The Weekly ETF Roundup: w/e June 26, 2020 - China's influence grows
Updated: Jul 20
Global equities had their worst day of the week on Friday following a resurgence of reported Covid-19 cases adding to investors’ concerns that a recent jump could put a halt to the economic recovery. The FTSE 100 dropped -2.09%, the FTSE 250 -3.23%, Stoxx Europe 600 -1.89% and the DAX -1.96%. U.S. equities were down -2.86% for the same period.
The CBOE Volatility Index dropped -1.11% for the week and closed Friday at $34.73.
WTI Crude oil closed on Friday at $40.46 a barrel, up +1.79% for the week.
UBS Global Asset Management debuted two new funds on Xetra and Börse Frankfurt – a sustainable investment fund and a commodity strategy that simultaneously takes a short and long position in two commodity indices. The UBS ETF (IE) MSCI World Socially Responsible UCITS ETF (USD) A-dis provides exposure to global equities which have with sustainable business activities. TER is 0.25%.
The UBS ETF (IE) CMCI Commodity Carry SF UCITS ETF (hedged to EUR) A-acc gives investors access to a commodity strategy that simultaneously takes a short and long position in two commodity indices. The index has 2.5 times leverage. TER is 0.34%. Source: ETF Stream
~On 30 June, 21Shares AG will be listing its 21Shares Bitcoin ETP, 21Shares Ethereum, and crypto basket index HODL in GBP on the Swiss SIX Exchange. Already listed in USD, CHF and EUR, adding GBP will open up the institutional-grade crypto ETPs to all UK investors with access and connectivity to the SIX Swiss Exchange. ETF Express
Flows and Performance
Gold ETCs have seen massive inflows this year as investors seek shelter during turbulent times. According to the World Gold Council, there has been over $30bn inflows in 2020. Globally there is now more than $200bn held within gold ETCs. Source: ETF Stream
ESG ETFs are also enjoying a record year, according to a report from Lyxor ETF, with inflows in May hitting €2.4bn (£2.2bn). Lyxor ETF’s latest Money Monitor report shows that equity ESG ETFs gathered €1.6bn of inflows in May, while bond products took in the remaining €800m. So far in 2020, ESG ETFs have gathered €10.6bn in inflows.
In Emerging Markets
Last week the FT reported that Turkey may be demoted from the status of an “emerging market” to a “frontier” market by index provider MSCI. Turkey has been a part of the MSCI Emerging Markets Index since 1989. MSCI said that it was considering placing Turkey under review because access to the country’s equity market had been “adversely impacted” by a series of bans on stock lending and short selling that have been imposed in recent months.
Turkey’s weighting in the MSCI index has fallen to approximately 0.50% from its long-term average of around 2%, as the depreciation of the lira has seen the value of Turkish stocks fall in dollar terms.
Emre Akcakmak, a Dubai-based portfolio manager at East Capital, estimated that such a move could lead to about $5bn in total outflows from Turkish equities, including about $2bn to $3bn from passive investment funds that track the index. Source: FT
China has leapfrogged the UK and France to become the world’s fifth-largest fund domicile. The country pulled ahead of established asset management markets France, the UK, Japan and Australia to seize 4.1% of worldwide fund assets. The US is the world’s largest fund domicile, controlling 47.9% of the market, followed by Luxembourg with 8.8%, Ireland with 5.8%, and Germany with 4.6%. The data is for open-ended, regulated funds, including money market funds, globally.
Managers have long viewed China as the largest single growth opportunity globally, with the country’s pool of assets expected to increase significantly in line with its ageing population and expanding middle-class.
Yoon Ng, director of Asia-Pacific insights at Broadridge, said that expansion in China was “critical” for global asset managers, pointing to opportunities created by the increased mobilisation of savings to investment products, strong culture of digital distribution and growing subadvisory opportunities. She noted that while most other Asia-Pacific markets suffered net outflows in the first quarter, China recorded $135bn of net sales. Source: FT
Credit Suisse is to close nine ETPs that provide magnified exposure to gold, silver and natural gas prices as well as the volatility of the US stock market. US regulators have repeatedly warned that leveraged ETPs are unsuitable for retail investors because they can generate unexpectedly large losses. The nine products, known as VelocityShares, have combined assets of about $3bn. The largest, known as TVIX, tracks an index of futures contracts on the S&P 500 VIX Short-Term Futures Index, with 200% leverage on the volatility moves.
The increase in equity volatility has driven up the price of TVIX by 206% this year, increasing its assets to $1.4bn. Investors, however, have withdrawn about $1.4bn from TVIX for the same period. No other ETP with assets of more than $1bn has ever been closed before. FT
Fund in Focus:
Continuing with the theme of ETFs that have performed well during the pandemic, this week we are taking a look at the WisdomTree Cloud Computing UCITS ETF. This fund provides access to cloud companies through direct investment in publicly listed firms which primarily are involved in providing cloud software and services. Below you will find additional details from the WisdomTree website as well as other ETFs within a somewhat similar thematic category.
Cloud computing has become the most important trend in the software and information technology industry globally. The fund has focused exposure to businesses that derive the majority of the revenue in cloud space and meet the revenue growth criteria. Research for the selection of companies in the Index and, subsequently, the Fund, is conducted by experts in the cloud space and the technology market, ensuring the portfolio remains focused and relevant.
Fund Performance and Flows (data sourced from ETFLogic):
Top 3 Best Weekly Performers in the UK
WisdomTree Brent Crude Oil 1x Daily Short +4.60%
Invesco MSCI Kuwait UCITS ETF +4.28%
UBS ETF – Bloomberg Barclays TIPS 10+ UCITS ETF (hdg to GBP) A – dis +2.41%
Top 3 Worst Weekly Performers in the UK
Lyxor MSCI World Energy TR UCITS ETF – Acc (USD) -7.03%
Lyxor S&P 500 Banks UCITS ETF – Acc -6.72%
iShares Edge MSCI USA Value Factor UCITS ETF (Dist) -5.69%
Top 3 Weekly UK Inflows
iShares Treasury Bond 20Yr UCITS ETF GBP Hedged (Dist) +$277.6m
iShares USD Corp Bond UCITS ETF USD (Acc) +59.6m
iShares JP Morgan USD EM Bond UCITS ETF (Acc) $56.1m
Top 3 Weekly UK Outflows
Lyxor SG Global Quality Income NTR UCITS Monthly Hdg GBP (Acc) -$352.7m
WisdomTree WTI Crude Oil – GBP Daily Hedged -$345.1m
iShares USD Short Duration Corporation Bond UCITS ETF USD Hdg (Acc) -$33.6m
*Fund in Focus or any portion of this newsletter are informational only and not intended to provide recommendations of any kind.