ETF Market Developments And Trends

• The US-listed ETF market grew in terms of assets under management in May, increasing to $588 billion (versus $535 billion at the end of April and $530 billion at the end of 2008).
• The number of US-listed ETFs has continued to decline this year, as 42 ETFs were closed. Northern Trust exited the business, liquidating 17 ETFs, and PowerShares trimmed their ETF roster (eliminating 19 ETFs). In May, MacroMarkets LLC announced that it would be terminating the MacroShares $100 Oil Up Trust (UOY) and the MacroShares $100 Oil Down Trust (DOY), with trading scheduled to cease on June 26. The funds had combined assets of approximately $20 million.
• We expect to see continued closings, as there are still over 150 US-listed ETFs with less than $10 million in assets. However, new ETFs that match investor needs continue to gather meaningful assets, and I do not see ETF liquidation as a negative sign of the health of the industry.
• New ETF issuance slowed, with only 29 new ETFs being launched so far this year. However, new issues increased in May, with three new sponsors entering the market.
• New products from established issuers in May include The WisdomTree Dreyfus Emerging Currency Fund and the Van Eck Market Vectors Brazil Small-Cap ETF, both of which should benefit from renewed interest in emerging markets.
• The first family of ETFs offering exposure to sectors in emerging markets was launched by Emerging Global Advisors, starting with the EGS Emerging Markets Energy and EGS Emerging Markets Metals & Mining Funds.
• Grail Advisors launched The Grail American Beacon Large Cap Value ETF - the first ETF to use a team of three active managers using qualitative stock-picking processes.
• Finally, bond giant Pimco launched its ETF, with the debut of the Pimco 1-3 Year U.S. Treasury Index Fund with an initial expense ratio of just 9 basis points.
• In addition to launching its first ETF, Pimco filed six more fixed-income ETFs across the Treasury yield curve and the first ETFs to break the TIPS market into short- and long-term categories.
• We believe interest in ETFs from BlackRock and Pimco are encouraging signs for the growth of the ETF market.
• In conjunction with a white paper “How to Save the Mutual Fund (Before It's Too Late),” SwanDog Strategic Marketing launched its own Mutual Fund Doomsday Clock to call attention to the need for firms to focus on the problem at hand. SwanDog founder Dave Swanson stated that "Pimco's brilliant brand play, through the launch of their short-term treasury ETF, sets the Doomsday Clock at 25 minutes to midnight."

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