State Street to Create Digital Currency Platform
Although a short week, there was certainly no lack of major ETF news. In Europe, it was impossible to miss the headlines of Amundi’s announcement to acquire Lyxor’s asset management arm – no shocker there. And globally, State Street announced a partnership with Pure Digital to create a digital currency platform. Read on for more top ETF highlights from this week.
Fund Launches and Updates
BlackRock has launched Europe’s first euro-denominated emerging markets government bond ETF. The iShares J.P. Morgan € EM Bond UCITS ETF (EB3M) is listed on the Deutsche Boerse with a total expense ratio (TER) of 0.35%. Link
Invesco has expanded its range with the launch of Europe’s second S&P 500 equal weight ETF. The Invesco S&P 500 Equal Weight UCITS ETF (SPED) is listed on the London Stock Exchange and Deutsche Boerse with a total expense ratio (TER) of 0.20%, the cheapest ETF in Europe with this exposure. Link
UBS Asset Management has launched sterling-hedged and US dollar-hedged versions of its liquid corporate bond ESG ETF. The sterling-hedged UBS ETF Bloomberg Barclays MSCI Global Liquid Corporates Sustainable UCITS ETF (GLCO) is listed on the London Stock Exchange, while the US dollar-hedged UBS ETF Bloomberg Barclays MSCI Global Liquid Corporates Sustainable UCITS ETF (CORPS) is listed on the SIX Swiss Exchange. Both products have total expense ratios (TERs) of 0.25%. Link
Two of the largest players in the digital asset space are combining forces to launch a bitcoin ETF. Jersey-based CoinShares has partnered with Canadian firm 3iQ on the issuance of the 3iQ CoinShares Bitcoin ETF. The fund will be listed on the Toronto Stock Exchange with 3iQ acting as the fund manager. Link
In the U.S., Institutional investors have put $1.25bn into a new US fund aimed at identifying the winners of the transition to a low-carbon world, making it the largest exchange traded fund launch ever and underscoring the surging demand for ESG products. The BlackRock US Carbon Transition Readiness fund began trading on Thursday, eclipsing the previous largest ETF listing, the iShares ESG MSCI USA Leaders fund, which debuted with $850m in May 2019. Link
Schwab announced plans for its first foray into the ESG ETF space with a recent filing with the Securities and Exchange Commission for the Schwab Ariel ESG ETF Strategic ETF. Link
Global ETP flows ramped up in Q1, setting a new record: more than $335B was added globally, surpassing the previous record of $253B set in Q4 2020.
So far this year, risk-on sentiment has favoured equity ETPs, which gathered almost $284B in Q1. Flows into fixed income ETPs enjoyed $58B of net buying in Q1 and global interest in commodities ETPs remained muted, with $5.8B of net outflows in Q1.
The UCITS ETP story followed a similar pattern to the global picture, with record-breaking net inflows of $58B in Q1 2021.
Equities led UCITS flows saw $53B of net buying and $5B of inflows in fixed income UCITS ETPs. Link
Short interest in the $14 billion iShares 20+ Year Treasury Bond exchange-traded fund (ticker TLT) has climbed to about one-fifth of the shares outstanding, the highest since early 2017. Bearish bets have risen from 7% at the start of 2021 amid the fund’s 13% year-to-date drop. Investors have pulled almost $2.6 billion from TLT so far in 2021, putting the fund on track for the worst year of outflows since its inception in 2002. Link
Amundi has announced that it entered into exclusive negotiations with Société Générale to acquire its asset management arm, Lyxor, for a total cash consideration of €825m. The transaction, which is subject to regulatory approvals is expected to be completed by February 2022. Link
The costs of switching core ETF holdings to ESG along with excess tracking error considerations are two crucial metrics for investors, according to research conducted by Flow Traders. The research, which analysed 73 of the most traded exchange-traded products in the ESG space, found ESG ETFs with exposure to European equities have higher switching costs than other developed markets. While these switching costs for European benchmarks are approximately between 12 and 26 basis points (bps), the Japanese and US markets are far cheaper with the switch to ESG ETFs costing under five bps. Meanwhile, switching costs for global ESG ETFs average around 13 bps and emerging markets unsurprisingly jumped higher to 35 bps.
State Street announced yesterday that it will partner with Pure Digital to create a "unique wholesale digital currency trading platform" aimed at institutions. Specifically, State Street's Currenex will provide the underlying trading technology for Pure Digital's "fully automated, high throughput OTC market for digital assets and cryptocurrencies with physical delivery and bank custody." Currenex previously provided market-leading technology to the FX community. Pure Digital and State Street also said they "intend to further explore the digital currency trading space," in a press release on Thursday. Link
In a video interview with ETFGI this past week, the CEO of Grayscale, the first US firm to convert a mutual fund to an ETF, discussed some of the regulatory and operational hurdles of the process. He also mentioned that converting the smaller dividend “gem” funds was “bit of a test case” and they already have paperwork filed for another conversion with their alternative energy fund which will convert to a sustainable energy ETF. The driver behind their decisions? Per Jim Atkinson , “the market has spoken pretty loudly -- investors prefer ETFs to open-end mutual funds”.
Exchange traded funds in Taiwan have seen a dramatic surge in popularity over the past year, with one in four Taiwanese investors in their 20s now holding the investment products, data from the Taiwan Depository and Clearing Corporation show. More widely, by the end of 2020, more than 15 per cent of registered investors in Taiwan, or close to 1m people, owned ETF products, a significant jump from 9 per cent in 2019 and 2 per cent in 2014. The size of the island’s onshore ETF market swelled by 135 per cent in the two years to the end of 2020 to NT$1.7tn ($60.1bn). Link
Virtu held a two-day virtual conference covering global capital markets – below are two interesting slides on the current ETF flow landscape in China and the entire APAC region.
In case you missed it…
A 121-year-old chocolate bar with royal connections has been found in the attic of a National Trust property. The chocolate bar was part of a batch commissioned by Queen Victoria and sent as a morale-booster to British troops during the Boer War.
It was found in its original wrapper and tin in a Boer War helmet case at the 15th century Oxburgh Hall in Norfolk. Anna Forrest, the National Trust's cultural heritage curator, said: "Although it no longer looks appetising and is well past its use-by date - you wouldn't want it as your Easter treat - it is still complete and a remarkable find.
Thank you for reading and have a great weekend!