Exchange Traded Funds May 2009

Slides:



Advertisements
Similar presentations
Hedge fund flows on pace to nearly double 2012
Advertisements

Investment Basics A Guide to Your Investment Options Brian Doughney, CFP® Wealth Management Senior Manager.
CHAPTER 4: INVESTMENT COMPANIES.  Definition: financial intermediaries that collect funds from individual investors and invest those funds in a potentially.
Vanguard Investments Canada Inc. Put ETFs to work for your clients For Financial Advisor Use Only. DO NOT DISTRIBUTE TO INVESTORS OR PROSPECTIVE INVESTORS.
Economic and Market Recap April Equity and Fixed Income Markets IndexMar (%)QTR (%)2014 (%)2013 (%)2012 (%)2011 (%)2010 (%) S&P/TSX Composite.
Copyright © 2003 South-Western/Thomson Learning All rights reserved. Chapter 6 Investment Companies.
Investment Companies Economics 71a: Spring 2007 Mayo 17, Malkiel 8 Lecture 4.8.
Growth of Exchange Traded Funds
McGraw-Hill/Irwin © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved. Mutual Funds and Other Investment Companies CHAPTER 4.
13 Investing in Mutual Funds Mutual Fund = an investment vehicle offered by investment companies to those who wish to: –Pool money –Buy stocks, bonds,
International Portfolio Investment
McGraw-Hill/Irwin Copyright © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved. Mutual Funds and Other Investment Companies CHAPTER 4.
Vicentiu Covrig 1 Mutual funds Mutual funds (see Ch. 16 Hirschey and Nofsinger)
How Stock Portfolios Create Excess Return Market Timing Strategic Themes Security Selection Contributing Factor Modest Low Impact on Portfolio Return Importance.
ETF Essentials Inside the ETF revolution
Satrix ETF’s Make a Million (!) July/August 2009.
ETFs in Canada October 24, Disclaimer This document is for information purposes only and is not an invitation to purchase securities listed on.
Copyright© JSE Limited February 2010 The South African and Global Landscape of Exchange Traded Funds (ETFs) 1.
Portfolio Management Group 1 Building Portfolios Using Exchange Traded Funds Nancy Hartsock Financial Advisor Financial Planning Specialist Smith Barney.
Certificate for Introduction to Securities & Investment (Cert.ISI) Unit 1 Lesson 45:  Exchange-traded funds (ETFs)  Main characteristics of ETFs  How.
Vicentiu Covrig 1 Mutual funds Mutual funds. Vicentiu Covrig 2 Diversification Professional management Low capital requirement Reduced transaction costs.
ETF Sales & Trading Toronto | Montreal | Exchange Traded Funds Structure and Market Making September 2014.
State of the Nation for Exchange Traded Funds (ETFs) Trevor Cummings Vice President.
Investments Vicentiu Covrig 1 Mutual Funds ( chapter 4)
Martin Arnold Director - Research Analyst ETF Securities.
Portfolio Management Grenoble Ecole de Management.
Power Income Portfolio For more information call:
For Dealer Use Only. 2 Key Features Tactical Asset Allocation Benefits of Indexing, Convenience of ETFs Experienced Portfolio Management Low Cost, Managed.
Baring Asset Management Limited 155 Bishopsgate, London EC2M 3XY Tel+44 (0) Fax+44 (0) Authorised and regulated.
Name of Fund Spring 2013 (Managing Partner) CONFIDENTIAL Property of (insert company name) Emblem/ Logo.
Chapter 14 Investing in Mutual Funds Copyright © 2012 Pearson Canada Inc
© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 19 SLIDE Saving and Investment Planning Stock.
Maximising Investment Opportunities: releasing value from estates Barclays Private Equity 15 th May 2008.
Equity income: a niche asset class Neil Margolis, Portfolio Manager May 2007.
The Montgomery Institute Investment Proposal December 2013.
For Dealer Use Only. 2 Key Features Tactical Asset Allocation Benefits of Indexing, Convenience of ETFs Experienced Portfolio Management Low Cost, Managed.
ETF’s An ETF is a security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange. ETFs experience.
Vicentiu Covrig 1 Indirect Investing Indirect Investing (see Ch. 3 Jones)
©2007, The McGraw-Hill Companies, All Rights Reserved 17-1 McGraw-Hill/Irwin Chapter Seventeen Mutual Funds.
Indirect Investing Chapter 3
Mutual Funds and Hedge Funds Chapter 4 Risk Management and Financial Institutions 2e, Chapter 4, Copyright © John C. Hull
Satch Chada, Structured & Alternatives Solutions, Merrill Lynch Michael Forstl, Structured Products Consulting Group, Nuveen Investments April 16, 2008.
Prudential Balanced Fund (PRUBF1) November 2011 Fixed information Licensed Date: 5 October 2006 Listing date: 4 December 2006 Base Currency: VND Tenure:
PROFESSIONAL ASSET MANAGEMENT. Basic Categories Private Management: Clients each have a separate account {popular with institutions} Investor 1 Investor.
Arihant Financial Services Tejas Shah
INVESTMENTS Lecture 11 Investment Companies and ETFs.
Mutual Funds and Hedge Funds
Copyright © 2003 South-Western/Thomson Learning All rights reserved. Chapter 8 Investment Companies.
Place Client Logo Here Oil Market Outlook Paul Horsnell Head of Commodities Research, Barclays Capital Intertanko Singapore Tanker Event 30 March 2006.
Nifty BeES. Only Mutual Fund in India with exclusive focus on quantitative and passive investment management Monitored by Securities and Exchange Board.
Mutual Funds and Other Investment Companies
BGI / CFA Institute Seminar The Success of Exchange Traded Products (ETF/ETN) despite market downturn A review of usage, exposures, risks and applications.
INVESTMENTS | BODIE, KANE, MARCUS Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin CHAPTER 4 Mutual Funds and.
3-1 Chapter 3 Charles P. Jones, Investments: Analysis and Management, Tenth Edition, John Wiley & Sons Prepared by G.D. Koppenhaver, Iowa State University.
MUTUAL FUNDS 101 WHAT THEY ARE AND HOW THEY WORK MARCH 2013.
Chapter 11 Investment Companies. Closed-end Open-end (commonly called a mutual fund)
Mutual funds (see Ch. 16 Hirschey and Nofsinger)
Aberdeen’s Stewardship Capabilities
GRAND LODGE OF WISCONSIN
‘Diversified Growth Funds’ have become the go-to strategy
How Do ETFs Fit into investment portfolios?
4 Mutual Funds and Other Investment Companies Bodie, Kane, and Marcus
LMEprecious – London’s Gold and Silver futures
Personal Finance Mutual Funds
TREASURY ORGANIZATION AND STRUCTURE
TREASURY ORGANIZATION AND STRUCTURE
Mutual Funds and Hedge Funds
Pamplona Credit Opportunities Fund
Market linked debentures
Global diversified ETF fund
Presentation transcript:

