Tag Archives: europe

November ETF Asset Report

The month of November was all about heightened Fed lift-off bets and geo-political flare-ups on the Paris terror attacks. While the first confirms the U.S. growth momentum, more so after the upward revision in the Q3 GDP numbers (from 1.5% to 2.1%), the second points to lingering geopolitical threats in the coming months. Investors seem to have reacted along the headlines. At least, the asset flow pattern says that. Let us explain the trend below. ETF Asset Gainers U.S. After nagging speculations on the rate hike timeline, direct hints from the Fed this time were well digested by the market. Investors appeared to have paid more attention to the improving economy than to the fears that cheap money will now call it quits. As a result, several U.S. ETFs found a place in the top-10 asset gatherers’ list with the large-cap U.S. ETF iShares Russell 1000 ETF (NYSEARCA: IWB ) being at the helm. The fund added over $2.6 billion in assets in the month. This propelled its AUM to $15.1 billion. Three other U.S. ETFs, small-cap iShares Russell 2000 ETF (NYSEARCA: IWM ), large-cap blend Vanguard S&P 500 ETF (NYSEARCA: VOO ) and large-cap growth ETF iShares Russell 1000 Growth (NYSEARCA: IWF ) added about $2.26 billion, over $811 million and over $717 million, respectively, to their asset base. Total Bond Market Probably to spread out the risk and earn returns in the face of an impending rate hike, investors opted for the total bond market approach. This increased investors’ lure for iShares Core U.S. Aggregate Bond (NYSEARCA: AGG ) which has exposure to both government and corporate bonds. Maturity-wise, the fund follows a diversified approach. AGG hauled in about $2.45 billion to exit the month with about $30 billion in assets. Developed Markets The wave of easy money polices across the international arena, be it in Europe or the Asia-Pacific, has brightened the appeal for the developed market. In fact, the Euro zone is mulling over further policy easing if deflationary risks shoot up. This is why funds like iShares Core MSCI EAFE (NYSEARCA: IEFA ) and iShares MSCI EAFE (NYSEARCA: EFA ) have attracted about $1.53 billion and $1.02 billion, respectively. Another ETF Vanguard FTSE Developed Markets ETF (NYSEARCA: VEA ) also added about $755.7 million in assets. ETF Asset Losers Short-term U.S. Bonds The Fed’s plans to raise the benchmark interest rates in December after almost a decade, will no doubt hurt the short-term bond ETFs the most. As expected, investors rushed to leave the zone and as much as $1.36 billion in assets gushed out of the short-term bond ETF iShares 1-3 Year Treasury Bond ETF (NYSEARCA: SHY ). Another ETF SPDR Barclays 1-3 Month T-Bill (NYSEARCA: BIL ) lost $552.8 million in assets. Gold As the Fed is gearing up for policy tightening, the greenback has gained strength and is weighing on gold. Prices of gold slipped to the six-year low in the month. Even a safe haven appeal in the wake of the terrorist attacks in several parts of the globe in November could not hold back investors from fleeing the yellow metal. SPDR Gold ETF (NYSEARCA: GLD ) had to sacrifice about $1.3 billion in net assets. High Yield As the yield on the benchmark 10-year U.S. government note rose to 2.23% (as of November 25, 2015) from 2.20% at the start of the month, investors started to dump all high-yield bond ETFs. Junk bond ETF SPDR Barclays High Yield Bond (NYSEARCA: JNK ) witnessed outflows of about $1.02 billion and took the third spot. Original post

