SSgA Lowers Sector SPDR Prices

Earlier in the year, SSgA lowered the annual expense ratio on its nine Select Sector SPDRs from 23 bps to 21 bps. The move appears to be made at least in part with the intention of capitalizing on a recent price increase by Vanguard: The home of the first index mutual fund raised the expense ratio on its own exchange-traded sectors to 0.25 percent, up from 0.22 percent last year.

Vanguard’s decision seems to be motivated largely by economic necessity—with significant asset declines in 2008, the sector ETFs benefit less from the “economies of scale” that ETFs with more assets can still exploit. The firm is widely known for its “at cost” pricing on its index funds.

Strategic Insight Projects $1 Trillion In ETF Assets

A new study out by the mutual fund research firm Strategic Insight predicts that ETF assets will top $1 trillion globally within two years. The report said that, as more investors turn to asset allocation and advisers increasingly use fee-only compensation models, asset levels should grow.

The report found that 70 percent of advisers questioned said it’s highly likely they’ll increase their use of ETFs in the next two years. It also said that assets are skewing more toward retail channels, with individual investors (including advisers) now representing at least half, and possibly as much as 60 percent, of the total ETF marketplace. It said that 70 percent of use by individual investors of ETFs will come in the form of replacements for stocks rather than substitutions of actively managed mutual funds.

The report also projected that ETF use will grow faster in Europe because of strong usage by institutional investors.

MacroMarkets Revises Housing ETF Filings

MacroMarkets has revised plans for its planned housing ETFs, the MacroShares Major Metro Housing Up (NYSE Arca: UMM) ETF and MacroShares Major Metro Housing Down (NYSE Arca: DMM) ETF. Originally, the firm had applied to the SEC for two funds that aim to deliver 200 percent and -200 percent of the returns of the S&P/Case-Shiller 10-City Composite Home Price Index. The new filing ups the ante to 300 percent and -300 percent of the returns.

Like all MacroShares products, the new housing ETFs will follow the unique MacroShares product structure. The funds are issued as pairs, with equal numbers of Up and Down shares, and hold Treasuries as their only asset. The funds’ NAVs are adjusted monthly based on the returns of the target index, with assets shuttled from the Up to the Down fund (or vice versa) depending on how the index moves.

All MacroShares are issued for specific terms. In the new filing, MacroMarkets shortened the term for the new funds from 10 to five years. After five years, the funds will be liquidated and shareholders will receive exact payouts based on the NAV of the funds at that time.

The expense ratio for the ETFs is expected to be 1.25 percent. At press time, no launch date was set.

First Airlines ETF Debuts

Claymore became the first-mover in yet another industry space, with the launch of the Claymore/NYSE Arca Airline ETF (NYSE Arca: FAA) in late January. FAA is the first airlines-specific ETF to launch in the U.S.

The Claymore ETF tracks a pure-play modified market-cap-weighted index covering the passenger airline industry. FAA holds 25 global airlines stocks—70 percent domestic and 30 percent international. All holdings must derive at least 50 percent of their business from passenger airline activity. The index is rebalanced quarterly.

FAA charges 0.65 percent in annual expenses.

RevenueShares Rolls Out Total Market Fund

The RevenueShares Navellier Overall A-100 Fund (NYSE Arca: RWV) launched in January.

Its underlying index selects components from a universe of some 4,800 stocks, mainly based on top-line sales. The Navellier Overall A-100 Index is reconstituted quarterly and was developed by Louis Navellier, a well-known growth-minded mutual fund and institutional money manager. Essentially, it arrives at its component list by using quantitative screens in combination with several equal-weighted factors: sales growth, operating margin growth, earnings-per-share growth, earnings revisions, earnings surprises, earnings momentum, return on equity and free cash flow.

RWV charges a net expense ratio of 0.60 percent.

Global X Makes Debut With Colombia ETF

A new ETF provider arrived on the scene on Feb. 6, when Global X Management launched the Global X/InterBolsa FTSE Colombia 20 ETF (NYSE Arca: GXG).

The fund is the first to cover the Colombian market and tracks the FTSE Colombia 20 Index. It has a concentrated portfolio with 20 names screened for liquidity and selected based on market capitalization. Constituents are capped at 20 percent of the index’s total weight. Banks, Oil & Gas, and Financial Services were the three largest sectors at its launch.

The fund charges an annual expense ratio of 0.86 percent.

