Vanguard to Exit Hong Kong
European markets were mostly up last week as hopes for a vaccine continued to rise. The FTSE 100 decreased –0.63%, the FTSE 250 was up +1.23%, whilst the Stoxx Europe 600 saw an increase of +1.04%. The DAX was also up for the week with a positive return of +2.10%.
U.S. equities were up +3.29% and the CSI 300 was up +2.67% for the same period.
The CBOE Volatility Index increased +1.86% from the previous week closing at 22.96 points.
WTI Crude oil closed last week at $42.97 a barrel, with an increase of +1.49%.
ETF Launches and Updates
HSBC Increases Their ESG Lineup
HSBC GAM has launched a new sustainable equity ETF focused on emerging markets called the HSBC Emerging Market Sustainable Equity Ucits ETF which is now listed on the London Stock Exchange.
The new ETF is tracking the customised FTSE Emerging ESG Low Carbon Emissions Select index, which targets a 20% ESG improvement, a 50% carbon emissions reduction and a 50% fossil fuels reserves reduction. The total expense ratio is 0.18%. Source: Citywire
SSGA Expands Smart Beta Range
State Street Global Advisors (SSGA) has expanded its smart beta funds range with the launch of a global low-volatility Ucits ETF, which will see to benefit from the safest names in the Stoxx Global 1800 index.
The new ETF, which is formally called SPDR Stoxx Global Low Volatility Ucits ETF, will track the Stoxx Global Low Risk Weighted Diversified 200 index, which represents the least volatile companies after accounting for adequate diversification.
This benchmark provides broad exposure to the world’s most developed markets drawn from the Stoxx Europe 600, Stoxx North America 600 and Stoxx Asia/Pacific 600 indices.
The SPDR Stoxx Global Low Volatility Ucits ETF has a TER of 0.30%. It has had a primary listing on Euronext Amsterdam since Monday and will have a secondary listing on the London Stock Exchange on Tuesday. Source: Citywire
In Asia – CSOP Launches Tech ETF
Asset managers are racing to launch index funds tracking China’s top technology companies, capitalising on investor fervour stirred by Sino-U.S. tensions, and fuelled by Ant Group’s blockbuster listing.
This week, CSOP Asset Management Ltd launched the first ETF based on the Hang Seng TECH Index, which tracks the 30 biggest tech companies listed in Hong Kong, including Tencent Holdings and Alibaba Group.
China Asset Management Co and Dacheng Fund Management Co will follow suit, while global ETF giants Vanguard and BlackRock are preparing for similar products, according to company filings and people familiar with the plans. Source: Reuters
In Japan — Global X Launches Dividend and Reit ETFs
Global X, the New York based ETF provider owned by South Korea’s Mirae Asset Global Investments, has launched two ETFs in Japan. The ETF provider listed the Global X Logistics J-Reit ETF and Global X MSCI SuperDividend Japan ETF on the Tokyo Stock Exchange on August 26.
In 2019, Japan’s income-oriented equities and mixed-asset strategies attracted the most inflows among locally domiciled funds in Asia. In March, Daiwa was reported to be planning to invest $120m into Global X as part of a move to create thematic ETFs for the Japanese market. Global X, a specialist in themed investments, had 72 funds at end-2019, with $12.4bn in assets under management. Global X’s first ETF launch in Japan comes on the heels of a strong first half for Japanese ETFs, buoyed by the Bank of Japan expanding its ETF buying programme. Source: FT
Flows and Performance
ESG Flows Global assets held in exchange traded funds invested according to ESG principles surpassed $100bn last month, according to ETFGI. The milestone was breached after $6.76bn of net inflows in July, which brought assets in globally listed ESG ETFs and ETPs to a total of $101bn. ESG vehicles domiciled in Europe accounted for 51.6 per cent of those assets, while US-based ETFs and ETPs held just over 40 per cent of the market.
Amundi’s MSCI Emerging ESG Leaders Ucits ETF was the most popular fund in the space and collected $588.8m. The global ESG ETF and ETP industry comprises 393 products with 1,077 listings, from 92 providers on 31 exchanges in 25 countries, according to the consultancy. At the end of July, overall assets in the European ETF/ETP industry stood at $1.08tn. Source: FT
Active ETF Flows Continue to Climb
Actively managed ETFs have reached a record asset high of $194 billion at the end of July. According to data provider ETFGI, active products gathered net inflows of $9.16 billion during July, bringing year-to-date net inflows to a record $35.41 billion.
