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ETF Asset Report Of H1: Currency Hedging Tops; U.S. Flops

As we step into the second half of 2015, it might be useful to look at how the $2.16-billion ETF industry performed in the first half of the year. After analyzing, we can conclude that currency-hedged ETFs and developed markets were the star performers in terms of asset gathering, as these saw maximum inflows, while the broader U.S. market was the laggard. Though “Grexit” worries in June had a last-minute impact on the half-yearly asset report, it could not totally derail the original sentiments. Let’s find out the top gainers and losers in terms of asset growth in the first half of 2015 (Source: etf.com ). Gainers Currency Hedging – WisdomTree Europe Hedged Equity ETF (NYSEARCA: HEDJ ) Currency hedging as a technique rocked in the first half of this year when it came to playing the developed economies like Europe. The rounds of monetary easing and the launch of the QE policy revived the eurozone this year. While policy easing devalued European currencies, the greenback strengthened on rising rate worries in the U.S. This policy differential made the currency hedging theme a shining star in 1H. Thanks to this trend, HEDJ, an ultra popular Europe ETF, was at the helm, having amassed over $14 billion in assets so far. Another exchange-traded fund, the Deutsche X-trackers MSCI EAFE Hedged Equity ETF (NYSEARCA: DBEF ), which tracks the stocks from Europe, Australia and the Fast East, also added about $10.7 billion to its asset base and took the second spot. Developed Economies – iShares MSCI EAFE ETF (NYSEARCA: EFA ) Since accommodative policies were common in developed nations, from Europe to Japan to Australia and some emerging economies, EFA and the Vanguard FTSE Developed Markets ETF (NYSEARCA: VEA ) took the third and tenth spots in the list, respectively. EFA hauled in about $6 billion, while VEA gathered about $2.7 billion in assets. Among the developed economies, Japan drew sizeable investor attention on stepped-up economic stimulus and after having come out of a technical recession in the final quarter of 2014. Though aggressive stimulus devalued the yen and bolstered the appeal for the hedged Japan ETFs, regular funds also did well in the first half. As a result, the WisdomTree Japan Hedged Equity ETF (NYSEARCA: DXJ ) and the iShares MSCI Japan ETF (NYSEARCA: EWJ ) – taking the sixth and seventh spots – saw inflows of $4.4 billion and $3.24 billion, respectively. Europe ETFs also gave an all-star performance, despite Greek debt default worries. Accordingly, the Vanguard FTSE Europe ETF (NYSEARCA: VGK ) and the iShares MSCI Germany ETF (NYSEARCA: EWG ) – the eighth and ninth position holders, each stacked up over $2.7 billion in assets. Vanguard ETFs – Vanguard Total Stock Market ETF (NYSEARCA: VTI ) and Vanguard S&P 500 ETF (NYSEARCA: VOO ) Since the relatively smaller market cap U.S. stocks rocked the show in 1H being better bets to guard from the rising dollar, the success behind VTI was self-explanatory. As the name suggests, VTI targets stocks across the capitalization spectrum and amassed about $4.9 billion assets. However, this does not seem the sole reason for the fund’s success. Vanguard’s low-cost approach was immensely popular in the last few years, which is why the issuer saw its asset base growing by leaps and bounds. Probably this was why VOO saw net asset inflows of $4.5 billion in 1H, despite the broader market underperformance. Losers U.S. – SPDR S&P 500 ETF Trust (NYSEARCA: SPY ) SPY, having witnessed an outflow of $42.7 billion in assets to-date, was the hardest hit. Though it started to gain traction on several occasions this year in line with the broader U.S. economic recovery, it could not woo investors. After all, the S&P 500 was flat in the first half. A soaring greenback and a harsh winter in the first quarter wrecked havoc on this benchmark index. Another fund by iShares, the iShares Core S&P 500 ETF (NYSEARCA: IVV ), also lost about $2.37 billion in assets. Investors should note that other ultra-popular ETFs that track key U.S. bourses like the Nasdaq and Dow Jones saw assets bleeding out of their products. The PowerShares QQQ Trust ETF (NASDAQ: QQQ ), which looks to track the tech-heavy Nasdaq, shed about $2.83 billion in assets and became the third-highest loser of 1H. The SPDR Dow Jones Industrial Average ETF (NYSEARCA: DIA ) too was in no better position, having lost about $1.67 billion in assets. Emerging Markets – iShares MSCI Emerging Markets (NYSEARCA: EEM ) The fund comes as a distant second, seeing a net exodus of about $3 billion in assets. The Fed rate hike worry was the major reason for investors’ aversion to the space. An anticipation of a cease in cheap dollar inflows may have caused investors to flee the space. Rate-Sensitive Sectors – Consumer Staples Select SPDR ETF (NYSEARCA: XLP ) and iShares U.S. Real Estate ETF (NYSEARCA: IYR ) Rate hike concerns sent jitters in the high-yielding sectors of the U.S. economy, leading investors to shy away from consumer staples and REIT ETFs, known for their high dividend yield. As a result, XLP had to sacrifice about $2.66 billion in net assets, while IYR surrendered about $1.61 billion. Original Post

