The Weekly ETF Roundup: w/e July 31, 2020 - Massive Outflows From Vanguard All-World Dividend ETF
Global markets were mixed last week with losses across the board in Europe. The FTSE 100 dropped -3.68%, the FTSE 250 was down -1.90%, whilst the Stoxx Europe 600 saw a decrease of -2.97%. The DAX was also down for the week with a negative return of -4.09%.
U.S. equities were up +1.75% and the CSI 300 increased +4.22% for the same period.
The CBOE Volatility Index dropped -5.34% from the previous week closing at 24.76 points.
WTI Crude oil closed last week at $40.27 a barrel, with a decrease of -2.47%.
Credit Suisse Asset Management has launched an ESG ETF that offers exposure to global stocks with a minimum volatility tilt. The CSIF (IE) MSCI World ESG Leaders Minimum Volatility Blue UCITS ETF (CSY9) is listed on Deutsche Boerse and SIX Swiss with a total expense ratio of 0.25%. The fund is comprised of large and medium-sized companies from 23 developed markets around the world that are in line with MSCI’s sustainability criteria. CSY9 is Credit Suisse’s sixth ETF available in Europe as the firm’s assets under management surpassed $2bn in June. Source: ETF Stream
DWS has expanded its ESG ETF range with the launch of a short-duration corporate bond product. The Xtrackers ESG EUR Corporate Bond Short Duration UCITS ETF (XZE5) will be listed on the London Stock Exchange and Deutsche Boerse with a total expense ratio of 0.16%. Source: ETF Stream
Swiss cryptocurrency investment management boutique FiCAS has launched the world’s first actively managed bitcoin exchange-traded product. The Bitcoin Capital Active ETP (BTCA) is listed on the SIX Swiss Exchange with a management fee of 2%. Source: ETF Stream
Franklin Templeton has launched a European equity ETF and US equity ETF which are compliant with the European Union’s Paris Aligned Benchmark. The Franklin STOXX Europe 600 Paris Aligned Climate UCITS ETF (EUPA) and the Franklin S&P 500 Paris Aligned Climate UCITS ETF (500P) have a total expense ratio of 0.15%. Both ETFs are now listed on the Deutsche Boerse, the London Stock Exchange and Borsa Italiana. Source: ETF Stream
HANetf is set to convert its Irish domiciled ETFs, currently held in the CREST system, to the International Central Securities Depository model via Euroclear Bank. The following ETFs will convert to the ICSD model:
EMQQ Emerging Markets Internet & Ecommerce UCITS ETF - Accumulating HAN-GINS Cloud Technology UCITS ETF - Accumulating HAN-GINS Tech Megatrend Equal Weight UCITS ETF Accumulating KMEFIC FTSE Kuwait Equity UCITS ETF - Accumulating The Medical Cannabis and Wellness UCITS ETF - Accumulating HAN-GINS Indxx Healthcare Innovation UCITS ETF – Accumulating
Flows and Performance
Investors rotated out of a euro-denominated high yield ETF last week in a sign of growing concerns about the rise in default rates this side of the pond. According to data from Ultumus, the €6.7bn iShares € High Yield Corp Bond UCITS ETF (IHYG) saw $164m outflows in the week to 24 July, the fifth highest across all European-listed ETFs.
The outflows come after European high yield bond default rates doubled to 2.4% in H1, up from 1.2% at the end of 2019, according to Fitch Ratings. Source: ETF Stream
Investors yanked over half the assets from Vanguard’s global high dividend yield ETF last week amid ongoing uncertainty surrounding dividend cuts and suspensions following the coronavirus turmoil. According to data from Ultumus, the Vanguard FTSE All-World High Dividend Yield UCITS ETF (VHYL) saw $1.2bn outflows in the week to 24 July, the most across all European-listed ETFs, taking its total AUM to $1.1bn. Source: ETF Stream
We anticipate July flow data to start rolling in from various providers over the next few weeks. In the interim, the following top ten individual fund inflows for the month of July are below courtesy of ETF Logic data.