Exchange Traded Funds May 2009 Deborah Fuhr, Managing Director Global Head of ETF Research & Implementation Strategy Phone: +44 20 7668 4276 Email: Deborah.Fuhr@barclaysglobal.com NOT FOR DISTRIBUTION INTO THE US OR CANADA

ETFs Product Overview Are open-ended index tracking funds1 ETFs are managed by asset managers ETFs are bought and sold through brokers Trade on the exchange like any other stock Settle like any other share on the exchange Can be purchased, cleared and held in brokerage or custodial account Can go long or short Lendable & Marginable Transparent underlying portfolios available daily Real Time indicative NAV ETFs will price around their NAV due to the creation/redemption process 1 Note a few active funds which disclose their portfolios daily have been approved and listed

ETFs Product Overview Finally, the Who of Sector Investing ETFs Are liquid. Liquidity reflects liquidity of underlying basket of shares not the trading volume of the ETF – as long as trading with a broker which is an authorised participant Creation/redemption process makes ETFS as liquid as underlying shares Unique structure for brokers who enter into legal agreements with the ETF asset managers to be Authorized Participants, Creation - Redemption agents or Liquidity Providers Portfolio of securities can be exchanged for “Creation Units” “Creation Units” can be redeemed for underlying portfolio Creation/redemption (“in kind”) feature allows for arbitrage and results in the fund trading near Net Asset Value Finally, the Who of Sector Investing The point of this slide is that whatever type of client you cover, it should be represented by one of these bullet points. If it isn’t, please let me know, and it will be; The only bullet point that I’ll single out is the last one: even Active Stock Pickers use sector investing - we’ll see why in just a moment when we examine one of the case studies Just so no-one is in any doubt, all our experience to date points to the fact that Sector Investing covers every part of the Client and Mandate spectrum