FocusShares Plans Its Comeback

Just a few months ago, start-up FocusShares LLC decided to close its four ETFs, all of which focused on niche sectors. However, more recently it has filed for exemptive relief that would allow it to launch a family of target date ETFs.

Target date funds have been a white-hot product area in the mutual funds industry in recent years, particularly in the 401(k) market, where ETFs are looking to expand.

Although it is implied in FocusShares’ new filing that more funds could follow, the firm’s proposed second batch of funds feature six target date ETFs targeting five-year periods ranging from 2015 to 2040. The funds will track indexes from Mergent Inc.’s Indxis subsidiary. The underlying indexes are a combination of U.S. government STRIPS and equities, with the weights of both segments varying according to the index’s target date.

WisdomTree Modifies ETFs To Exclude Financials

WisdomTree Investments is changing the investment strategy of two of its dividend-focused ETFs so that they exclude exposure to the Financials sector.

Beginning in late April, the WisdomTree Dividend Top 100 (NYSE Arca: DTN) will be renamed the WisdomTree Dividend ex-Financials Fund; its international counterpart, the WisdomTree International Dividend Top 100 (NYSE Arca: DOO), will be renamed the WisdomTree International Dividend ex-Financials Fund.

The funds will become the first dividend-focused ETFs to exclude Financials.

Van Eck Launches New Muni Funds

Van Eck rolled out two new municipal bond ETFs in the first week of February. Both funds break new ground in the area of muni ETFs.

The Market Vectors Pre-Refunded Municipal Index ETF (NYSE Arca: PRB) launched first; it tracks the Barclays Capital Municipal Pre-Refunded-Treasury-Escrowed Index. The index covers muni bonds that are essentially refinanced debt secured by U.S. Treasuries, thereby combining both the tax-free nature of municipal debt and the credit quality of federal government debt. PRB could be a fit for investors who are uncomfortable with the increased risk levels in the traditional muni bond space. The fund charges an annual expense ratio of 0.24 percent.

A few days after PRB’s debut, Van Eck introduced the Market Vectors High-Yield Municipal Index ETF (NYSE Arca: HYD). HYD tracks the Barclays Capital Municipal Custom High Yield Composite Index. The fund charges annual expenses of 0.35 percent.

SSgA Launches Short-Term Treasury And MBS ETFs

State Street Global Advisors launched the SPDR Barclays Capital Short Term International Treasury Bond ETF (NYSE Arca: BWZ) and the SPDR Barclays Capital Mortgage Backed Bond ETF (NYSE Arca: MBG) in late January.

BWZ targets international investment-grade debt issued in local currencies with maturities of one to three years. It covers mainly developed but also emerging markets. BWZ charges 0.35 percent in annual expenses.

MBG tracks the Barclays Capital U.S. MBS Index, which covers investment-grade, U.S. agency mortgage-backed securities; i.e., MBS backed by government-chartered entities like Ginnie Mae, Freddie Mac and Fannie Mae. It charges 0.20 percent in annual expenses.

SSgA Rolls Out Intermediate-Term Bond ETF

State Street Global Advisors has launched an intermediate-term bond ETF focused on investment-grade corporates and government debt.

The SPDR Barclays Capital Intermediate Term Credit Bond ETF (NYSE Arca: ITR) started trading in February. It carries an annual expense ratio of 0.15 percent and tracks an index of more than 2,500 bonds and a weighted maturity of 5.2 years.

Although it can invest in agency and related noncorporate securities, ITR’s holdings at least initially are heavily slanted toward investment-grade corporate bonds. At its launch, two sectors, Industrials (37.4 percent) and Financials (36.2 percent), dominated constituents of the ETF’s underlying index. Agencies and local authorities made up a combined 8.6 percent. The new ETF also has a sprinkling of some sovereign debt.

Long-Term Fixed-Income SPDR Starts Trading

In March, SSgA rolled out the SPDR Barclays Capital Long Term Credit Bond ETF (NYSE Arca: LWC). The new ETF is designed to provide access to investment-grade corporate and noncorporate bonds with maturities of 10 years or more. It comes with an expense ratio of 0.15 percent.

Entering 2009, LWC’s index included 965 issues with an average dollar-weighted maturity of 24.39 years. It has one of the longest—if not the longest—average maturities of any available fixed-income ETF. Given the state of markets lately, demand has been strong for long-term bond funds. Typically, longer-termed issues stand to gain more than those with shorter terms in periods of low-interest rates and bearish stock markets.

