Tag Archives: chinese

Weekly ETF Asset Round-Up: Equity Tops, Bonds Lag

Last week, the U.S. economy injected a fresh lease of life into the market, which has lately been troubled by Chinese hard landing fears, stretched equity valuations, oil price worries and some downbeat global economic data. The bulls have once again taken the center stage mainly because of an oil-rebound, though uncertainty is prevalent. Let’s take a look at the ETF asset flow of last week to understand the changing perception of investors. Improvement in the U.S. job scenario, inflation, manufacturing, construction spending, and housing and consumer spending data along with a spike in oil prices resulted in huge money inflows into the U.S. equity funds last week as per etf.com (as of March 3, 2016). Asset Gainers As a result, the SPDR S&P 500 Trust ETF (NYSEARCA: SPY ) , an ETF that resembles the S&P 500 index, saw inflows of nearly $1.76 billion last week. This took the fund’s asset base to around $176.7 billion. The return of risk-appetite was also validated by asset gains in the junk bond ETF space. The space has long been downtrodden. This was because that this segment has huge exposure in the energy market and includes debt issued when oil prices were at lofty levels. Oil prices slid in early 2016, putting energy companies on the verge of default and pressure on junk bonds. However, recent risk-on sentiments in the market and an oil price recovery pushed investors to pour more than $1.16 billion and $1.13 billion in the SPDR Barclays High Yield Bond ETF (NYSEARCA: JNK ) and the iShares iBoxx $ High Yield Corporate Bond ETF (NYSEARCA: HYG ) last week. Investors’ interest in risky assets may be back, but probably not in a full-fledged way. As much as $1.31 billion asset inflows into the gold bullion ETF, the SPDR Gold Trust ETF (NYSEARCA: GLD ) , revealed this. Gold demand has been surging lately on a safety bid. Investors’ continued interest in the yellow metal tells us that not only is volatility still present, the recent rally may also lose momentum any time soon. Inflation-protected bond ETF the iShares TIPS Bond ETF (NYSEARCA: TIP ) also gathered about $529 million in assets as the U.S. inflation outlook brightened on a relatively subdued U.S. dollar and recuperating energy prices. Asset Losers The fixed income world saw outflows with the iShares Short Treasury Bond ETF (NYSEARCA: SHV ) topping the losers’ list, having shed about $1.22 billion in assets. Just as the U.S. economy started delivering upbeat data, talks over rate hikes were back on the table. This will surely hamper investors’ interest in short-term Treasury bond ETFs as further Fed hikes would have the worst impact on the short-end of the yield curve. Another short-term bond ETF, the iShares 1-3 Year Treasury Bond ETF (NYSEARCA: SHY ) , saw a $330.9 million reduction in assets. Ultra short-term investment grade bond ETFs including the PIMCO Enhanced Short Maturity Strategy ETF (NYSEARCA: MINT ) and the SPDR SSgA Ultra Short Term Bond ETF (NYSEARCA: ULST ) also lost $422.4 million and $179.7 million in assets, respectively, last week. Apart from short-term bond ETFs, intermediate bonds products like the iShares 3-7 Year Treasury Bond ETF (NYSEARCA: IEI ) and the SPDR Barclays Intermediate Term Treasury ETF (NYSEARCA: ITE ) saw assets worth $374.8 million and $230.6 million, respectively, gushing out of the funds. Original Post

Robo Rise Barred By High Client Acquisition Cost

Robo-advisors need clients to operate and the cost of acquiring clients in financial services is high. To us, this is the elephant in the robo-advisor room that is seldom discussed – which we believe is a strategic failure of the highest order. It is an overriding concern that hangs over all other discussions about robo-advisors. Acquisition costs include the costs of initially finding a prospect and then converting those prospects into clients, with the inevitable attrition rate that those conversions incur. When total costs are compared to clients gained, the results can be surprisingly high. Lucian Camp calculates the cost of acquiring a client in the UK to be around £200 (US$312). This cost is beyond the means of many advisory firms, which is why they grow rather slowly – largely through word of mouth referral. In the past, they might have relied on product manufacturers and distributors to provide them with marketing support. Under new regulations in the UK, such supports are now largely no longer possible, but they continue to thrive in the US marketplace. In a world where former specialties have become commoditized, being able to make a financial product or service no longer makes you special as it once did. Where, in the past, you may have been able to extract an economic rent because you occupied a position of advantage, market forces have now equalized you. Today, the ability (knowledge) and capacity (cash flow) to quickly market financial products to scale is what separates successful financial services businesses from the ‘also-rans’. It does not matter if you arrive at the marketplace with a better mousetrap if that trap is hidden where the mice cannot find it. Cheese – in the form of marketing, advertising and promotion – will help to attract them. But cheese isn’t cheap. We return, once again, to our initial caution – robo-advisors are very good at servicing customers, but do nothing to attract customers. Putting a robo-adviser to work effectively requires considerable investment in marketing and promotions, with no guarantee of success. Vitamins and supplements are equally generic. Yet, a family business in Australia figured out how to create a brand that made generic inputs ‘special’. In late 2015, a Chinese firm acquired the vitamin and supplement company, Swisse, for A$1.5 billion (US$1.05 billion). Swisse is a marketing machine – it is constantly in the news, through its sponsorship of high-profile ambassadors and it spends a lot of money on advertising. It is rumored that its annual marketing budget is A$50 million (US$35 million) when the cost of the raw materials for all of the products it makes is less than A$5 million (US$3.5 million). Vitamin C is not special – being part of the brand image and lifestyle Swisse promotes is special. More than US$1 billion worth of special! Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. Additional disclosure: For FA audience/ Gil Weinreich