End of April 2009: ETFs Listed Globally • At the end of April 2009 the Global ETF industry had 1,678 ETFs with 3,009 listings, assets of $706.87 billion, from 90 providers on 43 exchanges around the world. • YTD assets have fallen by 0.5% which is less than the 3.0% fall in the MSCI World index in USD terms. • YTD the number of ETFs increased by 5.6% with 109 new ETFs launched. • YTD the average daily trading volume in USD decreased by 5.0% to US$76.6 Billion. • Standard & Poors (S&P) ranks 1st with US$173.86 Bn in ETF AUM tied to their benchmarks, while MSCI ranks 2nd with US$146.51 Bn, followed by Barclays Capital in 3rd with US$61.47 Bn. • There are currently plans to launch 756 new ETFs. • Globally, net sales of mutual funds (excluding ETFs) were US$117.4 Bn, while net sales of ETFs were US$2.8 Bn during the first two months of 2009 according to Strategic Insight. • Additionally, there were 301 other ETPs (Exchange Traded Products) with assets of US$72.95 Bn from 32 providers on 18 exchanges. Combined, there were 1,979 products with assets of US$779.81 Bn from 108 providers on 45 exchanges around the world. Data as of end April 2009 Source: Global ETF Research & Implementation Strategy Team, Barclays Global Investors, Bloomberg

ETF/ETP Tool Box 5 Equity Fixed Income Cash Alternatives Currency Global Capitalisation (Large, Mid, Small…) Sectors Broad Markets Emerging Markets Countries Inverse / Leveraged Styles Active Dividend Fundamental Infrastructure Real Estate Shariah Thematic Private Equity Fixed Income Government Corporate Credit Inflation High Yield Mortgage Backed Emerging Markets Cash EONIA, SONIA Fed Funds Alternatives Hedge Funds Carbon Currency Developed Currencies Emerging Market Currencies Inverse / Leveraged Strategy (Carry, Momentum…) Commodities Broad (S&P GSCI, DJAIG, RICI, CRB…) Sub-indices (Energy, Livestock, Precious Metals, Industrial Metals, Agriculture...) Individual Commodities Based on Physically held Assets (Gold, Silver, Platinum, Palladium…) Based on Futures Based on Forwards Inverse / Leveraged 1,678 ETFs with 3,009 ETF Listings 301 other ETPs* with 562 ETP Listings Total: 1,979 Products with 3,571 Listings *Other ETPs (Exchange Traded Products) include HOLDRs (Holding Company Depository Receipts), ETCs (Exchange Traded Commodities), Exchange Traded Currency products, and Exchange Traded Notes. As of end April 2009 5

Growth in Institutional Users of ETFs Finally, the Who of Sector Investing The point of this slide is that whatever type of client you cover, it should be represented by one of these bullet points. If it isn’t, please let me know, and it will be; The only bullet point that I’ll single out is the last one: even Active Stock Pickers use sector investing - we’ll see why in just a moment when we examine one of the case studies Just so no-one is in any doubt, all our experience to date points to the fact that Sector Investing covers every part of the Client and Mandate spectrum Source: ETF Research & Implementation Strategy Team, Barclays Global Investors, Thomson Financial 6

Types of Institutional Users of ETFs Source: ETF Research & Implementation Strategy Team, Barclays Global Investors, Thomson Financial 7

Global ETF and ETP Growth Data as of end April 2009 Source: Global ETF Research & Implementation Strategy Team, Barclays Global Investors, Bloomberg

Top 25 ETF Providers around the World Ranked by AUM, as of end April 2009 Source: Global ETF Research & Implementation Strategy Team, Barclays Global Investors, Bloomberg

Global ETF Assets by Type of Exposure Data as of end April 2009 Source: Global ETF Research & Implementation Strategy Team, Barclays Global Investors, Bloomberg

