Creating a Well-Balanced Portfolio6TH ANNUAL GLOBAL ETF AWARDS ® 6TH ANNUAL GLOBAL ETF AWARDS...
Transcript of Creating a Well-Balanced Portfolio6TH ANNUAL GLOBAL ETF AWARDS ® 6TH ANNUAL GLOBAL ETF AWARDS...
6TH ANNUAL GLOBAL ETF AWARDS®
6TH ANNUAL GLOBAL ETF AWARDS
“How the industry measures excellence.”
REFERENCE
MATERIAL
INVESTOR DISCUSSION FORUM
Creating a Well-Balanced Portfolio
Reference materials submitted by:
Jim Rowley
Institutional
Portfolio construction challenges
FOR FINANCIAL ADVISORS ONLY. NOT FOR PUBLIC DISTRIBUTION.
Institutional
Institutional
Institutional
Institutional
Institutional
Institutional
Institutional
6TH ANNUAL GLOBAL ETF AWARDS®
6TH ANNUAL GLOBAL ETF AWARDS
“How the industry measures excellence.”
REFERENCE
MATERIAL
INVESTOR DISCUSSION FORUM
ETFs, ETNs, Options and Leveraged Products to Enhance Returns
6TH ANNUAL GLOBAL ETF AWARDS®
6TH ANNUAL GLOBAL ETF AWARDS
“How the industry measures excellence.”
REFERENCE
MATERIAL
INVESTOR DISCUSSION FORUM
Executing the Best Trades
6TH ANNUAL GLOBAL ETF AWARDS®
6TH ANNUAL GLOBAL ETF AWARDS
“How the industry measures excellence.”
REFERENCE
MATERIAL
INVESTOR DISCUSSION FORUM
An Overview of Niche Products
Reference materials submitted by:
Thompson S. Phillips
Michael Underhill
* 2007 Report on Socially Responsible Investing Trends in the United States
Faith Based!Investing!is!a!subset!of!the!overall!
Socially!Responsible!Investing!trend.All Socially
Responsible Investing Assets
American Religious Identity Survey (ARIS) 2008
*All!companies!evaluated!on!overall!ESG!performance.
KEY
X Exclusions!due!to!business!activity
R Exclusions!due!to!significant!revenues
C Case by case!analysis
W Weapons!of!mass!destruction!only!(WMD)
• FaithShares Advisors, LLC serves as an advisor to FaithShares Trust . The Funds are distributed by SEI Investments
Distribution Co., which is not affiliated with FaithShares Advisors, LLC.
• Investing!involves!risk,!including!the!possible!loss!of!principal.!The!Funds!are!non diversified!and,!as!a!result,!may!have!
greater!exposure!to!volatility!than!other!funds.!Current!and!future!holdings!are!subject!to!risk.
• Shares of FaithShares Funds are bought and sold at market price, not NAV, and are not individually redeemed from the
fund. Buying and selling shares will result in brokerage commissions.
• Carefully!consider!the!Funds'!investment!objectives,!risk!factors,!charges,!and!expenses!before!
investing.!This!and!additional!information!can!be!found!in!the!Funds'!prospectus,!which!may!be!
obtained!by!calling!1 877 FAITH55!(1.877.324.8455),!or!by!visiting!www.faithshares.com.!Read!the!
prospectus!carefully!before!investing.
• © FTSE International Limited (“FTSE”) 2009. All rights reserved. The FTSE KLD Baptist Values, Catholic Values, Christian
Values, Methodist Values and Lutheran Values Indexes are calculated by FTSE. All rights in the Indexes vest in FTSE and KLD
Research & Analytics, Inc. “FTSE®” is a trade mark of the London Stock Exchange Plc and the Financial Times Limited and is
used by FTSE under licence. “KLD” is a trademark of KLD Research & Analytics, Inc. and are used by FTSE under licence. All
information is provided for information purposes only and no responsibility or liability can be accepted by FTSE or KLD for
any errors or for any loss from use of this publication. No part of this publication may be reproduced, stored in a retrieval
system or transmitted by any other form or means whether electronic, mechanical, photocopying, recording or otherwise
without the prior written consent of FTSE. Distribution of FTSE index values and the use of FTSE indices to create financial
products requires a licence from FTSE and/or its licensors.
Listed Infrastructure in an Actively Managed ETF
Presentation to:
Global ETF Awards
by Michael Underhill
Chief Investment OfficerTel (262) 369-4101
Strictly Private and Confidential | Capital Innovations Copyright © 2010 | Professional use only - Not for distribution.
Listed Infrastructure ETF Overview April 2010 | 2
Strictly Private and Confidential | Capital Innovations Copyright © 2010 | Professional use only - Not for distribution.
Important information with respect to performance information presented herein
Past performance may not be indicative of future results. Returns are calculated based on the daily capital inflows and outflows from investments and include partnership investments when stated. Certain partnership investments for which capital innovations, llc delivers prudent person opinions or favorable due diligence reports are not included in the performance results. Unless otherwise identified, the investment rates of return set forth herein are gross of investment management fees and operational fees charged by capital innovations. Please refer to part ii of capital innovation’s form adv for a more detailed presentation of fees charged to various clients
The investment results for any particular client of capital innovations may differ significantly from the investment results presented herein due to different holding periods, different weighting of the portfolio, different acquisition dates, different fees and incentive amounts, and a more limited history of investments, among other factors. Accordingly, returns presented herein are not necessarily representative of the returns achieved by capital innovations for all of its clients as a whole or all of its clients with respect to transactions individually or as a whole.
Past performance is no guarantee of future results. Further information and complete reports regarding capital innovation’s track records are available upon request. To receive a complete list and description of capital innovations” investments included in the track record, contact Susan Dambekaln at (262) 369-4101, 1130 James Drive, suite 101, Hartland, Wisconsin 53029.
Strictly Private and Confidential | Capital Innovations Copyright © 2010 | Professional use only - Not for distribution.
Listed Infrastructure ETF Overview April 2010 | 3
Table of Contents
The opportunity
– What is infrastructure?
– Why is it attractive?
Value Proposition of an Actively Managed Listed Infrastructure ETF
– A portfolio of listed securities
Strictly Private and Confidential | Capital Innovations Copyright © 2010 | Professional use only - Not for distribution.
Listed Infrastructure ETF Overview April 2010 | 4
* S & P Listed Infrastructure Assets - A Primer, March 2009
Infrastructure assets represent a broad mix of businesses that provide essential services to society.
What is infrastructure
Strictly Private and Confidential | Capital Innovations Copyright © 2010 | Professional use only - Not for distribution.
Listed Infrastructure ETF Overview April 2010 | 5
Unique investment characteristics:
Stable cash flows, potential for inflation hedging
– Inelastic Demand, given scarcity of resource
– Long useful life of asset
Hybrid nature of both fixed income and capital gains
– Best opportunity for capital gains from investments involving
development risk, or some monopoly businesses
Variety of risk and return profiles
– Range from low-risk regulated assets to moderate-risk energy
projects
– Inflation linked assets
– Less vulnerable to economic cycles
Infrastructure: A Differentiated Asset Class
Strictly Private and Confidential | Capital Innovations Copyright © 2010 | Professional use only - Not for distribution.
Listed Infrastructure ETF Overview April 2010 | 6
Demand for Infrastructure continues to dwarf the ready supply of capital for projects:
Population Growth
Urbanizations
Aging Infrastructure
Favorable economic/political climate
The American Society of Civil Engineers estimates that $2.2 trillion is needed over the next five years to restore existing infrastructure to acceptable levels
Aviation D
Bridges C
Dams D
Drinking Water D-
Energy D+
Hazardous Waste D
Inland Waterways D-
Levees D-
Public Parks & Recreation C-
Rail C-
Roads D-
School D
Solid Waste C+
Transit D
Wastewater D-
America’s Infrastructure currently
holds a “D” Average
(Source: American Society of Civil Engineers, Report Card for America’s Infrastructure 2009)
The Demand for Infrastructure in The United States
Strictly Private and Confidential | Capital Innovations Copyright © 2010 | Professional use only - Not for distribution.
Listed Infrastructure ETF Overview April 2010 | 7
Global Growth Dynamics Drive Infrastructure Investment
Age China India Mexico Western
Europe
USA
0-19 30.9% 41.3% 41.0% 22.6% 27.7%
20-39 33.5% 32.2% 32.7% 26.6% 27.6%
40-59 24.8% 18.9% 18.1% 28.7% 27.9%
60+ 10.8% 7.65 8.2% 22.1% 16.8%
Developed Markets need to be rebuilt - Brownfield & Rehabilitative Brownfield Focus
Emerging Markets need to build infrastructure - Greenfield Focus
Source: U.S. Bureau of the Census, International Database, Global Population Report 2007 Published 2007
Listed Infrastructure ETF Overview April 2010 | 8
Strictly Private and Confidential | Capital Innovations Copyright © 2010 | Professional use only - Not for distribution.
0
10
20
30
40
50
60
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
$Billions
Years
Highway, transit rail, aviation, facilities ($69b)
Schools and school modernization ($40b)
Energy efficiency and green buildings ($20b)
Environmental restoration and watershed mgmt ($13b)
Water and Flood Control ($12b)
Medical, health and extended care facilities ($2b)
Source: Congressional Budget Office and ENR
$57b in peak year 2010 Construction Stimulus Government Outlay
U.S. Federal Stimulus Spending: Timing of Impact
Strictly Private and Confidential | Capital Innovations Copyright © 2010 | Professional use only - Not for distribution.
Listed Infrastructure ETF Overview April 2010 | 9
Publicly Traded Liquid Securities
Global in scope
Mid to large cap companies
Traditional infrastructure sectors
Index Selection
– Other listed infrastructure benchmarks are market weighted
indices that will comprised of 90% utilities securities.
– S & P Global Infrastructure Index is 40% utilities, 40%
transportation and 20% energy.
What is the Value Proposition? Investing in a portfolio of listed infrastructure securities
Listed Infrastructure ETF Overview April 2010 | 10
Strictly Private and Confidential | Capital Innovations Copyright © 2010 | Professional use only - Not for distribution.
Geographic exposure Subsector exposure
Listed Infrastructure Investment Universe
6TH ANNUAL GLOBAL ETF AWARDS®
6TH ANNUAL GLOBAL ETF AWARDS
“How the industry measures excellence.”
