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June 2018 ETF 20/20: Exchange Traded Fund Monthly Report


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Key Highlights

Our monthly ‘ETF 20/20’ report briefly summarizes recent Exchange Traded Fund (ETF) trends globally. It uses data from the First Bridge ETF database that includes all global ETPs.

  • Global ETF assets were $5.085T as of May 31, 2018.
  • As of May 31, 2018, MSCI began to include China ‘A’ shares in its emerging markets index that is tracked by large ETFs like the iShares Emerging Markets ETF (‘EEM’).
  • Schwab published its annual ETF investor study, which showed that 91% of ‘millennial’ investors (currently aged 25 – 37) consider ETFs as their investment vehicle of choice.
  • There were 152 new ETF listings globally in May 2018.
  • US small caps (‘IWM’; 5.3%) significantly outperformed US large caps (‘SPY’; 2.8%) in the trailing 1-month through June 14, 2018.
  • In the US large cap equity space, growth outperformed other popular ‘smart beta’ strategies like value and low volatility in the trailing 1-month through June 14, 2018.

About Us

First Bridge provides ETF data and analytics to reputed institutional clients. Our ETF data sets include daily ETF holdings, global ETF product & smart beta classifications, historical distributions and risk metrics. Our clients include asset managers, financial software providers and research firms that use ETF data as a critical input into their systems & workflow. We often provide ‘high touch’ services to our clients in the form of ETF data sets customized to their needs with related support.  The First Bridge team combines deep expertise in the Indexing & ETF domain with skills in statistical programming and data visualization.

Email: support@firstbridgedata.com

Phone: (650) 762-9270

Web: http://www.firstbridgedata.com

Global ETPs: Landscape Snapshot

Global ETF assets were $5.085T as of May 31, 2018. The table below provides a detailed breakdown by ETF category, and is a summary from the First Bridge ETF data and analytics platform.

ETF / ETP Type

Assets ($M) - May '18

Assets ($M) - Apr '18

  1. Bonds

1.1 Broad Market

260,558

257,748

1.2 Corporate

249,695

250,627

1.3 Municipal

31,932

31,116

1.4 Treasury / Sovereign

180,353

182,107

1.5 Inflation Protected

60,467

59,567

1.6 Specialty / Other

75,137

76,122

  1. Commodities & Metals

2.1 Diversified Commodities

23,068

21,712

2.2 Agricultural

2,225

2,189

2.3 Energy

6,303

6,497

2.4 Gold & Metals

114,089

114,854

2.5 Other

162

155

  1. US Equity Exposure

3.1 Broad Market & Size

1,121,092

1,073,481

3.2 Dividend & Fundamental

112,468

111,676

3.3 Factor & Thematic

92,069

86,008

3.4 Sector & Industry

365,584

354,488

3.5 Growth / Value

352,049

338,147

3.6 Quant Strategy & Other

12,209

11,367

  1. Global/Ex-US Equity Exposure

4.1 Broad Market & Regional

890,769

904,247

4.2 Country Specific

615,073

627,469

4.3 Dividend & Fundamental

95,532

97,492

4.4 Factor & Thematic

128,875

128,098

4.5 Sector & Industry

103,063

102,398

4.6 Quant Strategy & Other

3,176

3,151

  1. Multi-Asset & Other

76,176

74,819

  1. Inverse / Leveraged

81,759

81,061

  1. ETP Listed in Israel*

30,684

30,381

All Globally Listed ETPs

5,084,569

5,026,977

Source: First Bridge Data and individual ETF Sponsors; ETF data as of May 31, 2018

* The Global Equities category includes both International (ex-US) and Global (US + International)

** Asset breakdown by exposure type not available for ETFs listed in Israel

Key ETF Related Developments

1. Inclusion of ‘A’ Shares in EEM became effective as of May 31, 2018

As of May 31, 2018, MSCI began to include China ‘A’ shares in its emerging markets index that is mirrored in the daily ETF holdings of large ETFs like the iShares Emerging Markets ETF (‘EEM’). China ‘A’ shares are stocks of firms that are incorporated and listed in China and trade in Renminbi. Historically these shares have been excluded from major indices since non-Chinese institutional investors did not have access to them, except through restricted QFII schemes.

A year ago MSCI announced that it would begin to include China ‘A’ Shares in its indices from June 2018, due to their increased accessibility through the Stock Connect program. In order to avoid drastic changes to indices, these stocks are subject to a 5% inclusion factor i.e. the stocks are weighted in the MSCI emerging markets index in proportion to 5% of their eligible market cap rather than their entire market cap. Also, only 30% of their market cap is eligible, since ‘A’ shares have a 30% limit on foreign ownership. Therefore, each ‘A’ share gets an index weight in proportion to 1.5% (i.e. 5% of 30%) of its total market capitalization. This change is being introduced in two stages – the index inclusion factor was set at 2.5% in the just completed May 2018 rebalance, and will be raised to the target 5% in the August 2018 quarterly rebalance.

After the May implementation, China ‘A’ shares account for approximately 0.73% of the MSCI emerging markets Index.  An increase in the index inclusion factor in the future could change the characteristics of the EM index. China ‘A’ Shares are more weighted towards sectors like healthcare and consumer staples that are driven by domestic Chinese demand relative to offshore China stocks that are more technology oriented.

