the size of the country makes India compelling. It has a population of 1.3 billion and a growing middle class and investors should not look past that fact,” adds Kanish.

———

Notes:
[1] Bloomberg Asia: https://www.bloomberg.com/news/articles/2022-09-02/uk-slips-behind-india-to-become-world-s-sixth-biggest-economy
[2] World Bank: https://www.worldbank.org/en/publication/global-economic-prospects

The post India’s economic development reflected in positive equity market performance appeared first on AdviserVoice.

Evan Metcalf

Leading ETF provider ETF Securities has given investors more options for investing in the fixed income market, with the launch of a US Treasury Bond fund and a USD high-yield corporate bond fund.

The new funds are ETFS US Treasury Bond (Currency Hedged) ETF (ASX Code: USTB) and ETFS USD High Yield Bond (Currency Hedged) ETF (ASX Code: USHY).

USTB is the first pure play exposure to US Treasuries available to Australian retail investors.

ETF Securities Head of Product Evan Metcalf says: “Fixed income securities play an important role in investment portfolios. Their returns generally have a low correlation to equity returns, which provides portfolio diversification.

“And over time, they have low volatility. This means they provide yield with relatively low risk. Investors often compare the yield on government bonds to the higher yield on dividends from equities. What they ignore is that to capture that dividend yield they must invest in an asset class with double-digit annual volatility.”

He added: “These investment options are perfect for investors like retirees or SMSFs who are seeking peace of mind, and low risk asset classes.”

Kanish Chugh, Head of Distribution ETF Securities added: “We will continue to offer innovative and timely products to the market and this launch marks the start of our new growth strategy, especially in light of Mirae Asset and Global X ETFs acquisition of our business.

“We are excited to work with Global X ETFs, and to dip into their vast research capabilities and experience.  As a leading provider of ETFs we will continue to offer solutions for investors to build portfolios across the spectrum, whether it’s defensive, growth, income or alternatives,” said Chugh.

ETFS US Treasury Bond (Currency Hedged) ETF (ASX Code: USTB) tracks the iBoxx $ Treasuries Total Return Index, hedged into Australian dollars. The index is market capitalisation weighted and tracks the performance of bonds issued by the US government.

USTB gains its exposure to the index by investing in DWS Group’s Xtrackers II US Treasuries UCITS ETF. DWS is a leading global fund manager with €850 billion of assets under management.

The market for US government debt is the deepest and most liquid of any type of financial instrument, with more than US$23 trillion of outstanding Treasuries.

Despite the scale of this market, Australian retail investors have had no access to a pure play investment in US Treasuries until now.

ETFS USD High Yield Bond (Currency Hedged) ETF (ASX Code: USHY) tracks the Solactive USD High Yield Corporates Total Market Index, hedged into Australia dollars.

USHY gains its exposure to the Index by investing in DWS Group’s Xtrackers USD High Yield Corporate Bond ETF.

High yield bonds are tradeable debt securities issued by companies with sub-investment grade credit ratings. Investors who are prepared to accept higher risk can earn higher income than investors in investment grade bonds.

To qualify for inclusion in the Solactive Index, bonds must be issued by companies based in developed market countries with at least US$1 billion outstanding face value.

Metcalf says: “Fixed income markets have had mixed results over the past year but long-term the asset has proved its value as a core holding, providing investors with yield at relatively low risk.”

The post Fixed income options expand with new ETF Securities launches appeared first on AdviserVoice.

Shanker will be responsible for leading several Victorian and Tasmanian accounts including financial planning firms. Based in Melbourne, he will report to Kanish Chugh, Head of Distribution, ETF Securities.

He has an extensive knowledge of the wealth management industry, working over a decade as a financial planner, relationship manager and Business Development Manager.

He joins ETF Securities from Lincoln Indicators, where he looked after clients across a suite of managed funds.  Prior to that he was a Business Development Manager at Associated Foreign Exchange (AFEX). He has also worked as a financial planner across National Australia Bank and Australian Financial Planning Group.

Chugh said: “We are delighted to have someone of Arjun’s experience join our growing team. We are passionate about helping advisers find suitable investment products and Arjun brings deep knowledge to the team as we continue to expand our suite of ETFs.”

Shanker said: “I am looking forward to utilising my experience across financial markets and advice combined with the insights of ETF Securities to bring high quality investment solutions to all our clients.

“I am passionate about financial advice. As an ex-financial planner, I am acutely aware of the compliance and operational challenges facing the industry. I am excited about the prospect of helping simplify the investment process.”