REFERENCE
MATERIAL
INVESTOR DISCUSSION FORUM
Global ETF, ETN and ETC Product Developments - New Ideas and Trends
Reference materials submitted by:
Pietro Poletto
London Stock Exchange Group ETFs & ETCs markets
6th Annual Global ETF Award
April 29th 2010
Pietro Poletto, London Stock Exchange Group
2
Content
1. Evolution and structure of the UK and Italian ETF markets
2. London Stock Exchange Group ETFs & ETCs markets – main statistics
3. European comparison
3
London Stock Exchange Group composition
4
– 357 ETFs
– 37 structured ETFs
– 67 ETCs
– 242 ETFs
– 217 ETCs and 1 ETN
– 122 multi-currency ETFs/ETCs
– 127 OTC reportable ETFs
London Stock Exchange Group
ETFs and ETCs market
ETFplus – the Italian Market
for ETFs & ETCs
UK Market for ETFs, ETCs & ETNs
Regulator authority:FSA
Listing authority:UKLA
Listing authority:Borsa Italiana
Regulator authority:Consob
Data as of 9th April 2010
5
1. Evolution and structure of the UK and Italian ETF markets
6
Evolution of the UK ETF market
Firstfundamentals-based ETF launched
September‘06
September‘06
September‘07
November‘07
December‘07
February‘08
March ‘08 March ‘09
April ‘00
First ETF listed in the UK
March ‘07
Dedicated ETC market segment launched
LSE launches multicurrency ETF trading
UK change in stamp duty, opening the market to foreign issuers
100th ETF listed
First Shari’ahcompliant ETF listed
First short ETCs listed
Firstleveraged ETCs listed
First Exchange Traded Note islaunched in the UK
November‘09
First currencyETC
April ‘10
10th anniversaryof the first ETF listed
7
Evolution of the Italian ETF market
September ’02
First ETFs listedon Borsa Italianaon Stoxx 50,Eurostoxx 50
November ‘03
First ETF on FTSE MIB
November ‘04
First ETFs on bond indices
November ‘05
First ETF on emergingmarkets (Hang Seng China Enterprises)
March ’07
100th listed ETF
2 April ‘07
ETFplus is born
May – July ’07
First structured ETFs listed: ShortLeveraged
September ‘07
First ETFs on Fundamental Indices
8
Evolution of the Italian ETF market
October ‘07
First ETFs on EONIA
February ‘08
First structuredETFs on FTSE MIB
July ’08
First ETFs on credit indices
December ‘08
Trading Record: 1.55 € bn traded in a single session
February ‘09
300th listedETF
October ‘09
400th listed instruments on ETFplus
February ‘10
Record: € 295.4 mln of daily average turnover
February ‘10
Record: 27,043 trades on a single session
9
2. London Stock Exchange Group ETFs & ETCs markets – main statistics
10
Number of ETFs/ETCs/ETNs listed on LSE
Data source: London Stock Exchange, as of 9th April 2010
30
56
123
148
217
46
107
182221
242
2914
_1
1
0
50
100
150
200
250
300
350
400
450
500
2004 2005 2006 2007 2008 2009 2010
ETN
ETC
ETF
Total
460
11
7
18
27
3767
357
164
309261
87
3020138
67
47
37
0
50
100
150
200
250
300
350
400
450
500
2002 2003 2004 2005 2006 2007 2008 2009 2010
ETC
ETFS
ETF
Total
461
Number of ETFs/ETCs listed on Borsa Italiana
Data source: Borsa Italiana, as of 9th April 2010
12
Issuer Breakdown - LSE
147ETFSecurities
69UBS
1Source
N.ETCs
20ETFSecurities
12Source
90iShares – BlackRock
15PowerShares – Invesco
N.ETNs
1Lyxor
1Osmosis
3Marshall Wace
4HSBC
22Lyxor - Société Générale
75Db x-trackers - Deutsche Bank
N.ETFs
Data source: London Stock Exchange, as of 9th April 2010
13
Issuer Breakdown - Borsa Italiana
Data source: Borsa Italiana, as of 9th April 2010
30Xmtch – Credit Suisse
17ETFSecurities
96iShares – BlackRock
30Amundi
N.ETC
67ETFSecurities
6JP Morgan
10Market Access – RBS
15EasyETF – BNP Paribas
16PowerShares – Invesco
85Lyxor - Société Générale
89Db x-trackers - Deutsche Bank
N.ETF
14
0
1000
2000
3000
4000
5000
6000
gen-04 lug-04 gen-05 lug-05 gen-06 lug-06 gen-07 lug-07 gen-08 lug-08 gen-09 lug-09 gen-10
0
50
100
150
200
250
300
350
400
450
500
London Stock Exchange - trades and turnover
Daily Average n. of Trades
2009: 4,018
Q1 2010: 4,865 +31% Y/Y
Daily Average Turnover
2009: £228.2 mln
Q1 2010: £382.8 mln +32% Y/Y
Daily Average (£m)
No. tradesDaily Average
Turnover
Data Source: London Stock Exchange, as of end March 2010
15
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
11000
12000
13000
14000
15000
16000
set-02 mar-03 set-03 mar-04 set-04 mar-05 set-05 mar-06 set-06 mar-07 set-07 mar-08 set-08 mar-09 set-09 mar-10
0
50
100
150
200
250
300
Borsa Italiana: trades and turnover
Daily Average n. of Trades
2009: 9,688
Q1 2010: 11,780 +59.69% Y/Y
Daily Average Turnover
2009: 214.4 mln
Q1 2010: 246 mln +32.53% Y/Y
Data source Borsa Italiana, as of end of March 2010
Daily Average (€ mln)
Turnover
No. TradesDaily Average
16
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
11000
12000
13000
14000
15000
16000
2003 2004 2005 2006 2007 2008 2009 2010
AUM in Monte Titoli (€ bn)
Data source: Borsa Italiana S.p.A. and Monte Titoli
0.53 bn
1.64 bn +209% Y/Y
3.98 bn +143% Y/Y
7.63 bn +92% Y/Y
10.06 bn +32% Y/Y 10.23 bn +2% Y/Y
13.47 bn +31.63% Y/Y
ETFplus – ETFs AUM in Italy
March 2010: 15.64 bn+16.12% YTD
17
3. European comparison
18
315
394
BIt
632
521242
LSE
0
50
100
150
200
250
300
350
400
450
500
550
600
650
LSEG Deutsche Borse Euronext SWX
74
162
67BIt
217LSE
0
50
100
150
200
250
300
LSEG Deutsche Borse Euronext
London Stock Exchange Group – the biggest European market for ETFs and ETCs
Data source: FESE and LSE as of April 9th 2010 (multi currency ETFs and ETCs are not considered)
ETCs listedETFs listed
284636
19
London Stock Exchange Group – market share (trades)
Data source: FESE
Year 2009
* For the London Stock Exchange Group FESE considers also ETCs trades (BIt 2,460,791, LSE 735,006) **Athens Exchange, Irish Stock Exchange, Boerse Stuttgart, CEESEG - Ljubljana Stock Exchange e CEESEG -Vienna
8,961,384
93,414
459,881
878,503
992,921
1,502,988
1,837,880
3,195,797
N. trades
1.04%
5.13%
9.80%
11.08%
16.77%
20.51%
35.66%
Market share (%)
+1.18%NYSE Euronext
+0.41%SIX
+0.43%Oslo Børs
-5.29%Deutsche Borse
Total
+0.91%Others**
-3.81%OMX
+6.16%LSEG*
on market share (%)
Exchange
20
London Stock Exchange Group – market share (turnover)
Year 2009
*For the London Stock Exchange Group FESE considers also ETCs turnover (BIt 54.46 , LSE 43.06) **Athens Exchange, Irish Stock Exchange, BME (Spanish Exchange), Boerse Stuttgart, CEESEG - Ljubljana Stock Exchange e CEESEG - Vienna
1.95%
3.66%
3.95%
6.94%
20.96%
26.58%
35.96%
Market share (%)
366.87
7.15
13.43
14.49
25.47
76.88
97.52
131.93
Turnover (bn €)
+1.34%SIX
-5.62%NYSE Euronext
+1.99%Oslo Børs
-0.12%Deutsche Borse
Total
-0.15%Others**
-0.49%OMX
+3.06%LSEG*
on market share (%)
Exchange
Data source: FESE
21
European Exchanges: average contract size, number of tradesand turnover Year 2009
15,285Oslo Børs
14,591OMX
55,380SIX
58,593London Stock Ex.
22,130Borsa Italiana
41,831NYSE Euronext
87,782Deutsche Borse
40,939Total
€Borsa
Average trade size
The bubble size is proportional to the average contract size
Data source: FESE
Deutsche
Börse
Euronext
OMX
SWX
Oslo Børs
Borsa Italiana
LSE
0
500.000
1.000.000
1.500.000
2.000.000
2.500.000
0 30000 60000 90000 120000 150000
Turnover (mln €)
Co
ntr
ac
ts (
n.)
22
Pietro Poletto – Head of ETFs and Fixed Income markets London Stock Exchange Group
T +44 (0)207 797 4294 - [email protected]
T +39 0272426243 – [email protected]
Borsa Italiana
Silvia Bosoni, T +39 0272426372 – [email protected]
Demis Todeschini, T +39 0272426419 - [email protected]
The publication of this document does not represent solicitation, by Borsa Italiana S.p.A., of public saving and is not to be considered as a
recommendation by Borsa Italiana as to the suitability of the investment, if any, herein described. This document has not to be considered complete
and it is meant for information and discussion purposes only. Borsa Italiana accepts no liability, arising, without limitation to the generality of the
foregoing, from inaccuracies and/or mistakes, for decisions and/or actions taken by any party based on this documents. Trademarks Borsa Italiana and
Borsa Italiana's logo, IDEM, MOT, MTA, STAR, SeDeX, MIB, IDEX, BIt Club, Academy, MiniFIB, DDM, EuroMOT, Market Connect, NIS, Borsa Virtuale,
ExtraMOT, MIV BIt Systems Piazza Affari Gestione e Servizi, Palazzo Mezzanotte Congress and Training Centre and PAGS are owned by Borsa Italiana
S.p.A. FTSE is a registered trademark of London Stock Exchange plc and The Financial Times Limited and is used by FTSE International Limited under
licence. London Stock Exchange, the coat of arms device and AIM are a registered trade mark of London Stock Exchange plc. The above trademarks and
any other trademark owned by the London Stock Exchange Group cannot be used without express written consent by the Company having the ownership
of the same. Borsa Italiana S.p.A. and its subsidiaries are subject to direction and coordination of London Stock Exchange Group Holdings (Italy) Ltd –
Italian branch. The Group promotes and offers the post-trading services of Cassa di Compensazione e Garanzia S.p.A. and Monte Titoli S.p.A. in an
equitable, transparent and non-discriminatory manner and on the basis of criteria and procedure aimed at assuring interoperability, security and equal
treatment among market infrastructures, to all subjects who so request and are qualified in accordance with national and community legislation,
applicable rules and decisions of the competent Authorities.
© April 2010 London Stock Exchange Group plc
All rights reserved.
No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or
any information storage or retrieve system without prior permission from the copyright owners.
London Stock Exchange
Gillian Walmsley, T +44 020 77973679 – [email protected]
Kara Hyne, T +44 02077971608 - [email protected]
6TH ANNUAL GLOBAL ETF AWARDS®
6TH ANNUAL GLOBAL ETF AWARDS
“How the industry measures excellence.”
REFERENCE
MATERIAL
INVESTOR DISCUSSION FORUM
Risk, Regulation and Challenges -
What Lies Ahead and the Effects on the Global Marketplace
Reference materials submitted by:
Bibb Strench
1 1089961
Exchangetradedfunds.com
6th
Annual Global ETF Awards
The Grand Hyatt ! New York
April 29, 2010
ETF Risk Management Regulation and Financial Innovation
By Bibb L. Strench
Seward & Kissel LLP
The U.S. Securities and Exchange Commission (SEC) recently added a new division curiously called the
“Division of Risk, Strategy and Financial Innovation.” Typically, regulation, especially risk regulation,
would be expected to retard financial innovation. The new division is only one sign that the SEC and
other regulatory bodies are bulking up to impose risk management regulations at financial firms that
offer exchange!traded funds (ETFs) and other investment products.