June AAII Asset Allocation Survey: Cash Levels Continue To Rise

Stock and stock fund allocations declined but remain above their historical average for the 27th month in a row. Bond, bond fund and cash allocations only showed minor changes this month. Of alternative investments held by members, real estate is represented the most. The June AAII Asset Allocation Survey reveals that individual investors increased their cash allocations for the third consecutive month. The rise in cash levels occurred as equity allocations fell to their lowest level since January. Stock and stock fund allocations declined 0.5 percentage points to 67.2%. June tied January for having the smallest allocation to equities in 2015. Nonetheless, stock and stock fund allocations remained above their historical average of 60% for the 27th consecutive month. Bond and bond fund allocations were unchanged at 15.5%. Technically bond fund allocations declined and bond allocations rose, but the changes were very minor. June was the second consecutive month with fixed-income allocations below their historical average of 16.0%. Cash allocations edged up 0.5%, to 17.3%. This third consecutive monthly increase kept cash allocations at their highest level since October 2014 (18.7%). The increase was not large enough to keep cash allocations from being below their historical average of 24% for the 43rd consecutive month, however. The rising level of cash corresponds with trends we’ve been seeing in our weekly Sentiment Survey. Neutral sentiment has been at an unusually high level for 12 consecutive weeks. Neutral sentiment’s record streak of consecutive weekly readings at or above 45% for 10 consecutive weeks lasted through much of last month. At the same time, many individual investors continue to be frustrated by the ongoing low-interest-rate environment. June’s special question asked AAII members if any portion of their portfolio is allocated to alternative investments (something we do not track in our monthly survey). Almost half of all respondents (49%) said no, they do not hold any alternative investments. Some said they have no interest in owning them, while others suggested they needed to learn more about these types of investments before deciding to allocate to them. A small group of members asked us to define what counts as an alternative investment. Slightly more than a third (35%) said they own alternative investments. Many described their allocations to “alts” as accounting for 10% or less of their total portfolio. Real estate was most common, with 15% of all respondents saying they had exposure to it either through real estate investment trusts (REITs) or via a direct ownership. One member has ownership in a vineyard. Here is a sampling of the responses: “I do not and will not consider ‘alternative investments.'” “No, because I do not have enough information about ‘alternative investments’ for evaluation.” “Not much…I tried silver, gold, stamps, and convertible bonds; no returns are as good as stocks.” “Yes, about 8% to 10% of my portfolio is in ‘alternative investments.'” Note: A spreadsheet error led to incorrect data being sent out in last month’s press release. The correct numbers for May’s Asset Allocation Survey were as follows: stocks and stock funds: 67.7% (down 0.2 percentage points), bonds and bond funds: 15.5% (down 0.7 percentage points) and cash: 16.9% (up 1.0%). June AAII Asset Allocation Survey results: Stocks and Stock Funds: 67.2%, down 0. 5 percentage points Bonds and Bond Funds: 15.5%, unchanged Cash: 17.3%, up 0.5 percentage points June AAII Asset Allocation Survey details: Stock Funds: 33.5%, down 1.1 percentage points Stocks: 33.6%, up 0.6 percentage points Bond Funds: 11.8%, down 0.1 percentage points Bonds: 3.8%, up 0.1 percentage points Historical Averages: Stocks/Stock Funds: 60% Bonds/Bond Funds: 16% Cash: 24% *The numbers are rounded and may not add up to 100%. The AAII Asset Allocation Survey has been conducted monthly since November 1987 and asks AAII members what percentage of their portfolios are allocated to stocks, stock funds, bonds, bond funds and cash. The survey and its results are available online here . Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…) 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.

Fed Risk Vs. Grexit: A Volatility-Based Approach

Long-term horizon, energy, currencies “}); $$(‘#article_top_info .info_content div’)[0].insert({bottom: $(‘mover’)}); } $(‘article_top_info’).addClassName(test_version); } SeekingAlpha.Initializer.onDOMLoad(function(){ setEvents();}); The spread of implied volatilities on both the S&P500 (VIX) and the Euro Stoxx 50 (VSTOXX) has widened to a new high. It is clearly attributable to the renewed tensions on a possible Grexit. Yet, the forthcoming Fed tightening might lead to an increase in the VIX, hence my suggestion to play a tightening of the volatility spread. The post-winter acceleration of growth in the U.S. has been a blessing but also a curse since it increases the probability of a liftoff in the second half of 2015. So far, the risk associated to what we could call a traditional cyclical/monetary policy related risk has been overwhelmed by that related to Greece. The chart below shows the spread between implied volatilities on European vs. U.S. stocks. Since the beginning of the year, it has been very responsive to the news flow pertaining to the “Grexit”. The link is also visible on a month-over-month basis, where it shows that the volatility spread might widen a little bit more. The same pattern is also visible in the FX space where the implied volatility on the EUR/USD has risen much more against the CVIX. Interestingly enough, the EUR/USD is well above parity even though the distance to default of Greece has never been that short. The strength of the trade balance of the Euro area is probably part of the explanation. The view here is simple. Any worsening of the Greek crisis should not be rejected but given 1. The width of the spread between Vstoxx and VIX; 2. It’s tendency to mean revert 3. The possibility that Yellen remains evasive enough to increase the uncertainty related to the aggressiveness of the Fed between now and year-end. I would not be surprised by a tightening, over the next few weeks, of the volatility spread across the Atlantic. Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…) The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article. Share this article with a colleague