2. Schwab’s annual ETF investor study emphasizes adoption by millennials

Schwab published its annual ETF investor study and this year’s edition placed an emphasis on the adoption of ETFs by millennials. Some of their findings are summarized below:

  • 91% of ‘millennial’ investors (currently aged 25 – 37) consider ETFs as their investment vehicle of choice. This is relative to 54% for ‘baby boomers’ (currently aged 54 - 72) and 30% for ‘matures’ (aged 73+).
  • 32% of the total investors surveyed by Schwab have replaced individual securities with ETFs. Here too, the replacement rate was higher for millennials (56%) compared to 10% for boomers and 8% for matures.
  • 73% of the investors surveyed by Schwab indicated that they intend to look at ‘smart beta’ ETFs during periods of market volatility.
  • 38% of millennials use either a fully automated robo advisor or portfolio building tool to invest, rather than investing with an advisor or by themselves. This trend is also likely to boost ETF demand in the future.

May 2018 ETF Launches – US

There were 16 new ETF listings in the US in May 2018. The new listings are summarized in the table below (this is a subset of our complete, regularly updated ETF list).

Table: May 2018 ETF Launches in the US

Type of Exposure

Sponsor

Tickers

Expense Ratios

(in bps)

US Equities

Industrial Real Estate

Pacer Financial

INDS:US

60

Real Estate - Data & Infrastructure Firms

Pacer Financial

SRVR:US

60

Retail Real Estate

Pacer Financial

RTL:US

60

High Beta US Equities

Salt Financial

SLT:US

50

Global or Ex-US Equities

Europe Large Cap 2x Leveraged - ETN

Credit Suisse

FEUL:US

100

AI & Big Data Theme

Global X

AIQ:US

80

Cryptocurrency & Blockchain - Active

REX Shares

BKC:US

88

Other Asset Types - Preferred Stock

U.S. Preferred Stock

Virtus ETF Solutions

PFFA:US

136

Target Date / Multi-Asset

Multi-Asset Tactical

First Trust

DALI:US

92

Commodities & Metals

Dynamic Commodity Strategy

US Commodity Funds

SDCI:US

80

Bonds

Bonds issued by S&P 500 firms

ProShares

SPXB:US

15

Inflation Hedged Corporate Bond

Blackrock

LQDI:US

20

Short Duration Bonds - Active

Hartford Funds

HSRT:US

29

High Yield Corporate Bonds - Active

Franklin Templeton

FLHY:US

40

International Aggregate Bonds - Active

Franklin Templeton

FLIA:US

35

Senior Loans

Franklin Templeton

FLBL:US

45

ETF List: http://www.firstbridgedata.com; Data as of May 31, 2018

May 2018 ETF Listings – International (Ex-US)

There were 136 new ETF listings outside the US in May 2018 including cross-listings and share class variants.

Chart: May 2018 New ETF Listings by Region (outside US); Total = 136

Chart: May 2018 New ETF Listings by Type of Exposure (outside US); Total = 136

ETF Data Source: www.firstbridgedata.com; As of May 31, 2018

Performance of Key Asset Classes & Strategies

US small caps (‘IWM’; 5.3%) significantly outperformed US large caps (‘SPY’; 2.8%) in the trailing 1-month through June 14, 2018. Small caps are less impacted by trade wars or an appreciating dollar, and benefit from consumer confidence and employment gains in the US.

In the US large cap equity space, growth outperformed other popular ‘smart beta’ strategies like value and low volatility in the trailing 1 month through June 14, 2018.

Data source: First Bridge Data (http://www.firstbridgedata.com); Data as of June 14, 2018

More First Bridge ETF Resources

First Bridge maintains granular data sets for all globally listed ETFs, with key metrics. For more information, email: support@firstbridgedata.com

Important Disclaimers

First Bridge Data LLC does not intend this guide to provide investment advice, and the information provided in this guide is not and should not be considered investment advice. First Bridge Data LLC shall not be liable for any actions or decisions made based on the information provided in this document, and the reader assumes all risk associated with any investment decision made based on information contained in this document. First Bridge Data LLC is not a registered investment advisor or broker, and does not recommend specific securities, funds, or investment strategies, nor does it advocate the purchase or sale of any individual investment vehicle. Discussion or references to specific securities or investment products in this book should not be considered endorsements or offers to buy or sell those products. The past performance of a mutual fund or exchange-traded fund (ETF), security, or investment strategy cannot guarantee its future performance.

First Bridge Data LLC has no obligation to update this document or to correct any errors or omissions that might be contained in this document. First Bridge Data LLC disclaims all warranties of any kind, expressed or implied, and hereby disclaim and negate all other warranties, including—without limitation—implied warranties or conditions of merchantability, fitness for a particular purpose, or non-infringement of intellectual property or other violation of rights. First Bridge Data LLC does not guarantee the completeness, accuracy, or timeliness of any data in this document, including any data sourced through third-party content providers. Neither First Bridge Data LLC nor its employees, third-party content providers, nor any person through whom the First Bridge Data LLC makes this document available, shall be liable for any direct, indirect, incidental, punitive, special, or consequential damages (including, without limitation, attorneys’ fees), whether in an action of contract, negligence, or other tortious action, that result from the use of this book. Neither First Bridge Data LLC nor its content providers shall be liable for any punitive, special, indirect, or consequential damages arising from or relating to the foregoing, whether in contract or tort or otherwise, even if First Bridge Data LLC has been advised of the possibility of such damages.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , ETFs
Referenced Symbols: EEM , IWM , SPY



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