Set forth below is an introduction to risk management regulatory efforts and related issues that
participants in the ETF industry should be aware of and in some cases adapt their organizations to
address. Risk management regulation has become increasingly important to ETFs both on a micro!level
– how to manage risks of the ETF firm in an operationally and regulatory sufficient manner !! and on a
macro!level – how the ETF industry can minimize the SEC and other regulators from imposing
burdensome and unnecessary risk management regulation. For these reasons, ETF providers need to
become well verse in risk management regulation and advocate of a risk management regulatory
scheme that reasonably addresses risks inherent in ETF operations without unduly chilling innovation in
the ETF industry.
Operational and Other Risks
The roots of risk management regulation are the internal controls at business entities. From the
beginning, sponsors and stake holders of corporate and trust entities have implemented a process to
control the operation of these entities. Operational risk or enterprise risk has been defined to be the
“risk of direct or indirect loss resulting from inadequate or failed processes, people and systems or from
external events.”1
A rudimentary example of a control addressing an operational risk is the need of a control to prevent
theft. A procedure should be in place that controls an officer’s ability to write a check drawn on the
entity’s bank account that is payable to the officer. An operational risk unique to ETFs and other
investment companies is ensuring the accuracy of the daily calculation of a fund’s net asset value in an
1 Basel Committee on Banking Supervision, Operational Risk, Consultative Document (January, 2001).
2 1089961
effort to avoid pricing errors. A firm offering an ETF has a host of other operational risks including those
inherent in the ETFs it offers, operations necessary to manage and offer the ETF and the ordinary risks
any business confronts.
Another type of risk, systemic risk, has historically been less relevant to ETFs. “Systemic risk” is a type of
risk that affects an entire financial market or system, and not just specific participants. The most
obvious example of a financial institution that presents systemic risk is a bank because failures and other
problems associated with a single bank’s lending and other activities can adversely impact the entire
banking system and economy as a whole.
There are examples of single investment management companies causing systemic disruptions in the
financial markets. On the private side, the failure of Long!Term Capital Management funds in 1998
linked to the Russian financial crisis led to the Federal Reserve System organizing a bailout for major
creditors of the funds that included large commercial and investment banks to prevent catastrophic
losses to the financial system. On the public side, the “breaking of the buck” by the Reserve Money
Market Fund in 2008 highly disrupted commercial paper markets and led to several programs by the
United States Treasury to restore confidence both in money market funds and the money market where
corporations issue commercial paper to finance their operations. Eventually, the Reserve Fund debacle
may lead to money market funds being subject to a “safety!and!soundness” approach used by federal
and state agencies to regulate banks.
Up until recently, systematic risk issues have not been raised by regulators with respect to ETFs and
investment companies. This is because ETFs do not issue depositary claims backed by the federal
government and losses at one ETF are unlikely to spill over to other ETFs or other market participants.
However, recent actions by the SEC suggest that the SEC, other regulators and Congress may be
examining whether certain types of ETFs raise systemic risk issues.
Evolution of Regulatory Risk Management
The government, particularly the SEC, has moved into the business of regulating risk management, a
business process that once was virtually regulatory!free and internal to the business entity. Over the
years, the internal control process at entities has become more formalized. One area of an entity’s
internal control that has been most formalized from a securities regulatory standpoint is financial
reporting. In 1985, a private!sector initiative known as the National Commission on Fraudulent Financial
Reporting or the “Treadway Commission” was formed to study the financial reporting system in the U.S.
Two years later, the Treadway Commission issued a report recommending that its sponsoring
organizations work together to integrate the various internal control concepts and definitions and to
develop a common reference point.
In response, the Committee of Sponsoring Organizations of the Treadway Commission or “COSO”
undertook an extensive study of internal control to establish a common definition that would serve the
needs of companies, independent public accountants, legislators and regulatory agencies, and to
3 1089961
provide a broad framework of criteria against which companies could evaluate the effectiveness of their
internal control systems. In 1992, COSO published its “Internal Control !! Integrated Framework.” The
COSO Framework defined internal control as "a process, effected by an entity's board of directors,
management and other personnel, designed to provide reasonable assurance regarding the
achievement of objectives" in three categories: effectiveness and efficiency of operations; reliability of
financial reporting; and compliance with applicable laws and regulations. COSO further stated that
internal control consists of: the control environment, risk assessment, control activities, information and
communication, and monitoring. It is the risk assessment component of COSO that regulators and risk
control officers have borrowed from when implementing risk control programs at investment firms such
as ETF sponsors.
While there likely are a number of origins of government involvement in risk management, the most
notable are the SEC rules that Congress in Section 404 of the Sarbanes!Oxley Act directed the SEC to
adopt. These rules require companies subject to the reporting requirements of the Securities Exchange
Act of 1934 (1934 Act) to include in their annual reports a report of management on the company's
internal control over financial reporting. In defining the “internal control” aspects of the rules
implementing Section 404, the SEC drew heavily on COSO. Under these rules, management of a public
company must evaluate and assess its company’s internal control over financial reporting:
management should evaluate whether it has implemented controls that adequately
address the risk that a material misstatement of the financial statements would not be
prevented or detected in a timely manner. The guidance describes a top!down, risk!
based approach to this principle, including the role of entity!level controls in assessing
financial reporting risks and the adequacy of controls. The guidance promotes efficiency
by allowing management to focus on those controls that are needed to adequately
address the risk of a material misstatement of its financial statements.2
At this stage, the SEC generally had limited its risk management regulation to financial reporting and not
broader risks faced by companies:
A few of the commenters urged us to adopt a considerably broader definition of internal
control that would focus not only on internal control over financial reporting, but also
on internal control objectives associated with enterprise risk management and
corporate governance. While we agree that these are important objectives, the
definition that we are adopting retains a focus on financial reporting, consistent with
our position articulated in the Proposing Release. We are not adopting a more expansive
definition of internal control for a variety of reasons. Most important, we believe that
2 Guidance on Internal Control over Financial Reporting, Securities Act Rel. No. 8810 (May 23, 2007).
4 1089961
Section 404 focuses on the element of internal control that relates to financial
reporting.3
In addition, ETFs and other types of investment companies were not subject to this risk regulation
because Section 404 expressly exempted investment companies from its requirements.
Around this time, the SEC also began a limited form of risk management regulation when it
adopted rules under the Investment Advisers Act of 1940 and the Investment Company Act of
1940 (1940 Act) requiring investment advisers and investment companies, including ETFs, to
implement compliance programs. While the rules did not expressly mandate risk management
procedures, the SEC in the release adopting the rules stated that: “[e]ach adviser, in designing
its policies and procedures, should first identify conflicts and other compliance factors creating
risk exposure for the firm and its clients in light of the firm's particular operations, and then
design policies and procedures that address those risks. “4
Senior officials at the SEC’s Office of Compliance Inspection and Examinations (OCIE) informally engaged
in further risk management regulation when they dictated in a series of speeches at fund and adviser
conferences specific risk controls that investment advisers and investment companies should have in
place. In one speech, Gene Gohlke, an Associate Director of OCIE, identified ten areas of risk that should
be addressed by an investment advisers’ and investment companies’ compliance programs, and then
concluded his remarks by stating:
But as a director, I would want to recognize that the potential benefits of investing in
derivatives may quickly dissolve into disaster. I would want to understand those risks, be
assured that the fund's service providers understood those risks, and have seen that
appropriate processes and systems were put in place to manage, monitor, and mitigate
those risks. Only then would I feel comfortable in exposing the fund and its shareholders
to derivatives.5
While many criticized his remarks as being regulation by speech, his speech did signal the ETF and
investment management industry that more risk management regulation was on the horizon.
3 Management’ Report On Internal Control Over Financial Reporting and Certification of Disclosure in Exchange Act
Period Reports, Securities Exchange Act Rel. No. 47986 (June 5, 2003).
4 Compliance Programs of Investment Companies and Investment Advisers, Investment Advisers Act Rel. No. 2204
(Dec. 17, 2003).
5 G. Gohlke, Speech by SEC Staff: "If I Were a Director of a Fund Investing in Derivatives — Key Areas of Risk on
Which I Would Focus," Mutual Fund Directors Forum, Washington, D.C. (Nov. 8, 2007).
5 1089961
Recent Events Signaling an Extensive Government Role in Risk Management
Recently, there has been a flurry of risk management regulation impacting ETFs and other investment
companies.
Division of Risk, Strategy and Financial Innovation
As previously noted, the SEC in September, 2009 created the Division of Risk, Strategy and Financial
Innovation. While little is known about how this Division will function, its actions in the risk
management regulatory area will clearly impact ETFs directly and indirectly. For example, the Division’s
first Director, Henry T.C. Hu, recently gave the following testimony before Congress on swap and other
over!the!counter (OTC) instruments, which are instruments commonly used by ETFs:
Regulation of major swap participants and dealers is a vital part of the OTC regulatory
regime. We understand that there may be entities that use swaps as risk management
tools . . . The term “risk management” is ambiguous and this wording could cause a
large number of important entities to fall outside this new needed regulation.6
ETF and Other Investment Company Disclosure Rules Mandating Board Involvement in Risk Management
On December 16, 2009, the SEC adopted rules that require ETFs and other investment companies to
describe in certain disclosure documents the board of director’s role in the oversight of risk.7 Effectively,
this disclosure rule requires ETFs to have a risk management process and the Board to monitor risk
management. The SEC noted that the disclosure about the board’s approach to risk oversight should
address whether the persons who oversee risk management report directly to the board and how the
board monitors risk.8
Proposed Rule 15c3!5
On January 19, 2010, the SEC proposed Rule 15c3!5 under the 1934 Act that will require broker!dealers
to implement risk management controls and supervisory procedures reasonably designed to manage
the financial, regulatory and other risks involved with trading ETFs and other securities on exchanges
and alternative trading systems.9
6 Testimony Concerning the Over!the!Counter Derivatives Markets Act of 2009 by Professor Henry T.C. Hu, Director
of the SEC’s Division of Risk, Strategy and Financial Innovation Before the House Committee on Financial Services
(Oct. 7, 2009).
7 Proxy Disclosure Enhancements, Investment Company Act Rel. No. 29092 (Dec. 16, 2010).
8 Id.
9 Risk Management Controls for Brokers or Dealers with Market Access, Securities Exchange Act Rel. No. 61379
(Jan. 19, 2010).
6 1089961
ETF Freeze
The most recent example of the SEC’s expanding risk management regulatory initiatives is the SEC staff’s
recent announcement on March 25, 2010 that it is conducting a review to evaluate the use of
derivatives by ETFs and other investment companies.10
The staff has determined to defer consideration
of requests from ETFs for exemptive relief that would allow them to make significant investments in
derivatives. The staff further stated that its decision will affect new and pending requests from certain
actively!managed and leveraged ETFs that particularly rely on swaps and other derivative instruments to
achieve their investment objectives. The staff added that “funds that rely substantially upon derivatives,
particularly those that seek to provide leveraged returns, maintain and implement adequate risk
management and other procedures in light of the nature and volume of the fund's derivatives
transactions.” Id. This latest action should be of particular concern to the ETF industry because the SEC
unilaterally has curtailed the introduction of any new ETF that makes “significant investments” in
derivatives.
Congress
In the wake of the “Great Recession” during the past several years, Congress is considering the
enactment of a series of reforms, many of which will impose a form of risk management regulation
carried out by federal agencies such as the SEC. Derivative regulation, including the regulation of swaps
discussed above, will almost certainly be part of any securities reform laws eventually enacted by
Congress.
