Can the U.S. catch up to Europe’s embrace of ESG?
Fund Launches and Updates
Amundi launched a new Japanese equities ETF, the Amundi Index MSCI Japan SRI UCITS ETF DR – Hedged EUR (C), which provides exposure to large and medium-sized Japanese companies with an ESG focus. The ETF is listed on Xetra and Börse Frankfurt. Link
DWS expanded its ETF offering with the launch of four new strategies offering a range of exposures including US tech stocks, sustainable European equities, and two US sectors. Physically replicated, the four ETFs are listed on the Deutsche Boerse and the LSE with TERs ranging from 0.12% to 0.20%. Link
Lyxor has converted its EUR and USD investment-grade corporate credit ESG ETFs to physical replication. It has also cut their fees from 0.20% to 0.14%. Link
Nomura has ended its European ETF range just six years after launching in 2015.
The four ETFs, which offer exposure to Japanese equities, officially delisted on 20 January. The range, which listed on the London Stock Exchange and SIX Swiss Exchange a year later in 2016, had $85.5m assets under management. Link
WisdomTree launched the WisdomTree Cybersecurity UCITS ETF (WCBR) on the London Stock Exchange, Borsa Italiana and Börse Xetra, TER of 0.45%. Press Release
VanEck has filed plans for the VanEck Vectors Digital Assets ETF. VanEck’s Digital Assets ETF will follow the MVIS Global Digital Assets Equity Index. Last month, VanEck filed plans for the VanEck Bitcoin Trust. Link
Flows
Emerging market ETFs captured big inflows. According to data from Ultumus, the $5.6bn UBS ETF MSCI Emerging Markets UCITS ETF (EMMUSA) saw $753m inflows in the week to 22 January, the most across all European-listed ETFs.
Following this, investors poured $102m into the $1.3bn Xtrackers MSCI Emerging Markets ESG UCITS ETF (XZEM) over the same period. Link
Looking back at 2020, it was a great year for ETFs, with global inflows surpassing $750 billion for the year and global assets under management growing by over 30%. Additionally, in Europe, it was the third-best year on record for inflows, with almost $120bn net into European-domiciled ETFs.
Looking forward, Jason Xavier outlines his thoughts on three key trends in ETFs which may dominate flows in 2021 here.
Franklin Templeton has been named the world’s worst-selling retail fund manager for 2020 after investors pulled almost $50bn. The asset manager has suffered more than half a decade of heavy redemptions, repeatedly holding the crown of the worst-selling investment manager.
Clients withdrew a net $48.3bn from Franklin Templeton’s mutual funds last year, according to figures from data provider Morningstar. Link
Noteworthy
ETF trading across European stock exchanges has increased dramatically over the past 12 months, in a sign investors are moving away from over-the-counter (OTC) trading in favour of increased transparency and reduced settlement risk.
The London Stock Exchange saw ETP orders jump to £154.8bn in 2020, up 50%, versus a turnover increase of just 5.9% across the overall market. Likewise, ETPs accounted for 12.4% of the LSE’s order book in 2020, up from just 5% in 2015.Link
The UK government is exploring whether the country could become a hub for exchange traded fund launches as it looks for ways to boost the asset management industry outside the EU.
Among the areas being examined by the government is whether the UK could become a centre for ETFs as it is “not aware of any significant remaining barriers” for ETFs to be domiciled in the UK. Link
Nice plug in the FT last week for Jane Street which has become one of the world’s largest market-makers, trading more than $17tn worth of securities in 2020. Its forte is lubricating trading in exchange traded funds, which manage nearly $8tn of assets according to data provider ETFGI.
Jane Street is especially dominant in the niche but rapidly growing world of bond ETFs. Link
Bloomberg’s ETF expert, Eric Balchunas, wrote an interesting opinion piece highlighting the SEC’s dragging its feet on the issue of approving crypto ETFs.
The piece highlights a recent Twitter poll which found that almost 80% of the 2,192 people who responded believe the SEC should approve a bitcoin ETF. About 50% would invest in one. Link
Interest in thematic exchange traded funds has accelerated in recent years, but research shows buyers should beware.
Academics have found that thematic ETFs, on average underperform the stock market on a risk-adjusted basis by about 4 percentage points a year for at least five years following their launch. However, despite the researchers warnings, the unique features of a thematic fund can pay off for an investor. Link
China’s two main stock exchanges in Shanghai and Shenzhen and the Japan Exchange have added new exchange traded funds and vowed to expand the product types included in their joint ETF Connectivity scheme which was launched 18 months ago.
Debuted in June 2019, the scheme allowed four Chinese and four Japanese asset managers to list new ETFs that invest and can be traded in each other’s market. Link
Wall Street’s new mantra: green is good. Bankers once saw tackling climate change as a niche issue. Now it is a chance to fuel future profits. Is it a turning point?
Larry Fink insists that this revolution which he is now championing will deliver good.
“I am 68 years old and have seven grandchildren. I want to leave the planet better for them but I am not doing this for environmental reasons — I am a fiduciary responsible for other people’s money and climate change is affecting their investments.”
And whether or not you believe him, the one thing that is clear is that if Fink is steering his $8tn-plus behemoth into green waters, others will follow. Link
Fund in Focus
This week we are looking at ETFs which have exposure to GameStop. Almost 100 global ETFs are exposed with a total 13.6m shares representing a 19% stake in GameStop. In the UK, five ETFs have the following exposure to GME:
– SPDR MSCI USA Small Cap Value Weighted UCITS ETF 2.4%
– iShares S&P SmallCap 600 UCITS ETF 2%
– SPDR Russell 2000 US Small Cap 0.9%
– iShares MSCI World Small Cap 0.3%
– Legal & General Investment Management 0.8%
Not too high for any of the five and its sounds like silver is the new target so we will see how those ETFs trade this week.
