Vanguard pulls in $90.4bn of new assets
Stocks in Europe, the U.S. and China were mixed last week. The FTSE 100 dropped –0.93%, the FTSE 250 was down -0.69%, whilst the Stoxx Europe 600 saw an increase of +0.48%. The DAX was also up for the week with a positive return of +0.84%
U.S. equities were up +1.76% and the CSI 300 increased +7.80% for the same period.
The CBOE Volatility Index dropped -1.41% from the previous week closing at 27.29 points.
WTI Crude oil closed last week at $40.55 a barrel, down -0.25% for the week.
French group Amundi expanded its responsible investment efforts with an ESG-focused emerging markets ETF, which has launched with €500m in seed investment from Finnish pension giant Ilmarinen. The new fund, which is formally called the Amundi MSCI Emerging ESG Leaders Ucits ETF, tracks an index that provides exposure to companies with high ESG performance relative to their sector peers. Source: Citywire
The firm also launched three new ETFs tracking future EU Paris-Aligned Benchmarks (PAB), which are designed to support the achievement of the objectives of the Paris Agreement by limiting global warming below 2°C above preindustrial levels. The new Euronext Paris listed funds are:
~Amundi Euro iSTOXX Climate Paris Aligned PAB UCITS ETF, TER 0.18%
~Amundi MSCI Europe Climate Paris Aligned PAB UCITS ETF, TER 0.18%
~Amundi MSCI World Climate Paris Aligned PAB UCITS ETF, TER 0.25%
HSBC HSBC Global Asset Management has expanded its low carbon product offering with the launch of a developed world ETF. The HSBC Developed World Sustainable Equity UCITS ETF (HSWD) is listed on the LSE with a TER of 0.18%.
HSWD tracks the FTSE Developed ESG Low Carbon Select Net Tax Index which seeks to target a 50% carbon emissions reduction and a 50% fossil fuel cut relative to the parent index. Source: ETF Stream
Lyxor ETF has launched four new equity ETFs designed to meet and exceed the EU Paris-aligned benchmarks’ minimum requirements across multiple regions. The new ETFs track the S&P Paris-aligned Climate indices for Eurozone, European, US and global equities and have a total expense ratio of 0.20%. Earlier this year, Lyxor became the world’s first ETF provider to launch an ecosystem of ETFs designed to mitigate climate change. Source: ETF Express
Tabula Investment Management launched an ETF that takes short exposure to North American high yield corporate debt. The Tabula North American CDX High Yield Credit Short UCITS ETF (TABS) is listed on the London Stock Exchange with a total expense ratio of 0.5% and is the first of its kind in Europe. It is comprised of roughly 100 sub-investment grade entities of equal weighting. ETF Stream
VanEck launched a new ETF designed to capitalise on global companies operating with a wide economic ‘moat’ over their peers. The fund, called the VanEck Vector Morningstar Global Wide Moat Ucits ETF, has been listed on the London Stock Exchange and has a total expense ratio of 0.52 percent.
The ETF contains US stocks and equities from regions such as Europe, Japan, China and Australia. It is a global variant of the VanEck Vectors Morningstar US Wide Moat Ucits ETF launched by VanEck in 2015, which uses the same ‘moat’ concept but focuses exclusively on US companies. Source: Citywire
Flows and Performance:
According to a recent Morningstar report, the European ETF market saw net inflows of €33.4bn in Q2 2020 bringing total assets to €903bn. Investors favoured fixed income which attracted 70% of the quarterly flows with €23.3bn of inflows bringing the asset class to €249bn as of the end of June.
Equity ETFs managed €4bn of inflows and ESG strategies across equity, fixed income and commodity ETFs attracted €6.7bn of inflows, adding to the €5.8bn seen in Q1.
iShares topped the ETF providers league table with EUR19.4 billion of inflows thanks to its dominance of the fixed income ETF segment in Europe.
Xtrackers saw significant inflows of €4.9bn for the quarter as well as Amundi and UBS managing to obtain €1.6bn and €1.5bn in new assets, respectively. Lyxor, Europe’s third largest ETF issuer saw negative net flows for the quarter as it lost €500m.