Global
International banking and securities regulators have been active in the area of risk management
regulation for a number of years. One group, the Senior Supervisors Group, an international body that
consists of banking and securities regulators from the U.S., including the SEC, and several European
countries issued a report that evaluates the effectiveness of current risk management practices during
this period of stress.11
The report noted that firms that tended to avoid significant challenges in recent
years typically had management information systems that assess risk positions using a number of tools
that draw on differing underlying assumptions and that the better performing firms had more adaptive
(rather than static) risk measurement processes and systems that could rapidly alter underlying
assumptions in risk measures to reflect current circumstances.12
The European Union has been a head of the SEC in terms of regulating risk management at firms
offering investment products through its Undertakings in Collective Investment in Transferable
10
Press Release, SEC Staff Evaluating the Use of Derivatives by Fund, 2010!45 (Mar. 25, 2010).
11 Observations on Risk Management Practice During the Recent Market Turbulence, (March 6, 2008).
12 Id.
7 1089961
Securities (UCITS) regulatory scheme. Currently, UCITS III requires management firms to have
appropriate risk measurement processes in place to enable them to monitor, measure and manage at
any time the risks of the positions and their contributions to the overall risk!profile of the collective
investment fund’s portfolio. While the recent years have shown a rapid growth in the importance of risk
management within the UCITS environment, at least one major accounting firm predicts that since
increased regulatory focus did not prevent the financial market turmoil, “the road to an efficient
embedded Risk Management framework for UCITS is still long.”13
Since 2006, the senior levels of the SEC and the Financial Services Authority, the United Kingdom’s
securities regulator, have held a formal dialogue on current matters affecting the U.S. and U.K. capital
markets and areas of future collaboration. In their most recent meeting held on February 1, 2010, they
reiterated in a press release their focus on disclosure regimes around client asset risk and their efforts
seek “to address, among other things, the intrinsic links between the types and degree of risk a
regulated entity/registrant assumes and their corporate governance and compensation policies.”14
ETF Response to Risk Management Regulatory Creep
How should an ETF business react to the inevitable growth of risk management regulations? ETF
providers should examine their approach to risk management with respect to their ETF products and
operations. An ETF provider should dedicate a person or committee of employees, including
representatives of senior management, to the task of identifying and establishing controls for
operational risks. ETF providers might even consider establishing the position of “Chief Risk Officer” or
an “Operational Risk Committee.”
ETF providers also should attempt to identify risks inherent in their ETF products and operations.
Recently, respondents to a European survey identified the following twelve operational risks at
investment management firms, most of which are applicable to U.S. ETF operations:
breach of client guidelines
errors in issuing orders to brokers
risks arising in the process of taking over a new business
fraud
failure to meet guarantees provided on a particular product
13
PricewaterhouseCoopers Luxembourg, Assess Your Risk Management Framework Under UCITS III
http://www.pwc.com/lu/en/risk!management/ucits!risk.jhtml (2009).
14 Press Release, SEC and UK FSA Hold Fifth Meeting of the SEC!FSA Strategic Dialogue, (Feb. 1, 2010).
8 1089961
information technology systems failure
failure to reconcile assets under custodianship and internal records
failure to obtain the best price for a client
failure of a counterparty
settlement problems
failure to collect all income.15
Lastly, ETF providers should understand that they are part of a larger community with common interests
and concerns, including the potential for overzealous governmental risk management regulation that
threatens product innovation. In terms of financial history, the ETF is a relatively new product and the
industry would not have existed but for a number of innovators who toiled for years and finally
convinced the SEC that it was in the public interest to exempt the ETF product from certain provisions in
the 1940 Act that would have otherwise prevented the offering of the ETF product. Innovation will be
necessary to ensure the viability and continued growth of the ETF product.
Conclusion
Clearly, the SEC’s decision to devote an entire division to risk regulation and the recent decision by one
of its other divisions to freeze ETF exemptive applications involving significant use of derivatives should
be a wake!up call to the ETF industry. Its participants must pay close attention to the risk management
regulatory agenda of the SEC, other federal agencies, Congress and world bodies and consider ways to
advocate more reasonable regulatory approaches that avoid heavy handedness. The consequences of
inaction will be a new industry that is unable to offer innovative ETFs, that has increased barriers of
entry and that is less competitive to other financial products.
15
C. Calomiris and R. Herring, “The Regulation of Operational Risk in Investment Management Companies” in ICI
Perspective” 10 (Sept. 2002).
6TH ANNUAL GLOBAL ETF AWARDS®
6TH ANNUAL GLOBAL ETF AWARDS
“How the industry measures excellence.”
REFERENCE
MATERIAL
INVESTOR DISCUSSION FORUM
The Continued Evolution of Indexes
6TH ANNUAL GLOBAL ETF AWARDS®
6TH ANNUAL GLOBAL ETF AWARDS
“How the industry measures excellence.”
REFERENCE
MATERIAL
INVESTOR DISCUSSION FORUM
Emerging Markets Forum:
Q&A Session with Industry Participants from
the Local and International Markets
Reference materials submitted by:
Deborah Fuhr
John Li
ETF Landscape
6th Annual ETF
Global AwardsApril 29, 2010
FOR INSTITUTIONAL USE – NOT FOR PUBLIC DISTRIBUTION
Deborah Fuhr, Managing Director
Global Head of ETF Research & Implementation Strategy
Phone: +44 20 7668 4276 Email: [email protected]
2 ETF Landscape Industry Highlights March 2010
ETFs listed globallyas at end March 2010
Data as at end March 2010.Source: Global ETF Research & Implementation Strategy Team, BlackRock, Toronto Stock Exchange (TSX).
We celebrate the 10th anniversary of ETFs in Europe as the first ETFs to launch in Europe were the iShares DJ STOXX 50 (EUN1 GY) and iShares DJ Euro STOXX 50 (EUN2 GY) on 11 April 2000 on the Deutsche Boerse, followed by the iShares FTSE 100 (ISF LN) on the London Stock Exchange extraMARK segment on 28 April 2000.
We also celebrate the 20th anniversary since the launch of the very first ETF globally. Twenty years ago on 9 March 1990 the first ETF was listed in Canada on the Toronto Stock Exchange (TSX): the TIPs (Toronto 35 Index Participation Fund) tracking the TSX 35 index. It was followed by the HIPs (Hundred Index Participation Fund) tracking the TSX 100 index on 26 September 1995. Ten years ago on 7 March 2000, the TIPs and HIPsETFs were merged into the iUnits S&P/TSE Index Participation Fund (XIU CN): an ETF that was originally listed on 4 October 1999.
At the end of March 2010 the global ETF industry had 2,131 ETFs with 4,133 listings, assets of US$1,081.9 Bn, from 123 providers on 42 exchanges around the world.
Assets
• YTD assets have increased by 4.4% from US$1,036.1 Bn to US$1,081.9 Bn, which is more than the 2.7% increase in the MSCI World Index in US dollar terms.
3 ETF Landscape Industry Highlights March 2010
ETFs listed globally (continued)as at end March 2010
Data as at end March 2010.Source: Global ETF Research & Implementation Strategy Team, BlackRock.
ETFs
• YTD the number of ETFs increased by 9.4% with 193 new ETFs launched.
• The number of ETFs listed in Europe surpassed the US, with 910 ETFs listed in Europe, compared to 814 in the US.
• There are currently plans to launch 833 new ETFs.
• The top 100 ETFs, out of 2,131, account for 64.6% of global ETF AUM, while 404 ETFs have less than US$10.0 Mnin assets.
Exchanges
• YTD the number of exchanges with official listings has increased from 40 to 42.
Trading volume
• YTD the average daily trading volume in US dollars increased by 19.1% to US$59.9 Bn.
ETF providers
• Globally, iShares is the largest ETF provider in terms of both number of products, 437 ETFs, and assets ofUS$504.1 Bn, reflecting 46.6% market share; State Street Global Advisors is second with 108 products and US$159.4 Bn, 14.7% market share; followed by Vanguard with 47 products and assets of US$104.1 Bn and 9.6% market share at the end of March 2010.
• The top three ETF providers, out of 123, have 71.0% market share.
4 ETF Landscape Industry Highlights March 2010
ETFs listed globally (continued)as at end March 2010
1 ETPs are products that have similarities to ETFs in the way they trade and settle but they do not use an open-end investment company structure. The use of other structures including grantor trusts, partnerships, notes and commodity pools by ETPs can create different tax and regulatory implications for investors when compared to ETFs which are funds.
Data as at end March 2010. Source: Global ETF Research & Implementation Strategy Team, BlackRock, Bloomberg.
Index providers
• MSCI ranks first in terms of ETF AUM tied to their benchmarks with assets of US$256.2 Bn and 295 ETFs,
while Standard & Poors (S&P) ranks second with US$256.1 Bn and 262 ETFs, followed by Barclays Capital in
third with US$97.1 Bn and 75 ETFs.
Mutual funds
• Globally, net sales of mutual funds (excluding ETFs) were minus US$25.8 Bn, while net sales of ETFs were
US$14.1 Bn during the first two months of 2010 according to Strategic Insight.
ETPs
• Additionally, there were 718 other Exchange Traded Products (ETPs)1 with 1,025 listings and assets of
US$153.6 Bn from 42 providers on 18 exchanges.
ETFs & ETPs
• Combined, there were 2,849 products with 5,158 listings, assets of US$1,235.5 Bn from 147 providers on
44 exchanges around the world.
5 ETF Landscape Industry Highlights March 2010
ETFs listed in the United Statesas at end March 2010
Data as at end March 2010.Source: Global ETF Research & Implementation Strategy Team, BlackRock.
At the end of March 2010 the US ETF industry had 814 ETFs, assets of US$736.3 Bn, from 29 providers on two exchanges.
Assets
• YTD assets have increased by 4.4% from US$705.5 Bn to US$736.3 Bn, which is less than the 4.9% increase in the MSCI US Index in US dollar terms.
• US domiciled ETFs/ETPs experienced net inflows totalling US$8.9 Bn YTD. Fixed Income ETFs/ETPs saw positive flows with US$10.1 Bn net new assets, followed by Global (ex-US) equities with US$1.9 Bn net inflows while North American equities experienced US$2.4 Bn net outflows.
ETFs
• YTD the number of ETFs increased by 5.4% with 52 new ETFs launched, while 10 ETFs were delisted.
• The top 100 ETFs, out of 814, account for 83.5% of US ETF AUM, while 123 ETFs have less than US$10.0 Mn in assets.
• 29 January 2010 marked the 17th anniversary of ETFs in the US.
ETF providers
• iShares is the largest ETF provider in terms of both number of products, 197 ETFs, and assets of US$376.7 Bn, reflecting 51.2% market share; State Street Global Advisors is second with 89 products and US$147.9 Bn, a 20.1% market share; followed by Vanguard with 46 products, assets of US$104.0 Bn and 14.1% market share at the end of March 2010.
• US domiciled ETFs have seen net inflows of US$10.1 Bn YTD. Vanguard has received the largest inflows with US$8.4 Bnnet new assets, followed by iShares with US$2.5 Bn net inflows, and PowerShares with US$2.0 Bn net inflows, while State Street Global Advisors experienced US$7.6 Bn net outflows YTD.
• The top three ETF providers, out of 29, have 85.4% market share.