The post ETF Securities bolsters distribution capabilities with business development manager appointment appeared first on AdviserVoice.

Kanish Chugh

Gold is not the only precious metal to have offered investors a safe haven this year, as Russia’s invasion of Ukraine and rising inflation focused attention on global political and economic risks. Silver, platinum, and palladium have all traded higher as well.

ETF Securities Head of Distribution Kanish Chugh says all four precious metals have traded at high levels over the past couple of years, but all are subject to periods of volatility.

“An option for investors is to smooth that volatility by investing in a basket of physical precious metals,” Chugh says.

ETF Securities’ Physical Precious Metals Basket ETF (ASX Code: ETPMPM) holds gold, silver, platinum and palladium in a single portfolio. The fund is backed by physical allocated metal held by JPMorgan Bank.

The fund is up 4.3% over the six months to the end of April. It has produced an average return of 8.5% a year over the past three years.

The metal allocation in the fund is currently 50.5% gold, 25.4% palladium, 17.7% silver and 6.4% platinum.

The gold price has eased back after hitting a peak of US$2,043 an ounce early in March and is currently finding support around US$1,840 an ounce.

Despite this decline, gold is still trading in a range it established in 2020, which well above the level of previous years.

Platinum and palladium also peaked in March this year, but silver hit another peak in mid-April.

Chugh says the prices of all four metals are driven by their appeal as stores of value and also their roles as industrial metals. The industrial supply and demand dynamics vary for each metals, giving them different trading patterns and giving investors diversification.

The post Investors should consider diversification in precious metals exposure appeared first on AdviserVoice.

Buying gold?

Investors are witnessing a decoupling of the relationship between gold’s fair value and US real yields, as concerns over the Ukraine war and high, persistent inflation prompt investors to put more emphasis on gold’s safe haven status, according to ETF Securities analysis of current market conditions.

For over a decade, gold’s key price driver has been the real yield on 10-year US Treasuries, which defines the opportunity cost of holding the non-yielding asset. Other factors determining the gold price are its safe haven status during periods of political crisis and its value as a hedge against inflation.

Gold is sensitive to rising interest rates, particularly US bond rates, which increase the opportunity cost of holding non-yielding bullion and put downward pressure on its price. But when investors focus on political or economic crises they will buy gold as a hedge, as they have been doing this year.

ETF Securities has bought around 8 million ounces of gold this year to support investment in its GOLD ETF.

ETF Securities’ research partner JP Morgan says tension between fair value estimates and hedging against risk is what gives gold its pricing dynamics, and right now geopolitical risk and inflation concerns have become the dominant factors and may continue to be in the short to medium term.

ETF Securities Head of Distribution Kanish Chugh says: “We are in a period of exceptional geopolitical risk and, at the same time, inflation is shifting higher and is no longer seen as transitory. Today. Gold’s price is being driven by its safe haven appeal and its value as an inflation hedge.”

Gold was range bound between US$1,750 and US$1,850 an ounce through most of 2021. It climbed over US$2,000 in January and has been trading around US$1,900 since then.

As the price has moved, analysts have debated gold’s sensitivity to US bond yields, rising inflation and the Ukraine war. Concerns about inflation and the Ukraine war are driving demand, while higher bond yields and a strong US dollar are seen to be putting pressure on the gold price.

The relationship with real yields has not gone away and will weigh on prices at some point but so far this year the gold price has been strong relative to real yields.

The US 10-year real yield has rebased higher since early March, while gold has withstood this downside pressure.

Chugh says: “We have seen strong demand. Investors are allocating more to gold as a hedge. The question now is whether the current dynamics will be sustained.

“We have some strong upside in yields this year and real yields will continue to push higher. On the other hands, we might be looking at the end cycle for this growth recovery, with aggressive rate rises. That is when gold comes into its own as a safe haven.”

The post Gold demand grows as investors seek a safe haven appeared first on AdviserVoice.

Graham Tuckwell,

Leading ETF provider ETF Securities will launch two funds that offer simple and cost-effective access to cryptocurrency investments. ETFS 21Shares Bitcoin ETF will be the first Australian ETF to invest in bitcoin, and ETFS 21Shares Ethereum ETF will be the first to invest in ether.

ETF Securities has partnered with 21Shares, a European fund manager that has been managing bitcoin, Ethereum and other cryptocurrency exchange traded products since 2018 and currently has US$2.5 billion of assets under management.