Index Providers Worldwide Ranked by ETF AUM Data as of end April 2009 Source: Global ETF Research & Implementation Strategy Team, Barclays Global Investors, Bloomberg

European ETF and ETP Growth Data as of end April 2009 Source: ETF Research & Implementation Strategy Team, Barclays Global Investors, Bloomberg 12

ETF Providers in Europe Ranked by AUM, as of end April 2009 Source: Global ETF Research & Implementation Strategy Team, Barclays Global Investors, Bloomberg

Expenses of ETFs vs Open-end Mutual Funds in Europe *As at end February 2009. **Captured from Morningstar on 20 March 2009. Source: Morningstar, ETF Research and Implementation Strategy Team, Barclays Global Investors.

How Are ETFs Used? Strategic Tactical ETF broad uses: Market Exposure: Implement wide variety of investment strategies using a broad range of market exposures Directional Views: Establish broad directional market position, use long & short trades to implement market view(s) Core Satellite: Achieve strategic focus Rebalancing: Correct drift in a portfolio’s asset allocation or style Completion: Add uncorrelated instruments and/or asset classes to strategy Strategic Interim Beta : Maintain exposure to given market while searching for specific market opportunity Cash Management : Able to invest cash rapidly and cost effectively to gain desired market exposures Derivatives Alternative : Broad opportunity set of Delta 1 exposures with single line cash based settlement Exposure Management : Easily shift portfolio emphasis by adjusting exposures (e.g. duration, credit) Thematic : Implement thematic exposures (e.g. dividends, alternatives) Tactical ETF broad uses: Strategic – longer term allocations into difficult-to-access markets or completion for non-specialty areas Tactical – Change risk or market exposure quickly and with exchange flexibility (size/speed) as well maintaining broad market exposure as whilst searching for alpha generating positions Broader drivers of demand: Purification of alpha and beta strategies Precise risk management Proliferation of market exposures beyond existing listed derivatives selection pool.

Why Are ETFs Used? Transparency Liquidity Diversification Flexibility Investors know the ETF composition at any given time ETFs offer two sources of liquidity Traditional liquidity measured by secondary market trading volume The liquidity of the underlying via the creation and redemption process Liquidity ETFs provide immediate exposure to a basket or group of securities for instant diversification Broad range of asset classes including equities, bonds, commodities, Investment Themes etc Diversification ETFs are listed on exchanges and can be traded at any time the market is open Pricing is continuous throughout the day Flexibility ETFs offer a cost-effective route to diversified market exposure The average total expense ratio (TER) for equity ETFs in Europe is 37 bps versus 87 bps (per annum) for the average equity index tracking fund and 175 bps (per annum) for average active equity fund1 Cost Effectiveness Transparency: real time iNAVs Liquidity: 2 sources of liquidity Creation/redemptions point: multi-dealer markets ETFs-price discovery mechanism Securities Lending ETF units and underlying assets can be lent out to potentially offset holding costs 1. Morningstar (March 2009)

Core-Satellite: ETFs Can be Used in the Core Portfolio, As Well As In the Satellite ETF(s) in the Core : A broad market index (DJ Euro Stoxx 50, MSCI World, iBoxx Government Bond) Exposure to diversified baskets of securities Optimized Core: sector, style or country indices ETF in the Satellite : Concentrated, focused ETFs: Sector and style Individual countries and regions Alternative asset class ETF(s) Active Strategy 3 Active Strategy 1 Active Strategy 2 Portfolio Core: Broad benchmark exposures Easily adjusted for TAA Can be optimized ETF Satellite ETF Satellite ETF Satellite

Fixed Income Index Guide Source: Fixed Income Index Guide, Barclays Global Investors, Bloomberg.

Commodity Index Comparison Rogers International Commodity Index S&P GSCI Dow Jones – AIG Commodity Index Reuters Jefferies CRB Index Source: ETF Research & Implementation Strategy Team, Barclays Global Investors, S&P, Dow Jones, Lyxor, RICI Handbook 2009.