6 ETF Landscape Industry Highlights March 2010
ETFs listed in the United States (continued)as at end March 2010
1 ETPs are products that have similarities to ETFs in the way they trade and settle but they do not use an open-end investment company structure. The use of other structures including grantor trusts, partnerships, notes and commodity pools by ETPs can create different tax and regulatory implications for investors when compared to ETFs which are funds.
Data as at end March 2010. Source: Global ETF Research & Implementation Strategy Team, BlackRock, Bloomberg.
Trading volume
• YTD the average daily trading volume in US dollars has increased by 21.6% to US$55.7 Bn.
Mutual funds
• In the US, net sales of mutual funds (excluding ETFs) were minus US$108.2 Bn, while net sales of ETFs domiciled in the US were positive US$5.5 Bn during the first two months of 2010 according to Strategic Insight.
ETPs
• Additionally, there were 145 other Exchange Traded Products (ETPs)1 with assets of US$85.4 Bn from 17 providers on one exchange.
ETFs & ETPs
• Combined, there were 959 products with assets of US$821.7 Bn from 42 providers on two exchanges in the US.
7 ETF Landscape Industry Highlights March 2010
We celebrate the 10th anniversary of ETFs in Europe as the first ETFs to launch in Europe were the iShares DJ STOXX 50 (EUN1 GY) and iShares DJ Euro STOXX 50 (EUN2 GY) on 11 April 2000 on the Deutsche Boerse, followed by the iShares FTSE 100 (ISF LN) on the London Stock Exchange extraMARK segment on 28 April 2000.
At the end of March 2010 the European ETF industry had 910 ETFs with 2,579 listings, assets of US$233.7 Bn,
from 36 providers on 18 exchanges.
Assets
• YTD assets have increased by 3.0% from US$226.9 Bn to US$233.7 Bn, compared to the 2.2% fall in the MSCI Europe Index in US dollar terms.
• Net new assets into European domiciled ETFs/ETPs totalled US$11.5 Bn YTD, with Emerging Market equities receiving US$2.3 Bn net inflows, followed by Asia Pacific equities with US$1.9 Bn and Commodities with US$1.7 Bn net new assets YTD.
ETFs
• YTD the number of ETFs increased by 9.8% with 81 new ETFs launched.
• The top 100 ETFs, out of 910, account for 68.4% of European ETF AUM, while 164 ETFs have less than US$10.0 Mnin assets.
Exchanges
• YTD the number of exchanges with official listings remained unchanged at 18.
Trading volume
• YTD the average daily trading volume in US dollars increased by 0.9% to US$2.3 Bn. Most ETF trades are not required to be reported in Europe as ETFs are not covered by the European Union directive on markets in financial instruments (MiFID).
Data as at end March 2010.Source: Global ETF Research & Implementation Strategy Team, BlackRock.
ETFs listed in Europeas at end March 2010
8 ETF Landscape Industry Highlights March 2010
ETFs listed in Europe (continued)as at end March 2010
1 ETPs are products that have similarities to ETFs in the way they trade and settle but they do not use an open-end investment company structure. The use of other structures including grantor trusts, partnerships, notes and commodity pools by ETPs can create different tax and regulatory implications for investors when compared to ETFs which are funds.
Data as at end March 2010. Source: Global ETF Research & Implementation Strategy Team, BlackRock, Bloomberg.
ETF providers
• iShares is the largest ETF provider in terms of both number of products, 172 ETFs, and assets of US$85.5 Bn, reflecting 36.6% market share; Lyxor Asset Management is second with 127 products and US$46.2 Bn, 19.8% market share; followed by db x-trackers with 120 ETFs and assets of US$38.6 Bn and 16.5% market share at the end of March 2010.
• Net new assets into European domiciled ETFs totaled US$11.2 Bn YTD. Lyxor Asset Management has received the largest inflows with US$1.7 Bn net new assets, followed by db x-trackers with US$1.6 Bn net inflows, and iShares with US$1.6 Bn net inflows YTD.
• The top three ETF providers, out of 36, have 72.9% market share.
Mutual funds
• In Europe net sales of mutual funds (excluding ETFs) were US$54.3 Bn while net sales of ETFs domiciled in Europe were US$6.9 Bn during the first two months of 2010 according to Lipper FMI.
ETPs
• Additionally, there were 268 other Exchange Traded Products (ETPs)1 with 535 listings and assets of US$15.6 Bnfrom six providers on five exchanges.
ETFs & ETPs
• Combined, there were 1,178 products with 3,114 listings and assets of US$249.3 Bn from 39 providers on 18 exchanges in Europe.
9 ETF Landscape Industry Highlights March 2010
ETFs listed in Canada as at end March 2010
Data as at end March 2010. Source: Global ETF Research & Implementation Strategy Team, BlackRock, Bloomberg, Toronto Stock Exchange (TSX).
We celebrate the 20th anniversary since the launch of the very first ETF globally. Twenty years ago on 9 March 1990 the first ETF was listed in Canada on the Toronto Stock Exchange (TSX): the TIPs (Toronto 35 Index Participation Fund) tracking the TSX 35 index. It was followed by the HIPs (Hundred Index Participation Fund) tracking the TSX 100 index on 26 September 1995. Ten years ago on 7 March 2000, the TIPs and HIPs ETFs were merged into the iUnitsS&P/TSE Index Participation Fund (XIU CN): an ETF that was originally listed on 4 October 1999.
At the end of March 2010 the Canadian ETF industry had 132 ETFs, assets of US$32.8 Bn, from four providers on one exchange.
Assets
• YTD assets have risen by 14.9% from US$28.5 Bn to US$32.8 Bn, which is more than the 5.2% increase in the MSCI Canada Index in US dollar terms.
ETFs
• YTD the number of ETFs increased by 21.1% with 23 new ETFs launched.
Trading volume
• YTD the average daily trading volume in US dollars has decreased by 14.9% to US$0.8 Bn.
10 ETF Landscape Industry Highlights March 2010
ETFs listed in Canada (continued)as at end March 2010
1 ETPs are products that have similarities to ETFs in the way they trade and settle but they do not use an open-end investment company structure. The use of other structures including grantor trusts, partnerships, notes and commodity pools by ETPs can create different tax and regulatory implications for investors when compared to ETFs which are funds.
Data as at end March 2010. Source: Global ETF Research & Implementation Strategy Team, BlackRock, Bloomberg
ETF providers
• iShares is the largest ETF provider in terms of assets with US$26.3 Bn in 36 ETFs, reflecting 80.2% market share; Claymore Securities is second with 26 products and US$3.8 Bn, an 11.6% market share; followed by BetaProManagement with 48 products, assets of US$2.2 Bn and 6.7% market share at the end of March 2010.
ETPs
• Additionally, there was one other Exchange Traded Product (ETPs)1 with nine listings and assets of US$0.5 Bn from one provider on one exchange.
11 ETF Landscape Industry Highlights March 2010
Data as at end March 2010.Source: Global ETF Research & Implementation Strategy Team, BlackRock, Bloomberg.
Global ETF and ETP asset growth
0
200
400
600
800
1,000
1,200
Assets US$ Bn
0
500
1,000
1,500
2,000
2,500
# Products
ETF Assets Total $0.8 $1.1 $2.3 $5.3 $8.2 $17.6 $39.6 $74.3 $104.8 $141.6 $212.0 $309.8 $412.1 $565.6 $796.7 $711.1 $1,035.7 $1,081.9
ETF Commodity Assets $0.0 $0.1 $0.3 $0.5 $1.2 $3.4 $6.3 $10.0 $25.6 $26.9
ETF Fixed Income Assets $0.1 $0.1 $4.0 $5.8 $23.1 $21.3 $35.8 $59.9 $104.0 $167.0 $178.8
ETF Equity Assets $0.8 $1.1 $2.3 $5.3 $8.2 $17.6 $39.6 $74.3 $104.7 $137.5 $205.9 $286.3 $389.6 $526.5 $729.9 $596.4 $841.2 $873.7
ETP Assets Total $2.0 $5.1 $3.9 $4.1 $6.3 $9.3 $15.9 $28.7 $47.5 $55.2 $150.8 $153.6
# ETFs 3 3 4 21 21 31 33 92 202 280 282 336 461 714 1,172 1,594 1,947 2,131
# ETPs 2 14 17 17 18 22 64 170 347 517 618 718
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Mar-10
12 ETF Landscape Industry Highlights March 2010
Source: Global ETF Research & Implementation Strategy Team, BlackRock, Bloomberg.
Top 25 ETF providers around the worldRanked by AUM, as at end March 2010
PROVIDER # ETFs
AUM
(US$ BN) % TOTAL # PLANNED # ETFs % ETFs
AUM
(US$ BN) % AUM
% MARKET
SHARE
iShares 437 $504.1 46.6% 24 24 5.8% $15.2 3.1% -0.6%
State Street Global Advisors 108 $159.4 14.7% 34 1 0.9% -$1.5 -1.0% -0.8%
Vanguard 47 $104.1 9.6% 3 0 0.0% $12.1 13.2% 0.7%
Lyxor Asset Management 129 $47.2 4.4% 1 4 3.2% $0.8 1.8% -0.1%
db x-trackers 137 $39.1 3.6% 9 16 13.2% $1.7 4.5% 0.0%
PowerShares 126 $38.0 3.5% 47 1 0.8% $3.4 9.8% 0.2%
ProShares 91 $23.3 2.2% 90 13 16.7% $0.1 0.5% -0.1%
Nomura Asset Management 30 $15.1 1.4% 0 0 0.0% $1.7 12.9% 0.1%
Van Eck Associates Corp 24 $13.7 1.3% 15 1 4.3% $1.2 9.7% 0.1%
Credit Suisse Asset Management 40 $11.3 1.0% 0 13 48.1% $1.7 17.4% 0.1%
Bank of New York 1 $9.0 0.8% 0 0 0.0% $0.4 4.8% 0.0%
Zurich Cantonal Bank 7 $7.4 0.7% 0 3 75.0% $0.7 10.4% 0.0%
Claymore Securities 61 $6.8 0.6% 25 4 7.0% $0.7 10.6% 0.0%
Commerzbank 68 $6.8 0.6% 6 6 9.7% $0.6 9.3% 0.0%
WisdomTree Investments 42 $6.7 0.6% 68 -10 -19.2% $0.3 4.2% 0.0%
Hang Seng Investment Management 3 $6.0 0.6% 0 0 0.0% $0.8 14.3% 0.0%
EasyETF 64 $6.0 0.6% 2 0 0.0% $0.1 1.8% 0.0%
Nikko Asset Management 12 $5.8 0.5% 0 2 20.0% $0.1 1.8% 0.0%
Amundi Investment Solutions 76 $5.7 0.5% 0 13 20.6% $0.9 19.1% 0.1%
ETFlab Investment 33 $5.6 0.5% 0 2 6.5% -$1.5 -20.6% -0.2%
Daiwa Asset Management 23 $5.1 0.5% 1 0 0.0% $0.2 3.1% 0.0%
Direxion Shares 34 $5.1 0.5% 100 8 30.8% $0.0 0.7% 0.0%
UBS Global Asset Management 16 $4.4 0.4% 0 2 14.3% $0.8 23.8% 0.1%
Rydex 31 $3.8 0.3% 82 0 0.0% $0.7 23.5% 0.1%
Source Markets 43 $3.6 0.3% 19 11 34.4% $0.8 27.5% 0.1%
Mar-10 YTD CHANGE
13 ETF Landscape Industry Highlights March 2010
Data as at end March 2010.Source: Global ETF Research & Implementation Strategy Team, BlackRock, Bloomberg.