Both funds will list on Cboe Australia (formerly Chi-X). ETFS 21Shares Bitcoin ETF (Code: EBTC) will track the price of bitcoin in Australian dollars. It is fully backed by bitcoin held in cold storage by Coinbase.

ETFS 21Shares Ethereum ETF (Code: EETH) will track the Australian dollar price of ether, which is the cryptocurrency of the Ethereum blockchain. It is fully backed by ether held in cold storage by Coinbase.

Cold storage involves storing the private keys used to access and transact in cryptocurrencies in offline servers, with no internet access and out of reach of hackers. Coinbase’s vault has become the preferred storage for many institutions and it holds one of the largest stores of cryptocurrency.

Its vault uses advanced encryption and key management, multi-signature bitcoin addresses, military grade physical security and highly secure processes to keep cryptocurrencies offline and dispersed across three continents.

Graham Tuckwell, Executive Chairman of ETF Securities Australia says EBTC and EETH give investors a way of trading cryptocurrency in a tightly regulated environment, without the need to establish and maintain their own bitcoin or Ethereum wallets, or manage the risks.

“Once we decided to build a range of crypto ETFs for the Australian market, there was only one partner we wanted to work with, and that’s 21Shares. Its pioneering approach to secure investment in cryptocurrency has been emulated by other fund managers around the world,” Tuckwell says.

ETF Securities Head of Distribution Kanish Chugh says bitcoin has been the best performing asset over the past 10 years and ether has been one of the top performing assets over the past five years. “They may be used as an alpha tilts or side bets in a portfolio. They can also be bought as portfolio diversifiers, as they are completely different asset and uncorrelated to shares, bonds and commodities.”

Ethereum provides both a currency (ether) and blockchain-based contracts, sometimes called “smart contracts”. These contracts have placed Ethereum at the centre of crypto innovation and made it the driving force behind non-fungible tokens (NFTs), decentralised finance and decentralised autonomous organisations.

Chugh says that for investors looking for exposure to cryptocurrencies, investment via EBTC and EETH overcomes the pitfalls of the cryptocurrency market, including low exchange quality, weak custody arrangements, vulnerability to hacking and the loss of private keys and passwords.

CEO of 21Shares Hany Rashwan says “We’re so incredibly excited to be able to offer the first direct exposure Bitcoin and Ethereum ETF in Australia. Australian investors clearly want and deserve an affordable, easy, and professional way to access the growing crypto asset class and we’re delighted to continue building accessible bridges into the crypto world. We’re starting with Bitcoin and Ethereum but have even more exciting plans for Australian investors”.

The net asset value of EBTC and EETH units is calculated by multiplying the coin entitlement of every unit by the price of underlying cryptocurrency as measured by CryptoCompare at 3pm Central European Time, converted into Australian dollars.

The post ETF Securities to launch Australia’s first Bitcoin and Ethereum ETFs appeared first on AdviserVoice.

Kanish Chugh

Gold has reconfirmed its role as a safe haven holding for investors in 2022, rising out of the range-bound position it was stuck in for much of 2021 as investors looked for a safe haven in response to the Russian invasion of Ukraine and other global tensions.

Another factor in gold’s recent rise is rising inflation, which is no longer seen as a transitory effect of the post-COVID recovery.

At its current level of around A$2,689 an ounce, gold has gained around 18.6% since its 12-month low in March last year and around 5.3% since it started to climb year to date (28 Feb).

ETF Securities’ Physical Gold ETF (ASX Code GOLD), which is backed by physical gold, returned 5.23 per cent over year to date (as at 28 Feb, 2022).

ETF Securities Head of Distribution, Kanish Chugh, says: “Disruptive geopolitical events usually damage shares and bonds. When turmoil strikes, investors flee risk. The value of bonds and shares are determined by what they’ll do in the future, or by their future cash flows. When investors worry about the future, they naturally ditch assets whose value derives from it.”

Gold is different, often thriving during periods of political or economic unrest. Some recent examples of when gold outperformed shares and bonds include the 9/11 attacks in the United States, Brexit and the onset of COVID-19.

For 30 years, Australian dollar gold has had a negative correlation of -0.36 to international equities like the S&P 500 and a negative correlation of -0.23 to domestic Australian equities like the All Ords. When equities suffer drawdowns, gold historically has held its value more.

Chugh says: “There are good reasons why gold does this. It has a proven history as a safe haven asset. More fundamentally, gold has no cash flows, unlike shares, bonds or property. It cannot be valued based on future cash flows.”

The Russian invasion of Ukraine has triggered another decoupling of gold from other assets.

