The Countdown to US Crypto ETFs is on
More “lite” bitcoin ETFs began trading in the US prompting many to believe a true crypto ETF may be approved within the month. Global ETF flows are slowly starting to trickle in and more commentary from pundits on what a possible Invesco SSGA merger means. Read on for more ETF highlights from the week.
Fund Launches and Updates
EUROPE Goldman Sachs Asset Management has launched the GS Access UK Gilt 1-10 Years UCITS ETF (GBPG) which is listed on the London Stock Exchange with an expense ratio of 0.07% and a management fee of 0.25%. Link
LGIM has cut fees on its cybersecurity ETF after gathering $2.9bn assets under management since its launch in 2015. The L&G Cyber Security UCITS ETF (ISPY) has seen its total expense ratio reduced by six basis points from 0.75% to 0.69%. Link
Lyxor will be renaming the £600m Lyxor MSCI USA UCITS ETF (USAL) to the Lyxor MSCI USA ESG UCITS ETF and will also change from a synthetic to a physically-replicated ETF. As well as the index swap, USAL will see its total expense ratio more than halved from 0.25% to 0.09%. Link
Jeffrey Gundlach’s DoubleLine Capital LP is planning to launch a pair of actively managed U.S. ETFs in a first for the Los Angeles-based manager of $137 billion. The firm intends to create the DoubleLine Opportunistic Bond ETF and the DoubleLine Shiller CAPE U.S. Equities ETF, according to a Monday filing with the SEC. Link
Additional launches last week:
ETF Securities Australia has launched a new thematic equity ETF which is the country’s first to target companies involved in the global hydrogen industry. The ETFS Hydrogen ETF (HGEN AU) has been listed on the Australian Securities Exchange with an expense ratio of 0.69%. Link
European ETF flows are starting to come in as shown below.
While we wait for official US ETF flow numbers, BlackRock has been hit by large outflows from some of its best-known US fixed income ETFs this year – the iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD), iShares iBoxx $ High Yield Corporate Bond ETF (HYG) and iShares Short Treasury Bond ETF (SHV), have witnessed greater outflows than any other US bond ETFs this year, a total of $23.8bn. This is even as the sector has posted near-record net inflows of $161bn YTD. Link
The top ten monthly creates and redeems for September:
DWS has launched a new external investigation into allegations it misrepresented its ESG credentials to clients. The German asset manager has hired US law firm Sullivan & Cromwell to deal with the greenwashing claims as the SEC and German regulator BaFin continue their inquiry. Link
Two bitcoin “lite” equity ETFs have begun trading in the US and a third has been approved by the Securities and Exchange Commission. The SEC has so far refused to approve any ETFs that invest in the cryptocurrency itself, even though similar vehicles are already up and running in Sweden, Switzerland, Jersey, Germany and Canada. However, some speculate that it will approve one or more bitcoin futures ETFs following encouraging comments from Gary Gensler, chair of the SEC. Link
One of the pioneers of ETFs said traditional asset managers must embrace innovations such as direct indexing and give up on a “fantasy land” belief in a comeback for active fund management. Blake Grossman worked at BGI for more than two decades, said many asset managers were living in the past. “Outside of a few firms, the asset management industry has been resistant to change and embracing technology and innovation,” Grossman told the Financial Times.
In a recent report, Cerulli Associates said it expected direct indexing to grow at an annualised rate of more than 12 per cent over the next five years, from total assets of $362bn at the end of 2020. The consulting firm also projected direct indexing to eclipse the pace of expansion for mutual funds and ETFs and other traditional financial products. Link
The FT is coming out with more articles on the possible Invesco and SSGA deal, highlighting that while State Steet’s ETF business languishes in third place, industry watchers are asking if it might be persuaded to sell its asset management arm. On paper, combining Invesco, a distant fourth in the ranking of ETF providers, with SSGA is the type of deal that excites activist shareholders and Wall Street’s M&A machine.
Marty Flanagan, Invesco’s chief executive, knows how painful asset management mergers can be, having only just digested the $5.7bn acquisition of smaller rival OppenheimerFunds in 2018, which was followed by hefty outflows and a slide in profits. “These large transactions have a terrible record. There are cultural risks as well as operational challenges . . . State Street clearly wants to do a deal but it’s not clear whether Invesco is the right partner,” said one dealmaker close to the talks. Link
U.S. Bank, the fifth-biggest retail bank in the nation, announced that its cryptocurrency custody service is available to fund managers. The offering will help investment managers store private keys for bitcoin, bitcoin cash and litecoin with the help of sub-custodian NYDIG. Link
Gary Gensler, chair of the SEC, has warned that leveraged ETPs present a risk to the stability of financial markets and are pushing for tighter rules to be applied. They said the SEC should revive its plan to force brokers and investment advisers to carry out checks to ensure that their clients properly understood the risks before allowing retail investors to buy and sell leveraged ETPs. The proposals to restrict sales were dropped last year following an outcry from investors who sent more than 6,000 comment letters to the SEC. Global assets held in leveraged and inverse ETPs stood at $112bn at the end of August, up from $80.8bn at the end of 2017. Link
21Shares Reaches Record $2 Billion in Assets Under Management and communicates expansion of team. Link
Additional interesting reads:
→ ‘Volmageddon’ Is History as SEC Greenlights Leveraged VIX ETFs Link
→ Cathie Wood’s flagship ETF hit by record outflows in September Link
→ Passive managers urged to do more to exclude ‘coal laggards’ Link
→ Former BlackRock, JP Morgan and State Street employees have banded together to launch a new fixed-income ETF venture focused on high-yield opportunities. Link
→ Digital asset ETP issuer 21Shares has announced that Copper will provide digital asset custody and staking services to secure the underlying assets of its cryptocurrency ETPs amidst increasing interest from institutional investors. Link
→ Is a merger with State Street really in Invesco’s best interests? Link
→ The ten trillion dollar man: how Larry Fink became king of Wall St 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.