• Andrea Murray

Global ETFs Continue Their Good News Trend but is There an Underlying Threat?


More record ETF growth numbers released this week with a lot of talk around not only the success of ETFs so far this year but the number of asset managers who are joining the stampede. Model portfolios were also the focus last week and their underrated reputation as well as the possible threat of direct indexing to the ETF world. Read on for more top ETF highlights from this week.


Fund Launches and Updates

EUROPE

DWS has launched two corporate green bond ETFs designed as Article 9 strategies under the EU’s Sustainable Finance Disclosure Regulation. The Xtrackers EUR Corporate Green Bond Ucits ETF and the Xtrackers USD Corporate Green Bond Ucits ETF are listed on the Deutsche Borse and have an annual fee of 0.25%. Link


Invesco expanded its fixed income range with the launch of a high yield bond ESG ETF. The Invesco USD High Yield Corporate Bond ESG UCITS ETF (UHYD) is listed on the London Stock Exchange with a total expense ratio of 0.25%. Link

Invesco also launched an emerging markets ESG-screened ETF. The Invesco MSCI Emerging Markets ESG Universal Screened UCITS ETF will offer investors access to large- and mid-cap stocks across 26 nations and has an ongoing charge of 0.19%. Link


WisdomTree has launched a commodities ex-agriculture ETF that offers exposure to energy, industrial metals and precious metals. The WisdomTree Enhanced Commodity ex-Agriculture UCITS ETF (EXAG) is listed on Deutsche Boerse with a management expense ratio of 0.35%. Link


THE AMERICAS

Goldman Sachs launched its first actively managed ETF, the Goldman Sachs Future Planet Equity ETF, which will target climate-friendly companies. Goldman plans to invest some of its own capital in the ETF will carry an annual total expense ratio of 75 basis points. Link


The full list of ETFs launched last week in the U.S.: Link




In South America, Blockchain investment firm QR Capital is to list an Ethereum ETF on Brazil’s stock exchange after winning approval from the markets regulator. The ETF will list on the Sao Paulo-based B3 exchange under the ticker QETH11.The ETF will use institutional custody provided by crypto exchange Gemini and is Latin America’s first Ethereum ETF. Link


ASIA-PACIFIC

Value Partners Asset Management Malaysia has launched the VP-DJ Shariah China A-Shares 100 ETF, the world’s first A-share ETF that tracks the performance of the Dow Jones Islamic Market China A-Shares 100 Index. The product is also Value Partners Malaysia’s first ETF to be listed on the local bourse. Link


Lion Global Investors and OCBC Securities will be listing a new China-focused ETF on Aug 2. The Lion-OCBC Securities China Leaders ETF tracks the Hang Seng Stock Connect China 80 Index, which comprises the top 80 largest Stock Connect eligible Chinese companies listed in either Shanghai, Shenzhen or Hong Kong by market capitalisation. Link


Flows


Flows into ETFs are already on track to outpace a record 2020, totalling $659bn in the first six months of 2021 compared with $767bn for all of last year, according to ETFGI. Global equity-based ETFs have already eclipsed last year’s intake, attracting net flows of $459bn as of June 30, exceeding $366bn and $283bn for 2020 and 2019, respectively.


Hot areas of long-term growth include expanding investor activity in fixed income, a growing preference for model portfolios. Assets held in the US model portfolio market will more than double from $4tn over the next five years to $10tn, according to BlackRock. It expects half of the new investor inflow for its US ETF arm to come from model portfolios in the future, up from around a third from in 2020. State Street, the third largest ETF provider globally, is also expanding its model portfolios business. It teamed up with Natixis, the French asset manager, to offer model portfolios to US financial advisers via Bank of America’s platform in late 2019. Link


The U.S. and Europe are not the only regions to enjoy record ETF flows this year. In what was a milestone first half-year, Australia’s ETF industry broke the $100 billion mark in March 2021 and grew 22% for the half, to end the financial year at $115.7B, an all-time high. Net new money for half year was +$8.8 billion (6% more growth compared to $8.3 billion in the first half of 2020) across 266 Exchange Traded Products trading on the ASX and Chi-X. Link


Noteworthy


21Shares AG announced an exclusive partnership with the largest German online retail platform, Comdirect effective July 13th. In this innovative partnership, 21Shares was retained as the sole provider of physically-backed crypto ETPs to the online broker’s savings plan program. Eleven of 21Shares’s ETP offerings currently listed in Germany are available on the Comdirect platform at zero commissions. Link