On the inflation front, commentary has shifted from seeing higher inflation as a transitory effect of the post-COVID recovery to accepting that it is a longer-term shift. The US consumer price index hit 7% in December.

Chugh says: “Higher inflation has historically supported gold. According to the World Gold Council, gold performs best when inflation is above 3%. When inflation rises, the value of paper money declines.

“Gold is known for being unpredictable. For some investors, this is a strength, as it helps ensure gold is an effective diversifier. And as we enter the new year, wearier, and with more dangers lurking, gold could continue providing an important source of diversification in investors’ portfolios.”

Gold is not just an asset for crises.

Since ETFS Physical Gold was launched in 2003, it has returned an average of 8.1% a year and over the past five years it has returned an average of 9.3% a year.

“Asset allocation analysis suggests that adding 2% to 5% of gold to a portfolio can improve performance and boost risk-adjusted returns on a long-term basis. This is because gold has shown consistently low levels of correlation with stocks and bonds over the long term, which means that the addition of gold to a portfolio is often able to improve risk-adjusted returns by adding diversification,” adds Chugh.

The post Gold remains the all-purpose defensive asset appeared first on AdviserVoice.

Kanish Chugh

The cryptocurrency market passed several important milestones in 2021, as corporate and institutional engagement with the sector deepened, crypto market infrastructure grew more robust, financial regulators started to take the emergence of blockchain-based decentralised finance (DeFi) seriously and non-fungible token (NFT) applications expanded rapidly.

ETF Securities Head of Distribution, Kanish Chugh, says: “On the same day in February that Tesla announced it had invested US$1.5 billion in Bitcoin, the Federal Reserve of St Louis published a paper on DeFi that pointed to the potential benefits of financial infrastructure built on the Ethereum blockchain.”

Chugh says that was just the start of a momentous year for cryptocurrency. Morgan Stanley became the first US bank to offer Bitcoin exposure when it authorised its 16,000 advisers to make it available to wealth management clients.

The European Investment Bank raised €100 million with an issue of two-year bond tokens (or digital notes) on Ethereum

Another milestone was the listing of cryptocurrency exchange operator Coinbase on the Nasdaq Exchange. The company had a US$100 billion market capitalisation at listing, underlining the value that the broader investment community now sees in the crypto market and its leading participants.

One of the more surprising developments was the decision of the government of El Salvador in September to accept Bitcoin as legal tender.

In its review of market developments in 2021, crypto specialist investment manager 21Shares, ETF Securities’ partner in developing cryptocurrency investment opportunities, said increasing institutional engagement and price expectations led the market to become overleveraged and triggered a couple of big corrections. Another contributor to volatility was the Chinese Government’s crackdown in Bitcoin mining and trading.

But 21Shares said that, overall, the year’s positive developments outweighed the uncertainty and volatility, pointing to strong expectation for the current year and beyond.

21Shares are optimistic about the future of this space because of the pace of innovation and the financial support entrepreneurs are receiving from venture capital (VC) firms and from a crowdsourced network of talents and resources. A good indication of this new era is the amount of VC investment in the industry, which increased 300% last year.

21Shares is forecasting that the rate of adoption of DeFi applications will pick up in 2022. Decentralised finance is a blockchain-based financial infrastructure built on smart contract platforms, replicating traditional financial services in what is aimed to be a more open and transparent way, bypassing intermediaries and centralised institutions.

In the NFT market, 21Shares says the wide acceptance of crypto-native art, music and games has given the industry a new profile and attracted a large cohort of creative talent. It says new marketplaces are emerging in this sector, including Fractional, which allows owners of NFTs to sell a fraction of their artwork at an affordable price.

21 Shares also expects to see greater interoperability across blockchains in the year ahead, improving user experience and unlocking a range of new services.

The post Cryptocurrency 2022: a year of extraordinary development in 2021 sets up great expectations for the year ahead appeared first on AdviserVoice.

Kanish Chugh

ETF Securities’ ETFS Morningstar Global Technology ETF (ASX Code: TECH) has been upgraded to ‘Highly Recommended’ by Lonsec.

Lonsec says the fund is an efficient way for investors to gain exposure to the developed markets information technology sector, which is under-represented in the Australian equity market.

It says TECH’s underlying index selection process is managed by a large and experienced equity research team with a disciplined process. The fund tracks the Morningstar Developed Markets Technology Moat Focus Index, with stock selections based on Morningstar’s research.

This structure – a rules-based equal weighted global equity index – combines elements of passive and active investing, which Lonsec says is offered at “a competitive management fee relative to similar global equity technology thematic ETFs.”