Health Of Eurozone Recovers: ETFs To Watch

The eurozone is showing signs of a speedy recovery, as evident from the four and a half year high expansion in its business activity for the month of November. According to a flash estimate by data firm Markit, the eurozone purchasing managers’ index inched up to 54.4 this month from 53.9 in October . This surpassed the threshold score of 50, which hints at an expansion in activity. The growth profile has weakened in recent times in the eurozone, failing rounds of monetary easing. The bloc recorded 0.3% growth in Q3, declining from a 0.4% rise in Q2 and falling short of market expectation. The growth rate in Q3 was the softest in a year as development cooled down in the eurozone’s heavyweights Germany and Italy. In such a backdrop, the news of fast-expanding business activity spread optimism among investors. New business growth was noticed in both service and manufacturing sectors. Germany turned up a super performer as companies experienced “their strongest monthly gains in new business orders for two years”. The boost has come at an opportune moment, when the ECB is mulling over further easing in policies to boost inflation and economic growth. The European Central Bank (ECB) president, Mario Draghi, reassured of a more intensified and protracted QE measure, if need be. He reaffirmed the evaluation of the monetary policy by the end of this year based on a volley of economic data. However, the latest upbeat data raises confusion over the ECB’s potential altruism in the December meeting, forcing some to believe that further easing may not be as generous as thought previously. But a stubbornly low inflation profile, thanks to the commodity market rout, gives all reasons to expect further monetary easing from the ECB. Overall, the chief economist at Markit indicated that the eurozone was “on course for one of its best quarterly performances over the past four and a half years.” Based on this data, he expects the euro bloc to post 0.4% economic growth in the final quarter of the year. Meanwhile, Greece received a bailout loan from the euro area member states as the former agreed to enact the stated austerity measures. ETFs to Watch Below, we highlight three European ETFs that could be tapped to play the latest uptick in business sentiments. To do this, we land up on currency-hedged ETFs, as this is the most-watched investing technique currently, thanks to opposing monetary policies in the U.S. and the eurozone. While the greenback is strengthening on a looming rate hike in the U.S., the euro is sliding on accommodative policies by the ECB (read: Guide to Currency Hedging ETFs ). WisdomTree Germany Hedged Equity ETF (NASDAQ: DXGE ) Since Germany was the main driver of the latest surge in business activity, German ETFs warrant a look. This German ETF holds 75 securities in its basket. It has a slight tilt toward the consumer discretionary sector, with 21.7% share, followed by double-digit exposure each in financials, industrials, materials and healthcare. It has managed assets worth $286 million, and trades in good volume of 165,000 shares a day, on average. The fund charges 48 bps in annual fees, and is up 9.6% so far this year (as of November 23, 2015). DXGE has a Zacks ETF Rank of 2 with a Medium risk outlook. WisdomTree Europe Hedged Equity ETF (NYSEARCA: HEDJ ) This fund can be viewed as a replica of the broad-based European growth. The fund appears rich, with AUM of nearly $21.3 billion. Its expense ratio comes in at 0.58%. Holding 130 securities in its basket, the product is pretty well spread out across components, with no firm making up for more than 6.19% of its assets. Consumer staples, industrial, consumer discretionary, financials and healthcare each have double-digit weight in the fund. In terms of country allocations, Germany and France are leading with 26.1% and 24.2% share, respectively, followed by the Netherlands (17.2%) and Spain (16.5%). The Zacks Rank #3 (Hold) fund is up 11.2% so far this year (as of November 23, 2015). WisdomTree Europe Hedged SmallCap Equity ETF (NYSEARCA: EUSC ) Since small-caps companies tend to pick up more when an economy improves, a look at the small-cap European companies seems justified. The fund provides exposure to close to 237 of the smallest European companies. This ETF has amassed about $245.7 million. The product is highly diversified, with no stock accounting for more than 2.06% of the portfolio. Sector-wise, industrials get the maximum exposure, at 25.9% of the portfolio. Financials and consumer discretionary also get double-digit allocation each, while energy gets the least exposure, at only 2.35% of the basket. As far as country exposure is concerned, Italy (21.1%), Germany (17.2%), France (16.4%) and Finland (13.1%) get top priority. The fund charges 58 bps in fees, and is up about 1.6% so far this year. Original Post

Wisdom Tree Small-Cap Global ETF: Currency-Hedged Version

Since the importance of currency hedging international investing is known to all, thanks to the soaring greenback against a basket of currencies, WisdomTree could not hold itself back from rolling out a currency-hedged global small-cap ETF, a few days after launching the WisdomTree Global SmallCap Dividend ETF (BATS: GSD ). The newly launched fund is named WisdomTree Global Hedged SmallCap Dividend Fund and trades under the ticker symbol HGSD . In any case, WisdomTree is almost at the helm of the currency-hedged ETF investing style. And this strategy would be extremely meaningful next year, as the Fed looks to hike key rates by the end of this year and most developed nations (even some emerging markets) are following the easy money policy to boost their economies (read: ” Can Anyone Match WisdomTree in Currency-Hedged ETFs? “). Below, we highlight the key characteristics and the prospects of HGSD. HGSD in Focus HGSD looks to deliver the investment results of the 1,000 largest small-capitalization companies that fall in the bottom 5% of the WisdomTree Global Dividend Index. It simultaneously follows a currency-hedging exposure, which is a beneficial strategy to minimize the adverse fluctuations between the U.S. dollar and foreign currencies. The fund charges 43 bps in fees. Sector-wise, Financials dominates the fund with 26.43% allocation, closely followed by Industrials (20.1%), Consumer Discretionary (15.34%) and Materials (9.21%). Geographically, the U.S. takes about 49.24% of the total basket, with Japan taking the second spot, holding about 10.69%. The other regions account for single-digit holdings each. How Could it Fit in a Portfolio? The wave of easy money polices across the globe, be it in Europe or Asia, have brightened the appeal for dividend investing lately. Though the Fed is preparing for policy normalization in December, the modest U.S. growth momentum indicates a slower rate hike trajectory in the future. All these market forces should keep bond yields in check globally. As a result, investors looking for steady current income might shift their focus to high-dividend stocks. Moreover, all these market forces set the stage for global investing, but it in a currency-hedged manner to neutralize the dollar strength. The newly launched ETF’s heavy exposure in the U.S. and Japan will enable it to ride on steady economic growth. Though the Japanese economy has slipped into a recession, its central bank is pursuing an ultra-easy monetary policy which should act as a driver for investors. Other underlying nations, including the UK, Canada and Australia, have also chosen the accommodative policy route to boost their own economies. This will lead to stepped-up activities and rising business and consumer confidence, which, in turn, will benefit small-cap companies. After all, small caps are considered the measure of the domestic economy. In a growing economy, these pint-sized securities perform the best, as they generate most of their revenues from the domestic market and strip out global growth concerns. Competition Players in the global small-cap, currency-hedged ETFs are not many. Hardly two or three products are available now. So, HGSD will face stiff competition from the iShares Currency Hedged MSCI EAFE Small-Cap ETF (NYSEARCA: HSCZ ) and the WisdomTree International Hedged SmallCap Dividend ETF (NYSEARCA: HDLS ). However, WisdomTree’s other fund, HDLS, does not consider stocks outside the U.S. and Canada. So, HGSD should not face any hurdle in amassing investors’ assets. Original Post