BGI Launches Two Fixed-Income ETFs

Barclays Global Investors launched two new international Treasury ETFs on the NASDAQ in January.

The iShares S&P/Citigroup International Treasury Bond Fund (Nasdaq GM: IGOV) and the iShares S&P/Citigroup 1-3 Year International Treasury Bond Fund (Nasdaq GM: ISHG) are both based on indexes tracking Treasury bonds that are issued in local currencies by developed markets other than the U.S. ISHG is limited to bonds with maturities between one and three years, while IGOV covers a broader timeline. Both cover 19 developed markets and charge an annual expense ratio of 0.35 percent.

CFTC Investigates USO

In late February, the U.S. Commodity Futures Trading Commission launched an investigation into the trading activity of the United States Oil Fund LP (NYSE Arca: USO).

Specifically, the CFTC is looking at USO’s trading activity on Feb. 6, when it rolled its entire portfolio of oil futures contracts from the March contract to the April contact. It should be noted that the concerns about USO are actually just one facet of a wider investigation into the oil market and trading practices.

At the time of the trade, USO’s management strategy called for it to roll its entire portfolio of West Texas Intermediate contracts from front-month contracts to the following month’s contracts on a single, prespecified day. One obvious concern is that such a large trade taking place each month all at once could artificially move the market.

However, the USO investigation may prove irrelevant. USO’s managers have said the fund will be changing its roll policy going forward. Rather than rolling its portfolio in a single day, the fund will break up the roll over four days, which should mitigate its impact on the market.

Credit Suisse Shutters ETNs

Credit Suisse Securities, the issuer of four Elements-branded ETNs, said that it was pulling three of the products off the New York Stock Exchange due to insufficient trading volumes. The Elements MLCX Gold Index ETN (NYSE: GOE), the Elements MLCX Livestock Index ETN (NYSE: LSO) and the Elements MLCX Precious Metals Plus Index (NYSE: PMY) were all set to end trading on April 3.

However, there is a possibility that the trio of ETNs will trade over the counter, and there currently is no plan to delist Credit Suisse’s fourth ETN, the Elements Credit Suisse Global Warming ETN (NYSE: GWO)—although that has not been ruled out. The three delisting ETNs all track indexes in the Merrill Lynch Commodity Index eXtra family of commodity indexes.

Source ETF Approved To Go Forward

Source ETF, the new joint venture between Goldman Sachs and Morgan Stanley, has received approval from the Irish Financial Regulator for the launch of 50 ETFs.

The ETFs will be launched under a UCITS umbrella fund called Source Markets plc, with Bank of Ireland as the custodian. No information is yet available on the listing date, the initial exchange of listing or fund fees.

The 50 ETFs approved as of Jan. 31 have a strong equity bias, consisting of funds tracking a number of developed market country indexes, pan-European broad, sector, dividend-weighted and capitalization band indexes, MSCI World, the FTSE EPRA Eurozone property index and a number of emerging market indexes. Only one fixed-income ETF, tracking the EONIA money market index, is among the 50.

China To Get Nasdaq-100 ETF?

The Nasdaq-100 Index, already the basis for one of the most popular ETFs in the U.S., is headed for China.

The Nasdaq OMX Group Inc. and Guotai Asset Management of Shanghai jointly announced that both will work on development of an exchange-traded product based on the popular Technology-heavy benchmark. It would be the first foreign-index-linked product to list in China.

The move marks a significant expansion by Nasdaq. At the end of January, BGI analyst Deborah Fuhr listed the company as the 11th-biggest index provider in the world based on ETF assets under management tied to its products, with an estimated global market share of 2.4 percent.

DB Launches ETFs In Asia

Deutsche Bank entered Singapore’s ETF market in late February with the launch of four ETFs. The country already had a range of ETF listings covering Asian markets and other asset classes, but the Deutsche Bank ETFs include Asia’s first inverse fund.

Three of the db x-trackers ETFs are tied to indexes representing the stock markets of Asian countries: Taiwan, India and China. The fourth fund offers short exposure to the S&P 500 and tracks the S&P 500 Short Index, which was created by Standard & Poor’s with the express purpose of underlying investable products.

According to Deutsche Bank, this is just its first push into Asian markets, and it intends to follow up with more launches of country and regional ETFs, as well as short and leveraged funds, in Singapore and the rest of Asia.

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