Wed. Jan 19th, 2022

Hello! Everyone wants a part of the action. ETFs are not a shiny new object for Wall Street, as they have been around for years, but that hasn’t stopped what feels like a steady pace of fund providers from turning existing assets into publicly traded or tossed funds. their own ETFs. .

This is the case with Capital Group, a $ 2.5 trillion fund manager, which initiates half a dozen actively managed funds with an ETF tax-effective envelope. We will take stock of the strategy.

As usual, send tips or comments and search me on Twitter at @mdecambre to tell us what to jump for. Sign up here for ETF Wrap.

The capital of ETFs?

Capital Group said it plans to launch a batch of ETFs by the end of the first quarter of 2022, and the initiative is preparing to be a prelude to a deeper entry into the fund type by the company based in Los Angeles, known for its American Funds Series.

ETF Wrap asked Todd Rosenbluth, head of research at CFRA’s ETF and mutual fund, to put Capital Group’s ambitions into perspective.

“They have $ 2.5 trillion in assets and show up late at the ETF party with money to spend to succeed,” he said.

“Demand for actively managed ETFs has never been stronger and they have strong relationships, a record of success with stock selection and scale to create waves even in a concentrated and crowded market,” he explained.

As Barron’s wrote on Tuesday, the trend for actively managed ETFs includes offerings the size of Fidelity, JPMorgan Chase and T. Rowe Price, but the active segment still accounts for a mere portion of the nearly $ 7 trillion ETF business. dollars.

Citing data from Morningstar, Barron’s wrote that among the 325 stock ETFs released this year and last, more than half are actively managed.

Why the change? As mentioned earlier, ETFs offer a cheaper alternative to mutual funds and suppliers see this as an opportunity to feed what has been perceived as a growing demand for these products offering investors the opportunity to buy baskets of assets and track their values ​​on a daily basis transparent and tax efficient.

Rosenbluth wrote that Capital Group’s first six products (five equity-linked funds and one for bonds) are likely to be the start of the company’s ETF franchise.

“We expect Capital Group to expand its training over the next few years to
provide an ETF alternative for clients in dozens of strategies, ”he wrote.

The good and the bad
The 5 best winners of last week

% Return

SPDR S&P Exploration and production of oil and gas ETF XOP,
-1.36%

10.6

VanEck Vectors Oil Services ETF OIH,
-1.14%

9.6

ETF Invesco China Technology CQQQ,
-1.18%

9.6

VANECK RARE EARTH / Strategic Metals ETF REMX
-2.10%

8.9

SPDR S&P Biotech ETF XBI,
+ 0.29%

8.8

Source: FactSet, until Wednesday, August 25, excluding TNCs and leveraged products. Includes NYSE, Nasdaq and Cboe traded ETFs of $ 500 million or more

The first five drops last week


% Return

TLS ETF of treasury bonds over 20 years iShares,
+ 0.21%

-1.6

SPDR Treasury Long Term SPDR ETF Portfolio,
+ 0.15%

-1.5

iShares ETF TLH of treasury bonds at 10-20 years,
+ 0.07%

-1.3

ETF Bones Invesco Taxable Municipal Bond
+ 0.12%

-1.1

Basic consumer fund SPDR XLP sector,
-0.49%

-1.1

Source: FactSet

TLC for TLT?

The TLT ETF for obtaining iShares treasury bonds over 20 years old,
+ 0.21%
he was one of the worst performers this week among the funds they raised ETF Wrap tracks (see attached chart) and there are some analysts who believe that the long-term bond ETF suggests that yields will increase in the short term as Jackson Hole approaches and is expected to Federal Reserve Chairman Jerome Powell sets the table to reduce central bank monthly purchases of $ 120 billion in treasury and mortgage-backed securities.

Mark Newton, market technician at Newton Advisors, says that while yields have been rising, as reflected in the 10-year TMUBMUSD10Y treasury note,
1.345%
around 1.37% on Thursday morning, it is not completely sold with the prospect of a renewed rise in yields.

“Does that mean yields are heading backwards upwards? I’m skeptical about that technically, as TLT seems to be on the verge of gaining support after this slight sell-off,” he writes in a recent research note.

through Newton Advisors

Rising returns have helped the SPDR XLF Sector Select Financial Fund,
-0.19%
this concentration, 3% more, and in August, 6.3% more. But Newton warned that sector movement and performance could also be paralyzed and even reversed.

A rebound from China’s ETFs

KraneShares CSI China Internet Kaneeb ETF
-1.21%,
one of the best ways to expose yourself to China’s Internet market is coming back a bit, 12% more per week, according to FactSet, but down from 36% the year before, after China repress the internet and technology sector before this spring.

Bloomberg reported that the fund added $ 181 million in new money on Tuesday, despite its problems. The new cash brings its total assets to $ 6.2 billion. The ETF is now larger than the $ 6.1 billion MSCI China iShares iShares MCHI ETF,
-1.24%,
reported the site. This week, the iShares China fund has risen 4.7%.

“Investors are betting that the pressure on Internet stocks will be short-lived,” Rosenbluth said ETF Wrap in comments sent by email.

The analyst added that it worries investors who bet on KWEB, referring to the KraneShares ETF symbol. He thinks that buyers may not get an adequate reward in relation to the risks of investing in the region and the sector.

A low volume change

The low volatility ETF Invesco S&P 500 SPLV,
-0.25%,
which tracks a low-volume index made up of equities with the lowest realized volatility in the last twelve months, saw its quarterly restructuring last Friday, with a reduction in its weight in finance and utilities. to increase.

CFRA

The weighting of the financial sector fell to 7% in August, after initially rising to 10% in May, CFRA notes. This represents the lowest weighting for finance since the ETF in February. Utilities now account for 19% of assets, up from 16% in May, while real estate is up 8%, up from 5%.

Do you lose patience?

Cathie Wood’s ARK Invest funds could be losing appeal among investors after a hard stretch, according to Evie Liu at Barron’s, a sister publication of MarketWatch. She writes that since the end of June, investors have extracted $ 2.7 billion net from the fund’s complex, citing data from FactSet.

The flagship of Wood Ark Innovation ARKK,
-0.54%
The fund has seen most of these outflows, about $ 1.4 billion, according to Barron. Ark Innovation has been down more than 3% so far in 2021, but has risen 4.1% this week and is up about 0.5% in August.

In comparison, the Dow Jones Industrial Average DJIA,
-0.29%
has gained 15% in 2021 so far, the S&P 500 SPX index,
-0.33%
has advanced 19% and the composite index Nasdaq COMP, high technology,
-0.29%
has risen nearly 16% this year.

Take a look at: The case of the collapse of Cathie Wood’s Ark: here is an ETF provider that summarizes the short thesis

There is a bitcoin ETF

No BTCUSD bitcoins,
-3.57%
ETF still.

Still, Eric Balchunas, a Bloomberg analyst, has speculated, via Twitter, that the Securities and Exchange Commission is likely to approve an ETF linked to Bitcoin’s future BTCs.
-3.39%,
and that it could be launched as early as October.

We reported here on the possibility of a futures-based bitcoin ETF: Gary Gensler of the SEC may have just set out the clearest roadmap to the first US bitcoin ETF

Good ETF reading
  • Women’s Equality Day: How an ETF Increases Nearly 20% This Year Promotes Women’s Empowerment (CNBC).

  • ETF commission cuts fail to win over European investors, says the State Street executive (FT paywall).

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