• Andrea Murray

U.S. Futures-based Bitcoin ETF is Finally Here


Well that was not quick. After 8 years from the first filing, a futures-based Bitcoin ETF has finally been approved by the SEC. The first product is expected to begin trading today with many to follow. Global ETF flows are now available and more commentary on what a possible SSGA merger means. Read on for more ETF highlights from the week.


Fund Launches and Updates


EUROPE

BNP Paribas has further expanded its low-carbon ETF fund range with the launch of the BNP Paribas Easy Low Carbon 100 Eurozone PAB Ucits ETF, which is listed on Euronext Paris and Deutsche Börse Xetra. Link

DWS is delaying planned fee cuts and index switches on two of its ETFs to indices that track ESG metrics --the Xtrackers JPX-Nikkei Index 400 UCITS ETF (XDNY) and the Xtrackers FTSE All-World ex UK UCITS ETF (XDEX) were originally planned to swap to ESG-screed indexes on 20 October. Link


Jacobi Asset Management has received approval from the Guernsey financial regulator to launch a physically-backed bitcoin ETF in Europe. The London-based asset manager has been given the green light to launch the Jacobi Bitcoin ETF by the Guernsey Financial Services Commission on Cboe Europe. Link


Lyxor has swapped the index on the former Lyxor SG European Quality Income NTR UCITS ETF (SGQA) from the Société Générale European Quality Income NTR index to the S&P Euro High Yield Dividend Aristocrats index. The swap, which took place in August, saw the ETF has change its name to the Lyxor S&P Eurozone ESG Dividend Aristocrats UCITS ETF and started trading under the ticker EDIV, as at 15 October. Link


More index swaps to ESG with Lyxor changing the Lyxor China Enterprise UCITS ETF (ASIL) index from the Hang Seng China Enterprises Net Total Return index to the MSCI China Select ESG Rating and Trend Leaders Net Total Return index. As a result, ASIL is now known as the Lyxor MSCI China ESG Leaders Extra UCITS ETF under the same ticker. The total expense ratio (TER) will remain at 0.65%. Link


SSGA is set to switch its US junk bond ETF to an ESG index. Effective 29 October, the SPDR Bloomberg Barclays 0-5 Year U.S. High Yield Bond UCITS ETF (SJNK) will be renamed the SPDR Bloomberg SASB U.S. High Yield Corporate Bond UCITS ETF with the same ticker and total expense ratio. Link


WisdomTree, listed the WisdomTree Enhanced Commodity ex-Agriculture UCITS ETF (“WXAG”) on the London Stock Exchange and Börse Xetra with a management expense ratio of 0.35%. Link

THE AMERICAS

ProShares is to launch the first US bitcoin futures ETF today, 19 October. The ProShares Bitcoin Strategy ETF (BITO), which does not directly invest in bitcoin, will carry an expense ratio of 0.95% when it hits the NYSE Arca exchange. It will be the first bitcoin-related ETF to list, previous efforts having been blocked by the SEC. Link


Additional launches last week:

SymbolSource: Link


ASIAPAC

Axa SPDB Investment Managers will launch China’s fourth smart electric-car themed ETF just six months after the first came to the market. Link


Flows


Inflows into global ETPs slowed in September, but remained generally positive despite market volatility, according to a report by BlackRock. Investors added a net $82.4bn to global ETPs during the month - just slightly down on August's $96.5bn.


Emerging market equity funds led the gains, attracting nearly $9 billion of net inflows making it the largest month for exposure since March, the fund manager stated.


This pickup in emerging market ETP flows came alongside a fall in US equity flows, which dropped from $48.5bn in August to $28.2bn.


European equity flows also fell flat, hitting their lowest level since October 2020, which was the last time there were net outflows from the asset class. Link


As shared by Bloomberg Intelligence’s Athanasios Psarofagis, global ETFs stand at $9.4 trillion and are set to break $1 trillion in flows for the year.

Noteworthy


Impossible to miss the news about the SEC finally allowing a futures-based ETF in the US. There were so many articles following the potential approval and finally the actual approval that we had to remove all of them or risk creating a novel and quite sure no one is ready for that read yet. While most articles were stating the simple facts of the filings and launch, a couple thankfully pointed out the differences between a physically-backed crypto ETF and a futures-based product – one of the biggest being the roll cost which can create a drag on a product return and one which I’d guess the majority of retail investors do not understand. And as we all know, the US has a very active retail ETF market. Well outlined pros and cons can be found in the following ETF Stream article which you can read here.

The Securities and Exchange Commission’s indication that it is going to look more closely at how it regulates complex exchange traded products has implications for future bitcoin ETF rules, say attorneys and analysts. Citing leveraged and inverse strategies as examples of complex ETPs, SEC Commissioners suggested that any new rules would cover ETPs that are not regulated by the Investment Company Act, such as ETNs, commodity pools and other structured notes. Link


The largest index providers have a “stranglehold” on the market, which is keeping licensing costs higher for asset managers and limiting further passive fund fee cuts, according to experts. But really, how much lower can they go? FTSE Russell, MSCI and S&P hold a dominant market position in Europe, with their indices accounting for more than 80 per cent of passive equity fund assets. MSCI alone has a 47 per cent share, according to Morningstar data. The article points to other smaller providers like Solactive which are using a different pricing model and are disrupting the market. Link


Can you have too much of a good thing? For regulators looking at the recent proliferation of funds sold with an ESG stamp, the answer may be “yes”. Fund managers who cannot substantiate ESG branding had better beware. According to data provider Morningstar, the number of ESG-focused open-ended and ETFs in the US increased last year by 30 per cent, to 392. They attracted a record $51.1bn of net inflows, more than twice the amount in 2019.


Over the three years to the end of 2020, 75 per cent of ESG funds ranked in the top half of their fund category for performance, Morningstar says. Reluctant to miss out on this bonanza, managers of some long-established funds have repurposed them for the ESG era, adopting new investment strategies and ESG-signalling names. Morningstar says 69 have done so since 2013 — 25 in 2020 alone, of which the two biggest were Invesco Floating Rate, now Invesco Floating Rate ESG, and USAA World Growth, now USAA Sustainable World. Link

Additional interesting reads:


Chancellor Sunak sets out sustainability requirements for asset managers ahead of COP 26-- Investment products will be required to set out the environmental impact of their activities Link


State Street’s $3.9tn asset management arm is repeatedly touted as a target for a major deal. The business, State Street Global Advisors, reportedly weighed up takeover talks with UBS. Link


21Shares, the Swiss pioneering issuer of cryptocurrency ETPs, announced that its Polkadot ETP (ASOL) has reached the key milestone of $100M in assets under management (AUM), which makes it the 5th 21Shares ETP reaching more than $100M in AuM. 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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