Active fixed income ETFs account for 67.8 per cent of overall assets, and the eight active ETFs now listed in the new semi-transparent structure have now gained assets of USD375 million.
Fixed Income focused actively managed ETFs/ETPs listed globally gathered net inflows of USD6.53 billion over July, according to ETFGI figures, bringing net inflows for the year to July 2020 to USD20.39 billion. Equity focused actively managed ETFs/ETPs listed globally attracted net inflows of USD2.07 billion during July, bringing net inflows for the year to July 2020 to USD12.48 billion. Source: ETF Express
In Asia – Vanguard to Exit Hong Kong
Vanguard has announced it will exit Hong Kong and transfer its Asian headquarters to Shanghai and will also wind down its Japan operations. Vanguard issued a statement to the Hong Kong Stock Exchange on Wednesday, saying that it was considering appointing a new investment manager to take over the products, or terminating these listed funds. “We regularly review our international business,” a company official said. “This review has now led us to the conclusion to wind down our Hong Kong operation, which primarily serves institutional clients, and not the individual investors that are our primary strategic focus.”
The official stressed that Vanguard still saw growth potential in Hong Kong, but added: “Unfortunately, from a distribution business standpoint, the current industry dynamics are better suited to institutional investors and do not currently support the scale needed for us to operate the economic engine behind our unique, low-cost, individual investor-orientated model.”
Vanguard listed its first ETF in Hong Kong in May 2013.
With the closure of its Hong Kong and Japan offices, Vanguard will only have Asia-Pacific presences in Shanghai, Beijing and Melbourne in Australia. Source: FT 8/26
Fund in Focus
Last week, Investors Chronicle published an article that recapped the performance and resilience of fixed income ETFs in March. While some initially questioned the discounts for some of the biggest corporate bond ETFs, the official explanation in hindsight pointed to the benefit of ETFs, which essentially worked as a price discovery tool and a pressure valve for an illiquid market.
In its own assessment the Bank for International Settlements added: “Compared with the relative staleness of bond prices and NAVs, ETF prices can be useful tools for market monitoring and valuable inputs to risk management models that require up-to-date assessments.” In other words, ETFs provided an element of price discovery that was lacking in the underlying market.
This brings us to this week’s Fund in Focus from Tabula, an ETF provider that specialises in fixed income ETFs – the Tabula ITRAXX IG Bond UCITS ETF which tracks the iBoxx iTraxx Europe Bond Index.
The index provides corporate bond exposure that reflects iTraxx Europe, a liquid and widely-used credit benchmark comprising 125 European investment grade entities. It includes EUR-denominated bonds with minimum outstanding of EUR 500 million and 3-7 years to maturity.
Assets under management as of Friday were €102.87million and the TER is 0.29%. Year-to-date, the fund is up +0.58% from its 8 January launch and since the March lows it has returned +5.73% as of Friday, the 28th of August.
Fund Performance and Flows (data sourced from ETFLogic)
Top 3 Best Weekly Performers in the UK
WisdomTree Cocoa +8.94%
Lyxor S&P 500 Banks UCITS ETF – Acc +4.46%
Lyxor MSCI World Information Technology TR UCITS ETF – Acc (USD) +4.16%
Top 3 Worst Weekly Performers in the UK
WisdomTree Brent Crude Oil 1x Daily Short -2.83%
iShares USD Treasury Bond 20yr UCITS ETF EUR Hedged (Dist) -2.70%
iShares USD Treasury Bond 20+yr UCITS ETF USD (Acc) -2.63%
Top 3 Weekly UK Inflows
iShares Treasury Bond 0-1yr UCITS ETF USD Accumulation +$256.6m
Vanguard Global Aggreg Bond UCITS ETF USD H Acc +$100.5m
iShares JPMorgan USD EM Bond ETF H D +$65.2m
Top 3 Weekly UK Outflows
iShares Global Corp Bond ETF HD -$77.5m
iShares USD Corp Bond UCITS ETF USD (Acc) -$35.6m
iShares USD Short Duration Corp Bond UCITS ETF USD (Acc) -$28.3m
*Fund in Focus or any portion of this newsletter are informational only and not intended to provide recommendations of any kind.