Structures of ETFs and ETNs General product features common to ETFs and ETNs are: Exchange traded Easy accessible investment vehicles for a wide range of asset classes Low Tracking Error Exposure to market risk of the asset class / index Specific features of in-specie ETFs are: Fund holds underlying securities in a ring-fenced separate account exposing the investor to no counterparty risk of the issuer. In the case of failure of the fund issuer, the investor has recourse directly to the pool of underlying shares or bonds. High transparency with regards to the holdings of the fund Opportunity for additional income to further reduce costs (i.e. through securities lending inside the ETF) is better than for other ETPs as in-specie ETFs hold index securities Multiple market makers can create and redeem new shares with the fund company promoting a highly competitive pricing, both on and off exchange ("multi dealer model") Specific features of swap-based ETFs are: Fund holds a basket of securities (which can be different from the underlying index securities) and an index swap. The swap counterparty risk is limited to a maximum of 10% of the value of the fund under UCITS rules. The investor has recourse to the basket of securities in the case of failure of the fund issuer. Structure allows compliance with UCITS rules on more indices than cash-based ETFs (i.e. commodity ETFs) Sometimes tax advantages possible (i.e. avoidance of stamp tax) While multiple market makers can price swap-based ETFs on and off exchange, every creation and redemption with the fund company generally involves a single swap counterparty Specific features of ETNs are: Investor owns a note, exposing the investor to the counterparty risk of the note issuer which is sometimes mitigated through collateral or guarantees More flexibility to issue products, i.e. on single commodities and currencies Possible access to structured product type solutions

ETF Landscape Reports ETF Landscape Quarterly Global Handbook includes the price tickers, index tickers, annual total expense ratio (TER), dividend policy, fund structure, assets under management (AUM) as well as the websites for the providers, exchanges, and index providers to assist in comparing the various products that are currently available. ETF Landscape Monthly Industry Review provides an up-to-date snapshot of the latest key industry trends with a view to helping professional investors make more informed decisions Sign up at no cost by sending your business card details to: ETFresearch@barclaysglobal.com

Disclaimer Regulatory information Barclays Global Investors Limited (“BGIL”), which is authorised and regulated by the Financial Services Authority in the United Kingdom, has issued this document for access by professional clients and for information purposes only. This document or any portion hereof may not be reprinted, sold or redistributed without authorisation from BGIL. This communication is being made available to persons who are investment professionals as that term is defined in Article 19 of the Financial Services and Markets Act 2000 (Financial Promotion Order) 2005 or its equivalent under any other applicable law or regulation in the relevant jurisdiction. It is directed at persons who have professional experience in matters relating to investments. This document is an independent market commentary document based on publicly available information and is produced by the ETF Research & Implementation Strategy team. Specifically, this is not marketing nor is it an offer to buy or sell any security or to participate in any trading strategy. Affiliated companies of BGIL may make markets in the securities of ETFs and may provide ETFs. Further, BGIL and/or its affiliated companies and/or their employees may from time to time hold shares or holdings in the underlying shares of, or options on, any security of ETFs and may as principle or agent buy securities in ETFs. This document does not provide investment advice and the information contained within should not be relied upon in assessing whether or not to invest in the products mentioned. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. The securities discussed in this commentary may not be suitable for all investors. BGIL recommends that investors independently evaluate each issuer, security or instrument discussed in this publication and encourages investors to seek the advice of a financial adviser. The appropriateness of a particular investment or strategy will depend on an investor's individual circumstances and objectives. The value of and income from any investment may go up or down and an investor may not get back the amount invested. The value of the investment involving exposure to foreign currencies can be affected by exchange rate movements. We also remind you that the levels and bases of, and reliefs from, taxation can change and is dependent upon individual circumstances. Although BGIL endeavours to update and ensure the accuracy of the content of this document, BGIL does not warrant or guarantee its accuracy or correctness. Despite the exercise of all due care, some information in this document may have changed since publication. Investors should obtain and read the ETF prospectuses from ETF managers and confirm any relevant information with ETF managers before investing. Neither BGIL, nor any affiliate, nor any of their respective officers, directors, partners, or employees accepts any liability whatsoever for any direct or consequential loss arising from any use of this publication or its contents. The trademarks and service marks contained herein are the property of their respective owners. Third-party data providers make no warranties or representations of any kind relating to the accuracy, completeness, or timeliness of the data they provide and shall not have liability for any damages of any kind relating to such data. © 2009 Barclays Global Investors Limited. Registered Company No. 00796793. All rights reserved. Calls may be monitored or recorded. 812850