Index providers worldwideRanked by ETF AUM
Index Provider # ETFs
Total
Listings
AUM
(US$ BN) % TOTAL # ETFs
AUM
(US$ BN) % AUM
MSCI 295 866 $256.2 23.7% 27 $12.4 5.1%
S&P 262 410 $256.1 23.7% 29 $6.9 2.8%
Barclays Capital 75 171 $97.1 9.0% 5 $9.6 11.0%
Russell 59 88 $69.3 6.4% -2 $3.3 5.0%
STOXX 205 613 $49.2 4.5% 1 -$1.8 -3.5%
Dow Jones 150 245 $42.5 3.9% 14 $1.6 3.9%
FTSE 138 308 $42.2 3.9% 12 -$0.5 -1.3%
Markit 80 163 $38.3 3.5% 10 $0.1 0.4%
NASDAQ OMX 47 70 $29.3 2.7% 4 $2.8 10.6%
Deutsche Boerse 34 110 $22.6 2.1% 4 -$0.9 -3.8%
Topix 53 63 $14.1 1.3% 0 $1.7 13.6%
Hang Seng 9 23 $13.3 1.2% 0 $1.5 12.9%
Nikkei 9 13 $13.2 1.2% 1 $0.7 5.8%
EuroMTS 28 66 $10.6 1.0% 6 -$0.4 -3.2%
CAC 18 26 $7.3 0.7% 0 -$0.3 -3.6%
NYSE Euronext 15 17 $6.4 0.6% 5 $0.2 3.6%
WisdomTree 35 35 $5.9 0.5% -10 $0.1 1.0%
Indxis 7 8 $3.8 0.4% 0 $1.0 36.8%
Intellidex 38 41 $2.7 0.2% -4 $0.1 2.5%
BNY Mellon 11 12 $2.3 0.2% 0 $0.0 0.5%
Morningstar 10 10 $1.8 0.2% 0 $0.2 10.4%
S-Network 15 33 $1.2 0.1% 2 $0.1 5.1%
Zacks 14 15 $0.7 0.1% 0 $0.1 12.6%
Value Line 5 5 $0.3 0.0% 0 $0.0 9.3%
Other 519 722 $95.5 8.8% 79 $7.3 8.2%
Total 2,131 4,133 $1,081.9 100.0% 183 $45.8 4.4%
YTD ChangeMar-10
MSCI, 23.7%
S&P, 23.7%
Barclays Capital, 9%
Russell, 6.4%
STOXX, 4.5%
Dow Jones, 3.9%
FTSE, 3.9%
Markit, 3.5%
NASDAQ OMX, 2.7%
Deutsche Boerse, 2.1%
Topix, 1.3%
Hang Seng, 1.2%
Nikkei, 1.2%
EuroMTS, 1%
CAC, 0.7%
NYSE Euronext, 0.6%
WisdomTree, 0.5%
Indxis, 0.4%
Intellidex, 0.2%
BNY Mellon, 0.2%
Morningstar, 0.2%
S-Network, 0.1%
Zacks, 0.1%
Value Line, 0%
Other, 8.8%
14 ETF Landscape Industry Highlights March 2010
Data as at end March 2010.Source: Global ETF Research & Implementation Strategy Team, BlackRock, Bloomberg.
0.00
1
1
1
SAR
0.00
1
1
1
UAE
49.82
9
363
162
UK
0.12
4
9
9
T
25.34
6
252
80
SW
2.12
2
12
12
S
2.33
2
33
10
SP
1.86
6
23
23
SA
0.01
1
1
1
SL
0.85
2
6
6
NO
0.27
4
106
11
N
1.83
4
383
14
IT
0.27
2
14
14
I
0.02
1
1
1
H
0.09
2
2
2
GR
0.07
1
21
1
A
0.27
1
1
1
F
55.05
9
416
244
FR
0.06
1
1
1
B
95.18AUM US$Bn
9Providers
958T listings
341P listings
G
P listings = Primary listingsT listings = Total listingsProviders = Primary ETF providersAUM = Assets Under Management in primary listings only
0.08
2
3
3
TH
2.28
2
14
12
TW
4.13
10
53
53
SK
2.42
8
55
11
SG
0.38
2
6
6
NZ
0.36
2
3
3
MY
27.31
6
73
70
J
2.53
3
27
6
AU
22.22
8
62
33
HK
0.33
6
14
14
IN
5.87
13
17
17
CH
0.00AUM US$Bn
1Providers
1T listings
1P listings
IND
-
-
25
-
CL
1.68
2
7
7
BZ
7.66
2
198
14
MX
736.30
29
814
814
US
32.76
4
156
132
CN
AUM US$Bn
Providers
T listings
P listings
32 33 34 35 36 3726 27 28 29 30 31
Global ETF listingsas at end March 2010
1 2 3 4 5
6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
BZ (Brazil), CN (Canada), CL (Chile), US (United States)
A (Austria), B (Belgium), F (Finland), FR (France), G (Germany), GR (Greece), H (Hungary), I (Ireland), IT (Italy), N (Netherlands), NO (Norway), SAR (Saudi Arabia),
SL (Slovenia), SA (South Africa), SP (Spain), S (Sweden), SW (Switzerland), T (Turkey), UAE (United Arab Emirates), UK (United Kingdom)
AU (Australia), CH (China), HK (Hong Kong), IN (India), IND (Indonesia), J (Japan), MY (Malaysia),
NZ (New Zealand), SG (Singapore), SK (South Korea), TW (Taiwan), TH (Thailand)
15 ETF Landscape Industry Highlights March 2010
Data as at end March 2010.Source: Global ETF Research & Implementation Strategy Team, BlackRock, Bloomberg.
US ETF and ETP asset growth
0
100
200
300
400
500
600
700
800
Assets (US$ Bn)
0
100
200
300
400
500
600
700
800
900
# Products
ETF Assets $0.5 $0.4 $1.1 $2.4 $6.7 $15.6 $33.9 $65.6 $84.6 $102.3 $150.7 $227.7 $299.4 $406.8 $580.7 $497.1 $705.5 $736.3
ETP Assets $2.0 $5.0 $3.8 $4.0 $6.1 $8.9 $14.4 $25.9 $40.5 $45.3 $88.1 $85.4
# ETFs 1 1 2 19 19 29 30 81 101 113 117 152 201 343 601 698 772 814
# ETPs 2 14 17 17 17 17 20 37 71 136 141 145
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Mar-10
16 ETF Landscape Industry Highlights March 2010
ETF providers in the United StatesRanked by AUM as at end March 2010
Source: Global ETF Research & Implementation Strategy Team, BlackRock, Bloomberg.
continued…
PROVIDER # ETFs
AUM
(US$ BN) % Total # Planned
YTD NNA
(US$ BN) # ETFs % ETFs
AUM
(US$ BN) % AUM
% Market
Share
iShares 197 $376.7 51.2% 22 $2.5 11 5.9% $12.3 3.4% -0.5%
State Street Global Advisors 89 $147.9 20.1% 33 -$7.6 1 1.1% -$1.9 -1.3% -1.2%
Vanguard 46 $104.0 14.1% 1 $8.4 0 0.0% $12.1 13.1% 1.1%
Powershares 107 $37.0 5.0% 46 $2.0 1 0.9% $3.4 10.0% 0.3%
ProShares 91 $23.3 3.2% 90 $0.5 13 16.7% $0.1 0.5% -0.1%
Van Eck Associates Corp 24 $13.7 1.9% 15 $1.2 1 4.3% $1.2 9.7% 0.1%
Bank of New York 1 $9.0 1.2% 0 -$0.2 0 0.0% $0.4 4.8% 0.0%
WisdomTree Investments 42 $6.7 0.9% 68 $0.6 -10 -19.2% $0.3 4.2% 0.0%
Direxion Shares 34 $5.1 0.7% 100 $0.1 8 30.8% $0.0 0.7% 0.0%
Rydex 31 $3.8 0.5% 82 $0.5 0 0.0% $0.7 23.5% 0.1%
Claymore Securities 35 $3.0 0.4% 22 $0.1 3 9.4% $0.1 4.3% 0.0%
First Trust Advisors 42 $2.8 0.4% 7 $0.7 2 5.0% $0.8 40.9% 0.1%
Charles Schwab Investment Management 8 $1.0 0.1% 0 $0.6 2 33.3% $0.6 174.8% 0.1%
PIMCO 10 $0.9 0.1% 10 $0.4 1 11.1% $0.4 84.3% 0.1%
RevenueShares 6 $0.4 0.1% 8 $0.1 0 0.0% $0.1 32.7% 0.0%
Fidelity Management & Research 1 $0.2 0.0% 0 $0.0 0 0.0% $0.0 19.6% 0.0%
XShares Advisors 5 $0.2 0.0% 34 $0.0 0 0.0% $0.0 -8.8% 0.0%
Global X Funds 8 $0.1 0.0% 15 $0.1 1 14.3% $0.1 65.5% 0.0%
IndexIQ Advisors 7 $0.1 0.0% 46 $0.0 2 40.0% $0.0 37.0% 0.0%
Jefferies Asset Management 4 $0.1 0.0% 0 $0.0 1 33.3% $0.0 18.6% 0.0%
Emerging Global Advisors 6 $0.1 0.0% 15 $0.0 2 50.0% $0.0 96.3% 0.0%
Old Mutual Global Shares 2 $0.1 0.0% 3 $0.0 1 100.0% $0.0 23.1% 0.0%
ALPS ETF Trust 2 $0.0 0.0% 6 $0.0 0 0.0% $0.0 77.1% 0.0%
AdvisorShares 1 $0.0 0.0% 3 $0.0 0 0.0% $0.0 24.3% 0.0%
Grail Advisors 7 $0.0 0.0% 1 $0.0 2 40.0% $0.0 96.7% 0.0%
YTD ChangeMar-10
17 ETF Landscape Industry Highlights March 2010
ETF providers in the United States (continued)Ranked by AUM as at end March 2010
Source: Global ETF Research & Implementation Strategy Team, BlackRock, Bloomberg.
PROVIDER # ETFs
AUM
(US$ BN) % Total # Planned
YTD NNA
(US$ BN) # ETFs % ETFs
AUM
(US$ BN) % AUM
% Market
Share
FaithShares 5 $0.0 0.0% 0 $0.0 0 0.0% $0.0 5.0% 0.0%
TXF Funds 1 $0.0 0.0% 0 $0.0 0 0.0% $0.0 1.9% 0.0%
OOK Advisors 1 $0.0 0.0% 0 $0.0 0 0.0% $0.0 0.0% 0.0%
Javelin Investment Management 1 $0.0 0.0% 1 $0.0 0 0.0% $0.0 -82.8% 0.0%
SPA ETF International - - - 7 - - - - - -
Capital West Securities - - - 1 - - - - - -
Exchange Traded Spreads Trust - - - 4 - - - - - -
Eaton Vance - - - 5 - - - - - -
FactorShares - - - 5 - - - - - -
Firsthand Capital - - - 1 - - - - - -
Factor Advisors - - - 22 - - - - - -
Florentez Investment - - - 1 - - - - - -
FocusShares - - - 6 - - - - - -
JP Morgan Asset Management - - - 2 - - - - - -
Macro Securities Depositor - - - 2 - - - - - -
Next Investments - - - 1 - - - - - -
Pax World Funds - - - 3 - - - - - -
RiverPark Advisors - - - 2 - - - - - -
Russell Investments - - - 0 - - - - - -
ShariahShares - - - 2 - - - - - -
Spinnaker ETF Trust - - - 1 - - - - - -
T Rowe Price - - - 1 - - - - - -
Total 814 $736.3 100.0% 694 $10.1 42 5.4% $30.8 4.4%
YTD ChangeMar-10
18 ETF Landscape Industry Highlights March 2010
NNA – Net New Assets. Data as at end March 2010.