TECH has a concentrated portfolio of 25 to 50 stocks (currently 34), with top holdings including US cyber security company Palo Alto Networks, Israeli data security and surveillance company Nice Ltd, French-Italian electronics manufacturer STMicroelectronics NV, Japanese electronics manufacturer Murata Manufacturing Co and US cloud enterprise solutions provider ServiceNow Inc.

It has produced an average return of 26.8% a year since inception in April 2017 after adjusting for costs and fees. While the MSCI World Index has grown by 14.5% a year over the same period. Over the 12 months to the end of September, the fund returned 32.5%, compared with 27.8% for the MSCI.

ETF Securities Head of Distribution Kanish Chugh says: “These returns are driven by Morningstar’s focus on attractive pricing relative to fair value and sustainable growth.”

“We have seen a growing usage of TECH in portfolios as a proxy for accessing some of the thematics like cloud and semiconductors for a diversified play. This ETF offers a a semi-active approach which has an obvious appeal for investors. The increased demand for TECH has also been driven by investment professionals who are adding this ETF in their model portfolios,” Chugh says.

As at 21^st October 2021, TECH reported Year To Date inflows of $114.3 million.

Lonsec says Morningstar’s MOAT process is a well-known investment strategy that has delivered strong investment performance. It is based on “analytical rigour delivered in a consistent manner”, aimed at identifying companies with a sustainable competitive advantage.

The research house says ETF Securities is a pioneer in specialist ETF investments, with the depth to manage and structure ETFs effectively and a proven track record of successfully running index strategies.

The post ETF Securities’ TECH ETF ‘Highly Recommended’ by Lonsec appeared first on AdviserVoice.

Kanish Chugh

The marriage of financial services and technology – fintech – has been a huge source of business innovation in recent years, creating many highly successful disruptors. With the rise of Afterpay, Australians have had a front row seat of the disruptive potential.

Now leading ETF provider, ETF Securities, has launched an exchange traded fund that gives investors access to the major trends in fintech.

Launched today on Chi-X , as Australia’s first Fintech ETF, the ETFS Fintech & Blockchain ETF (Exchange Code: FTEC) invests in a portfolio of 75 developed market stocks chosen to reflect several sub-themes in the growing fintech sector.

These include decentralised finance; digital payments and point of sale; payments processing; financial data provider and analyser; finance and tax software; trading and capital markets; and crowdfunding and peer-to-peer lending.

Decentralised finance, using blockchain technology, is the strategy’s key theme. Up to 20 stocks of the 75 stock portfolio can be blockchain companies.

ETF Securities Head of Distribution Kanish Chugh says: “This is an exciting growth period for the ETF sector in Australia as investors look for varied exposures to investment megatrends, led clearly by the innovation in technology sector. We have seen a lot of fintech disruption already in the form of digital wallets, robo-advice, instant international money transfers and free share trading.

“With blockchain adoption looming, the world steadily turning cashless and the global payments infrastructure becoming standardised, there is much disruption to come.

“The financial services industry has the strongest expected uptake of blockchain of any industry. Cryptocurrencies have shone a spotlight on blockchain and its potential, which extends to potential uses such as the ‘tokenisation’ of assets and ‘smart contracts’. Other major fintech trends include wealth moving online, the rise of alternative credit and big data.

“We hope this ETF will meet the growing demand from investors who are seeking exposures to these trends,” says Chugh.

Chi-X, has a growing list of active managed ETFs and listed managed funds. The launch of FTEC marks the inclusion of first passive ETF on Chi-X.

Chi-X Australia Chief Executive Vic Jokovic says: “Chi-X is excited to partner with ETF Securities to launch FTEC. This is a significant product for Australian financial markets, and we’re pleased that ETF Securities selected Chi-X to provide Australians with the opportunity to invest in the cutting edge technologies underpinning the next phase of innovation in financial services.”

FTEC will track the performance of the Indxx Developed Markets Fintech and DeFi Index. For inclusion in the Index, companies must have market capitalisation of more than US$500 million.

Some of the companies in the FTEC portfolio include payments companies Visa, PayPal and Square, which are all heavily involved in the move to cashless payments, the growth of e-commerce and the application of big data to payments.

Accounting software company Xero, which is a world leader in the transition of accounting to the cloud, and Black Knight, a US company that is automating mortgage processing, are also in the portfolio.

The post ETF Securities taps the fintech revolution appeared first on AdviserVoice.