European markets regulators are planning a year’s delay to a new rule imposing penalties on trades that fail to settle on time, after market participants said the coronavirus pandemic had made it impossible to hit next February’s deadline. Authorities are planning to push back the regime until February 2022, the European Securities and Markets Authority said on Tuesday. That would mark a second delay for the controversial rules, which lobby groups around Europe have argued will be harmful to the functioning, liquidity and stability of the region’s bond and exchange traded fund markets. FT
The ICE ETF Hub platform is aiming to expand coverage to international equity exchange-traded funds listed in the US and ETFs listed in Europe, Middle East and Africa. Peter Borstelmann, head of ICE ETF Hub, told Markets Media: “We are looking to expand coverage to include international equity and EMEA-listed ETFs in response to market demand.” The platform currently supports US-listed domestic equity and fixed income ETFs. Source: Markets Media
China’s exchange-traded fund AUM, excluding money market ETFs, rose 14.7% to $93.6bn through the end of May 2020, according to a report published by Cerulli Associates. This was the fastest among Asia (ex-Japan) markets, led by technology-related ETFs, the report said.
New ETF launches in the mainland have also contributed to AUM growth. During the first half, 44 ETF products were rolled out in China and raised $4.48m during their initial public offering, according to data provided by Morningstar.
Last year alone, ETF AUM in China grew 49.7% to $81.6bn. The firm expects the market to continue to grow, supported by industry developments which were highlighted in last week’s ETF weekly roundup. Source: Fund Selector Asia
In the US
Activist investors in the US stand to benefit from a proposed new SEC rule that would allow most institutional clients to keep their equity stakes secret. For more than 40 years, registered investors with $100m or more in US-listed securities have been required to disclose their holdings to the SEC every quarter. Under the proposed new rules, that number would increase to $3.5bn, leaving just 550 of the world’s largest investors disclosing their holdings. The SEC’s proposed shift would mean companies that depend on quarterly filings by asset managers to keep tabs on their investor base will lose access to reports from 90 per cent of investors. This will also have an impact on many ETF provider distribution teams who use the 13Fs for much needed transparency on who holds their ETF products. Source: FT
Fund in Focus
In a recent Financial Times article, the chief executive of Schroders claimed that some companies have used the coronavirus pandemic as an excuse to slash dividends, piling pressure on investors and pensioners in the process. Companies have cut tens of billions in payouts this year as they scrambled to conserve cash, after government lockdowns aimed at halting the spread of coronavirus hit earnings. In the UK alone, 176 companies cancelled dividends and 30 more cut them during the second quarter of 2020, according to research from Link, an investor services business.
In May, fund manager Janus Henderson Global Investors warned that close to $500bn could be wiped from the value of global dividends this year. It predicted that North American dividends were likely to be less affected than in Europe, including the UK. This brings us to our fund in focus to see how one of the largest Europe listed dividend ETFs, has fared during the pandemic -– The Vanguard FTSE All-World High Dividend Yield UCITS ETF (VHYL).
VHYL tracks is comprised of large and mid-sized company stocks, excluding real estate trusts, in developed and emerging markets that pay dividends that are generally higher than average. Launched in May of 2013, the annual TER is 0.29%.
Assets under management as of Friday, the 31st of July were $1.08bn and according to TrustNet had $2.2bn as of the 14th of July. As noted earlier in this newsletter, the fund recently had over $1bn in outflows in the past two weeks and the negative press regarding dividend cuts cannot be helping. Year to date, the fund is down -14.13% and since the March overall market lows, the fund has increased +33.89%.
Fund Performance and Flows (data sourced from ETFLogic)
Top 3 Best Weekly Performers in the UK
WisdomTree Cocoa +7.87%
Invesco MSCI Kuwait UCITS ETF +3.94%
WisdomTree Physical Gold – GBP Daily Hedged +3.77%
Top 3 Worst Weekly Performers in the UK
Lyxor MSCI World Energy TR UCITS ETF - Acc (USD) -4.80%
iShares Edge MSCI Europe Value Factor UCITS ETF EUR (Dist) -4.46%
UBS MSCI EMU Socially Responsible UCITS ETF (GBP) -3.99%
Top 3 Weekly UK Inflows
iShares USD Corp Bond UCITS ETF USD (Acc) +$131.4m
iShares U.S. Aggregate Bond UCITS ETF USD (Acc) +$109.5m
WisdomTree Long CHF Short GBP +$71.7m
Top 3 Weekly UK Outflows
iShares UK Gilts UCITS ETF GBP(Dist) -$192.8m
iShares Treasury Bond 0-1yr UCITS ETF USD Acc -$77.6m
WisdomTree Long USD Short GBP -$31.2m
*Fund in Focus or any portion of this newsletter are informational only and not intended to provide recommendations of any kind.