Source: National Stock Exchange (NSX), Global ETF Research & Implementation Strategy Team, BlackRock.
US ETF/ETP net new assets by type of exposure
ADV
(US$ Mn)
ASSETS
(US$ Mn)
NNA
(US$ Mn)
Equity 54,610.8 616,940.9 14,237.2 (1,352.5) 36,476.3
North America - Equity 46,369.9 413,266.7 12,167.3 (2,363.9) 1,987.0
Broad 34,043.2 318,652.3 8,696.4 (5,107.1) (11,180.1) Active 0.1 17.5 1.4 2.8 12.8
Real Estate 1,071.1 13,350.7 417.4 221.5 4,377.4
Technology 693.1 11,337.7 368.4 382.7 2,626.7
Financials 5,201.2 17,628.9 478.2 (687.5) 1,409.1
Energy 2,185.7 16,553.7 408.8 585.3 1,145.3
Materials 1,144.2 5,080.6 51.0 186.5 1,206.2
Consumer Goods/Services 1,105.3 8,719.1 818.0 1,047.8 287.2
Industrials 393.1 5,059.6 557.7 723.1 914.1
Utilities 174.6 4,536.8 56.1 (96.2) 1,526.9
Telecommunications 11.1 992.2 (1.1) 18.9 139.4
Other 16.5 2,103.2 18.8 37.2 (77.1)
Healthcare 330.7 9,234.3 296.0 320.9 (400.8)
Global (ex-US) - Equity 1,028.9 56,747.7 855.6 1,855.8 691.4
Asia Pacific - Equity 550.8 19,895.4 597.9 653.2 1,825.8
Europe - Equity 139.7 8,647.9 (125.1) (67.2) 1,574.0
Global - Equity 115.9 12,915.8 242.5 656.0 3,353.7
EXPOSURE Q1 2010 NNA (US$ Mn) 2009 NNA (US$ Mn)
Mar-10
19 ETF Landscape Industry Highlights March 2010
US ETF/ETP net new assets by type of exposure(continued)
NNA – Net New Assets. Data as at end March 2010.
Source: National Stock Exchange (NSX), Global ETF Research & Implementation Strategy Team, BlackRock.
ADV
(US$ Mn)
ASSETS
(US$ Mn)
NNA
(US$ Mn)
Emerging Markets - Equity 6,405.6 105,467.5 499.0 (2,086.4) 27,044.5
Broad - EM 3,372.6 64,130.5 139.2 (858.7) 16,691.3
Regional - EM 114.4 4,165.5 (52.9) (297.4) 1,400.7
Country - EM 2,918.5 37,171.6 412.7 (930.3) 8,952.5
Brazil 1,233.8 11,623.2 (31.6) 33.4 2,545.7
Chile 9.3 365.9 (5.3) 78.3 50.1
China 1,035.5 10,246.8 (147.8) (1,787.1) 2,191.1
Colombia 0.4 9.7 1.6 1.6 5.3
Egypt 0.1 2.0 - -
India 50.9 2,363.4 12.7 18.8 774.6
Indonesia 8.4 322.4 64.3 87.8 167.5
Israel 4.9 266.2 25.8 73.5 22.5
Malaysia 16.9 609.2 (6.9) 20.2 61.0
Mexico 139.7 1,298.2 203.1 97.8 302.0
Peru 2.7 168.2 36.0 55.1 96.3
Poland 0.2 19.2 - 10.2 7.3
Russia 90.2 1,926.1 213.9 369.0 378.8
South Africa 15.4 464.3 (17.6) (64.8) 18.4
South Korea 149.1 3,306.5 87.5 145.5 770.6
Taiwan 141.8 3,377.1 (56.0) (116.4) 1,093.7
Thailand 7.6 263.9 25.1 0.3 174.8
Turkey 8.4 407.4 (10.3) (7.2) 204.7
Vietnam 3.2 131.9 18.1 53.6 88.2
EXPOSURE Q1 2010 NNA (US$ Mn) 2009 NNA (US$ Mn)
Mar-10
20 ETF Landscape Industry Highlights March 2010
US ETF/ETP net new assets by type of exposure(continued)
NNA – Net New Assets. Data as at end March 2010.
Source: National Stock Exchange (NSX), Global ETF Research & Implementation Strategy Team, BlackRock.
ADV
(US$ Mn)
ASSETS
(US$ Mn)
NNA
(US$ Mn)
Fixed Income 1,622.1 116,869.8 4,671.7 10,098.6 44,801.9
Corporate 158.4 21,927.2 801.7 1,330.9 10,560.6
Inflation 128.9 21,873.7 227.8 1,880.0 10,139.8
Aggregate 187.4 25,610.2 720.7 1,891.2 8,216.7
Government 931.8 28,588.1 1,542.7 2,647.0 6,706.9
High Yield 142.3 9,871.8 1,025.8 1,506.6 4,429.4
Municipal 53.6 6,665.7 283.5 632.7 3,574.6
Mortgage 13.5 1,825.4 (13.8) (3.2) 913.1
Convertible 2.5 289.7 27.2 46.8 212.0
Active 3.7 218.0 56.1 166.5 48.8
Commodities 3,401.4 78,712.3 1,132.6 (113.4) 32,551.8
Precious Metals 2,463.6 57,089.8 1,089.2 648.8 18,793.2
Energy 677.8 6,931.8 (312.7) (1,422.2) 6,055.9
Broad 166.8 10,208.6 316.4 613.3 4,958.1
Agriculture 46.1 3,133.8 50.3 157.3 1,927.6
Industrial Metals 44.5 1,249.6 (10.5) (108.4) 798.1
Livestock 2.6 98.6 - (2.2) 18.9
Currency 314.3 6,868.2 (302.8) (1,086.0) 4,154.9
Alternative 191.3 1,664.1 638.7 1,254.5 1,258.7
Mixed 7.7 636.6 58.9 115.7 225.5
Total 60,147.6 821,691.9 20,436.3 8,916.9 119,469.1
EXPOSURE Q1 2010 NNA (US$ Mn) 2009 NNA (US$ Mn)
Mar-10
21 ETF Landscape Industry Highlights March 2010
Data as at end March 2010.Source: Global ETF Research & Implementation Strategy Team, BlackRock, Bloomberg.
Types of ETF exposure: United States
Large-Cap - Equity, 19.9%
Fixed Income, 15.2%
Emerging Markets - Equity, 14%
International - Equity, 13.8%
Sector - Equity, 10.8%
Growth - Equity, 5.1%
Value - Equity, 4.4%
Broad Market - Equity, 3.6%
Mid-Cap - Equity, 3.4%
Small-Cap - Equity, 3.3%
Leveraged Inverse, 2.1%
Custom, 1.6%
Leveraged, 1.3%
Commodities, 1%
Inverse, 0.4%
Currency, 0.2%
Active, 0%
Exposure # ETFs
AUM
(US$ BN) % TOTAL # ETFs
AUM
(US$ BN) % AUM
Equity 493 $575.3 78.1% 9 $17.0 3.0%
Large-Cap - Equity 39 $146.3 19.9% -1 -$4.0 -2.7%
Emerging Markets - Equity 72 $102.8 14.0% 8 -$1.0 -1.0%
International - Equity 147 $101.3 13.8% -1 $4.3 4.5%
Sector - Equity 135 $79.4 10.8% 1 $7.2 9.9%
Growth - Equity 27 $37.2 5.1% 0 $1.9 5.5%
Value - Equity 27 $32.5 4.4% 0 $3.1 10.6%
Broad Market - Equity 16 $26.2 3.6% 2 $2.0 8.4%
Mid-Cap - Equity 12 $25.3 3.4% 0 $2.4 10.7%
Small-Cap - Equity 18 $24.2 3.3% 0 $1.1 4.6%
Fixed Income 90 $112.1 15.2% 5 $10.3 10.1%
Leveraged Inverse 62 $15.6 2.1% 8 $1.0 6.6%
Custom 59 $11.8 1.6% 1 $2.7 29.5%
Leveraged 58 $9.8 1.3% 10 -$1.1 -9.9%
Commodities 14 $7.1 1.0% 3 $0.2 3.0%
Inverse 14 $3.0 0.4% 3 $0.2 6.4%
Currency 8 $1.3 0.2% 0 $0.4 43.9%
Active 16 $0.3 0.0% 3 $0.2 177.8%
Total 814 $736.3 100.0% 42 $30.8 4.4%
YTD ChangeMar-10
22 ETF Landscape Industry Highlights March 2010
Top 10 ETFs in the USRanked by Assets Under Management (AUM)
Ranked by US$ Average Daily Trading Volumes (ADV)
Data as at end March 2010.Source: Global ETF Research & Implementation Strategy Team, BlackRock, Bloomberg.
ETF
Bloomberg
Ticker
AUM
(US$ MN)
ADV
('000 Shares)
ADV
(US$ MN)
SPDR S&P 500 SPY US $78,098 169,558 $19,623
iShares MSCI EAFE Index Fund EFA US $35,805 15,828 $874
iShares MSCI Emerging Markets Index Fund EEM US $35,041 62,035 $2,558
Vanguard Emerging Markets VWO US $22,991 11,734 $482
iShares S&P 500 Index Fund IVV US $22,859 3,524 $409
PowerShares QQQ Trust QQQQ US $21,021 70,597 $3,348
iShares Barclays TIPS Bond Fund TIP US $20,028 1,037 $108
Vanguard Total Stock Market ETF VTI US $14,476 2,006 $118
iShares Russell 2000 Index Fund IWM US $13,350 58,255 $3,926
iShares iBoxx $ Investment Grade Corporate Bond Fund LQD US $12,316 680 $72
ETF
Bloomberg
Ticker
ADV
(US$ MN)
ADV
('000 Shares)
AUM
(US$ MN)
SPDR S&P 500 SPY US $19,623 169,558 $78,098
iShares Russell 2000 Index Fund IWM US $3,926 58,255 $13,350
PowerShares QQQ Trust QQQQ US $3,348 70,597 $21,021
iShares MSCI Emerging Markets Index Fund EEM US $2,558 62,035 $35,041
Direxion Daily Financial Bull 3x Shares FAS US $2,423 26,974 $885
iShares MSCI Brazil Index Fund EWZ US $1,213 16,839 $10,883
Financial Select Sector SPDR Fund XLF US $1,207 77,355 $6,819
Energy Select Sector SPDR Fund XLE US $1,011 17,533 $5,942
iShares FTSE/Xinhua China 25 Index Fund FXI US $977 23,570 $8,012
Direxion Daily Financial Bear 3x Shares FAZ US $903 61,802 $1,235
23 ETF Landscape Industry Highlights March 2010
Average expenses of ETFs vs open-end mutual funds in the US
*As at end February 2010.**Captured from Morningstar on 15 March 2010.
Source: Morningstar, Global ETF Research and Implementation Strategy Team, BlackRock.