Worldwide ETF assets stood at $6.3tn at the end of June, down 1.4% this year. Source: ETF Stream
2020 has been a record year so far for gold-backed ETF inflows, according to the latest ETF Flows reports from theWorld Gold Council. In the first half of the year, global net inflows reached $39.5 billion – topping the previous annual inflow record of $23 billion from 2016. North American funds accounted for 80% of global net inflows in June, adding $4.6 billion in AUM.
In its latest update, the World Gold Council showed that gold-backed ETFs recorded their seventh consecutive monthly increase, with inflows of 104t in June, which took global holdings to a new record of 3,621t. Gold spot prices rose above $1,800 an ounce for the first time since 2011 last week as investors continue to favor the traditional haven.
In the US
In the US, Vanguard pulled in $90.4bn of ETF inflows in the first half of the year beating out ETF rival BlackRock which gathered ETF inflows of $60.4bn. Invesco had ETF inflows of $4.9bn. WisdomTree, the New York-based asset manager, which shut a number of oil focused trackers this year due to high volatility, registered net outflows of $600m in the first half.
The Federal Reserve’s decision to use fixed income ETFs for the first time as part of its programme to support US bond markets has been widely viewed as an overwhelming vote of confidence for ETFs broadly. Inflows have surged following the Fed’s announcement in late March to reach a first half global total of just under $106bn. BlackRock highlighted the scale of inflows into investment grade corporate bond ETFs, which hit $21.6bn in June alone, a monthly record. Source: FT
The risk of UK funds being frozen out of the European market at the end of the year has risen after Brexit negotiators missed a key milestone aimed at securing market access for the City of London. The EU and the UK failed to meet their June 30 deadline for completing assessments of each other’s regulatory regimes for financial services, a prerequisite for allowing mutual market access post-Brexit.
The missed deadline in the “equivalence” regime has sparked fears of prolonged uncertainty and disruption for Britain’s £9tn asset management sector. Asset managers’ Brexit concerns centre on the loss of “passporting”, which allows them to sell funds easily across the EU. But a cliff-edge Brexit with no equivalence ruling in place would also have implications for how groups structure their sales teams and where they trade shares. Source: FT
Fund in Focus:
At the beginning of last week, Bloomberg reported that the CSI 300 Index added 14% in five days, the most since December 2014. ETF Express also published a thorough report on the markets saying that over the longer term, Chinese technology stocks, especially in the 5G construction and cloud computing areas are expected to outperform. This brings us to look at this week’s fund in focus – KraneShares CSI China Internet UCITS ETF, ticker KWEB.
KWEB seeks to measure the performance of the investable universe of publicly traded China-based companies whose primary business or businesses are in the Internet and Internet-related sectors listed in both Hong Kong and the United States.
Exposure to these companies may benefit from the increasing domestic consumption by China’s growing middle class — the country has an internet population of 854 million people which represents a penetration of only 61.2%. As a comparison, the U.S. internet population has 294 million people, a penetration rate of 89.5 per cent as of June 2019.
Launched in November 2018, the annual TER is 0.75%. Assets under management as of Friday, the 10th of July were $162m. Year-to-date the fund is up +42.90%.
Fund Performance and Flows (data sourced from ETFLogic):
Top 3 Best Weekly Performers in the UK
WisdomTree Industrial Metals GBP Daily Hedged +5.73%
WisdomTree Lead +4.25%
iShares MSCI EM ESG Enhanced UCITS ETF +3.84%
Top 3 Worst Weekly Performers in the UK
WisdomTree Industrial Metals 1x Daily Short -5.59%
Lyxor MSCI World Energy TR UCITS ETF Acc -3.76%
iShares Developed Markets Property Yield ETF -2.64%
Top 3 Weekly UK Inflows
iShares USD Corporate Bond UCITS ETF +$94.9m
iShares USD High Yield Corp Bond UCITS ETF +$86.4m
iShares US Aggregate Bond UCITS ETF USD +50.9m
Top 3 Weekly UK Outflows
iShares J.P. Morgan EM Local Govt Bond UCITS ETF USD -$43.6m
WisdomTree Brent Crude Oil GBP Daily Hedged -$42.1m
iShares USD Corporate Bond UCITS ETF EUR Hedged -$38.6m
*Fund in Focus or any portion of this newsletter are informational only and not intended to provide recommendations of any kind.