SIX is acquiring ULTUMUS LTD, the international London-based index and ETF data specialist. The acquisition aims at enhancing SIX’s data offering and to support its overall strategy to bring new data to its clients in a fast growing market, making trading in ETFs more transparent and efficient for customers. Link


The largest Bitcoin fund is ramping up its ETF ambitions through a new agreement with Bank of New York Mellon Corp. Grayscale Investments LLC will use BNY Mellon for exchange-traded fund services upon the hoped-for conversion of its $21.5 billion Grayscale Bitcoin Trust. Link


Fund shops have pumped out ETFs at a breakneck pace so far this year in an attempt to capture a share of the massive inflows into the products. Exactly 200 ETFs launched in the US during the first half of 2021, up from 131 during the same period last year, according to data from CFRA Research. Link




Vanguard has made the first acquisition in its 46-year history with a deal for Just Invest, a US start-up that builds bespoke portfolios for individual investors, i.e., direct indexing. Vanguard’s acquisition follows similar deals by its rivals BlackRock and JPMorgan. Link


U.S. money managers couldn’t stop the march toward ETFs, so they decided to join it instead. Now it’s more like a stampede. ETFs are on the brink of luring more money in seven months than in any calendar year on record. At 488.5 billion and counting, they’ll likely break the $497 billion full-year record set in 2020 in weeks, possibly days. Almost all of the 25 largest asset managers in the U.S. offer an ETF or plan to do so, according to Bloomberg Intelligence. Capital Group is the biggest without one — and it intends to join the club before long.

“It will be paramount that every existing asset manager have a viable ETF strategy moving forward,” said Nate Geraci, president of the ETF Store, an advisory firm. “The asset managers just now joining the ETF party are late, but they can still get in the door. The longer this goes on, the more difficult it is.”

The number of active fund launches is accelerating dramatically, and with 142 debuts versus 65 for passive products this will be the first year they outnumber their index-linked rivals. Link




Other noteworthy items:


Interesting FT article this morning reflecting on the 50-year history of index funds. Proof that some did not like the new entrant back then: “An anonymous mutual fund manager offered a complaint back in 1973: “If people start believing this random-walk garbage and switch to index funds, a lot of $80,000‑a‑year portfolio managers and analysts will be replaced by $16,000‑a‑year computer clerks. It just can’t happen.” Link


SIX announced that GlobalX, has joined SIX as a new ETF issuer today. According to an official announcement shared by SIX, Global X has joined the platform as the second new issuer of ETFs in 2021. With the joining of two funds by Global X, SIX now has a total of 1,539 ETFs, listed by 27 issuers. Link


Record Cash Pours Into $4 Billion Global X U.S. Infrastructure Development (PAVE) ETF as investors get bullish about President Joe Biden’s infrastructure plan. Link


Iconic Holding is a global crypto asset management group and is aiming for a one stop shop status in crypto ETPs. The firm, under its Iconic Funds subsidiary, recently launched its first physically backed bitcoin ETP on the Frankfurt Stock Exchange and on the Swiss Stock Exchange on May 28, 2021. Link


SEC Further Delays WisdomTree Bitcoin ETF Decision to Autumn Link


Broadridge estimates that the current market size for model portfolios holding ETFs, stocks and mutual funds is around $4 trillion, and that could potentially go to $10 trillion in five years. WisdomTree talks about their 12 model portfolios and how this is a significant but underrated trend. Link


S&P Dow Jones Indices has expanded its digital asset benchmark range with five cryptocurrency basket indices. The flagship of the new range, the S&P Cryptocurrency Broad Digital Market index, provides exposure to more than 250 coins. Link


In case you missed it…

It’s summertime finally here in London and finally at a temperature where ice cream is on many minds. What is the most unique flavour you have tried? I bet it can’t top this one – Kraft Macaroni & Cheese flavour which is on exclusive release in Brooklyn, NY and actually uses the blindingly fluorescent orange dry packet of cheese in the mixture. Two iconic childhood loves in one dessert. What’s next? Sunday Roast Swirl? Link


Disclosure: This newsletter consists of curated articles which we have read across the globe and while we can't include every ETF related news item, we would like to hear your thoughts on something we may have missed that you feel is important. All information is sourced from 3rd party media outlets, not our own material and should also not be viewed as financial advice.

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