Average TER(s)
Average
TER (bps)
Exchange Traded Funds*
Active 57Broad Market - Equity 18
Commodities 57
Currency 48Custom 44
Fixed Income 22Growth - Equity 21
International - Equity 42
Inverse 95Large-Cap - Equity 13
Leveraged 95
Leveraged Inverse 95Mid-Cap - Equity 22
Sector - Equity 32Small-Cap - Equity 21
Value - Equity 21
Total - Equity ETFs 34Total - Fixed Income ETFs 25
Total - All 33
Open-end Mutual Funds**
Passive/Indexed Domestic Equity 93
Passive/Indexed International Equity 83Passive/Indexed Fixed Income 40
Actively Managed Domestic Equity 146
Actively Managed International Equity 160Actively Managed Fixed Income 105
24 ETF Landscape Industry Highlights March 2010
Short InterestUS listed ETF & HOLDRS Short Interest
Source: Regulatory Notice 09-31, Financial Industry Regulatory Authority. SECWith short sales the investor risks paying more for a security than the investor received from its sale.
Data as at mid March 2010. Source: Global ETF Research & Implementation Strategy Team, BlackRock, Bloomberg.
• Short Interest in US listed Exchange Traded Funds (ETFs) were the highest ever during 2008.
– Based on data through March 2010 the average number of ETF shares short during 2010 YTD is 1,670 million shares which is lower than the average of 1,693 million in 2008, but higher than the average of 1,653 million in 2009 and significantly higher than the average of 1,242 million during 2007 and 837 million in 2006. The March 2010 short interest level for US-listed ETFs was 11.3% of shares outstanding or 1,741 million shares, up 0.3% from 1,735 million in December 2009.
• Investors are using ETFs for long/short and hedging strategies.
– At the end of March 2010, there were 814 ETFs listed in the US and 2,131 ETFs worldwide, which provide exposure to equity sectors, styles, countries and regional indices as well as fixed income, commodity indices and currencies.
• Security lending revenue on ETFs can be attractive.
– For investors who own ETF shares, the lending revenue that can be earned on ETFs, may at times, and for some ETFs, more than coverthe annual Total Expense Ratio (TER).
• Short Interest is often considered an indication of the level of scepticism in the market.
– Short interest data is captured for US listed securities on the 15th of each month or the next business day and reflects the number of shares that have yet to be repurchased to give back to lenders. The higher the short interest, the more investors are expecting a downturn. Short positions fall in value as stocks rise, and vice versa.
The rules on shorting ETFs on financial indices and the use of inverse and leveraged inverse ETFs on financial indices in the various markets are continually being updated as regulators react to market conditions and the actions of other regulators – so the position is quite fluid.
On 26 February 2010 the SEC approved a new rule that places restrictions on short selling a security when it has experienced a price decline of at least 10% in a single day. If this level is reached, short selling is only allowed if the price of the security is above the current national best bid.
Date
Short Interest
(MN Shares)
% of Shares
Outstanding
S&P 500
Index Level Short Interest
2003 Avg 812 27.1% 983 812,125,142
2004 Avg 952 26.3% 1,127 952,219,766
2005 Avg 781 17.2% 1,206 781,047,462
2006 Avg 837 13.5% 1,283 837,003,935
2007 Avg 1,242 16.1% 1,475 1,241,587,124
2008 Avg 1,693 17.0% 1,209 1,693,145,303
2009 Avg 1,653 12.4% 948 1,652,786,269
2010 Avg YTD 1,670 10.8% 1,128 1,669,631,983
Jan-10 1,522 9.9% 1,138 1,522,472,484
Feb-10 1,746 11.3% 1,095 1,745,601,507
Mar-10 1,741 11.3% 1,151 1,740,821,957
25 ETF Landscape Industry Highlights March 2010
ETP providers in the United StatesRanked by assets, as at end March 2010
Source: Global ETF Research & Implementation Strategy Team, BlackRock, Bloomberg.
PROVIDER # ETPs
Assets
(US$ BN) % Total # Planned # ETPs % ETPs
Assets
(US$ BN) % AUM
% Market
Share
State Street Global Advisors 1 $40.0 46.9% 0 -$0.1 0 0.0% $0.3 0.7% 1.8%
Deutsche Bank 34 $11.8 13.8% 2 -$1.5 0 0.0% -$1.8 -13.3% -1.6%
iShares 4 $9.6 11.3% 1 -$0.2 0 0.0% -$0.1 -0.8% 0.3%
Barclays (iPath) 30 $6.6 7.8% 3 $1.3 0 0.0% $0.7 11.0% 1.0%
United States Commodity Funds 7 $4.9 5.7% 1 -$1.3 0 0.0% -$2.6 -35.0% -2.8%
Merrill Lynch 17 $4.8 5.6% 0 -$0.5 0 0.0% -$0.4 -8.3% -0.3%
Rydex 9 $2.7 3.2% 13 $0.0 0 0.0% $0.0 0.4% 0.1%
ETF Securities 4 $1.3 1.5% 1 $0.7 2 100.0% $0.8 158.4% 0.9%
ProShares 12 $1.2 1.5% 38 $0.2 0 0.0% $0.2 19.8% 0.3%
JPMorgan Chase 2 $1.0 1.2% 0 $0.2 0 0.0% $0.3 37.5% 0.3%
Swedish Export Credit Corp 7 $0.9 1.1% 0 $0.1 0 0.0% $0.0 1.5% 0.0%
GreenHaven Commodity Services 1 $0.2 0.3% 0 $0.0 0 0.0% $0.0 4.6% 0.0%
Morgan Stanley 4 $0.1 0.1% 0 $0.0 0 0.0% $0.0 32.4% 0.0%
HSBC USA 1 $0.1 0.1% 0 $0.0 0 0.0% $0.0 -12.0% 0.0%
Goldman Sachs 2 $0.1 0.1% 0 $0.0 0 0.0% $0.0 -2.4% 0.0%
Barclays Capital 8 $0.1 0.1% 0 $0.0 0 0.0% $0.0 2.5% 0.0%
Credit Suisse 2 $0.0 0.0% 0 $0.0 1 100.0% $0.0 342.6% 0.0%
Jefferies Asset Management - - - 2 -
Sprott Asset Management - - - 1 - - - - - -
Total 145 $85.4 100.0% 62 -$1.2 3 2.1% -$2.7 -3.1%
YTD ChangeMar-10
YTD NNA
(US$ BN)
26 ETF Landscape Industry Highlights March 2010
European ETF and ETP growth
Data as at end March 2010.Source: Global ETF Research & Implementation Strategy Team, BlackRock, Bloomberg.
0
20
40
60
80
100
120
140
160
180
200
220
240
Assets US$ Bn
0
100
200
300
400
500
600
700
800
900
1,000
# Products
ETF Assets Total $0.7 $5.7 $10.7 $20.4 $34.0 $54.9 $89.7 $128.5 $142.7 $226.9 $233.7
ETF Commodity Assets $0.4 $2.0 $3.3 $4.9 $15.2 $16.6
ETF Fixed Income Assets $1.0 $2.9 $5.2 $12.1 $21.0 $41.1 $51.6 $51.1
ETF Equity Assets $0.7 $5.7 $10.7 $19.4 $31.0 $49.3 $75.7 $103.5 $96.6 $159.8 $165.6
ETP Assets $1.1 $2.1 $4.9 $7.0 $15.7 $15.5
# ETFs 6 71 118 104 114 165 273 423 635 829 910
# ETPs 2 32 56 123 158 268
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Mar-10
27 ETF Landscape Industry Highlights March 2010
ETF providers in EuropeRanked by AUM, as at end March 2010
Source: Global ETF Research & Implementation Strategy Team, BlackRock, Bloomberg.
continued…
PROVIDER # ETFs
AUM
(US$ BN) % Total
#
Planned # ETFs % ETFs
AUM
(US$ BN) % AUM
% Market
Share
iShares 172 $85.5 36.6% 1 $1.6 4 2.4% -$0.23 -0.3% -1.2%
Lyxor Asset Management 127 $46.2 19.8% 0 $1.7 4 3.3% $0.63 1.4% -0.3%
db x-trackers 120 $38.6 16.5% 9 $1.6 4 3.4% $1.42 3.8% 0.1%
Credit Suisse Asset Management 40 $11.3 4.8% 0 $1.5 13 48.1% $1.68 17.4% 0.6%
Zurich Cantonal Bank 7 $7.4 3.2% 0 $0.5 3 75.0% $0.70 10.4% 0.2%
Commerzbank 68 $6.8 2.9% 6 $0.7 6 9.7% $0.58 9.3% 0.2%
EasyETF 64 $6.0 2.6% 2 $0.1 0 0.0% $0.10 1.8% 0.0%
Amundi Investment Solutions 76 $5.7 2.4% 0 $1.0 13 20.6% $0.91 19.1% 0.3%
ETFlab Investment 33 $5.6 2.4% 0 -$0.2 2 6.5% -$1.46 -20.6% -0.7%
UBS Global Asset Management 16 $4.4 1.9% 0 $0.9 2 14.3% $0.84 23.8% 0.3%
Source Markets 43 $3.6 1.5% 19 $0.8 11 34.4% $0.78 27.5% 0.3%
XACT Fonder 12 $2.6 1.1% 0 -$0.1 0 0.0% $0.00 -0.1% 0.0%
Julius Baer 16 $2.6 1.1% 0 $0.5 12 300.0% $0.47 22.2% 0.2%
BBVA Asset Management 8 $2.2 0.9% 0 $0.0 0 0.0% -$0.18 -7.6% -0.1%
State Street Global Advisors 13 $1.4 0.6% 0 -$0.1 0 0.0% -$0.09 -6.1% -0.1%
PowerShares 19 $1.0 0.4% 1 $0.0 0 0.0% $0.04 3.7% 0.0%
RBS 10 $0.8 0.4% 21 $0.1 0 0.0% $0.07 8.9% 0.0%
Marshall Wace Asset Management 3 $0.4 0.2% 0 $0.4 3 100.0% $0.40 100.0% 0.2%
ETF Securities 23 $0.4 0.2% 0 $0.1 2 9.5% $0.08 25.7% 0.0%
DnB NOR Asset Management 3 $0.3 0.1% 0 $0.0 0 0.0% $0.02 5.7% 0.0%
Seligson & Co Fund Management 1 $0.3 0.1% 0 $0.0 0 0.0% $0.01 4.2% 0.0%
Mar-10 YTD Change
YTD NNA
(US$ BN)
28 ETF Landscape Industry Highlights March 2010
ETF providers in Europe (continued)Ranked by AUM, as at end March 2010
Source: Global ETF Research & Implementation Strategy Team, BlackRock, Bloomberg.
PROVIDER # ETFs
AUM
(US$ BN) % Total
#
Planned # ETFs % ETFs
AUM
(US$ BN) % AUM
% Market
Share
JPM Structured Fund Management 6 $0.2 0.1% 0 $0.0 0 0.0% -$0.03 -14.9% 0.0%
HSBC 4 $0.1 0.1% 0 $0.0 1 33.3% $0.06 69.5% 0.0%
Finans Portfoy Yonetimi 6 $0.1 0.0% 0 $0.0 0 0.0% -$0.04 -27.9% 0.0%
Alpha Asset Management 1 $0.1 0.0% 0 $0.0 0 0.0% -$0.01 -13.4% 0.0%
Beta1 ETFund 3 $0.0 0.0% 0 $0.0 0 0.0% $0.00 -5.6% 0.0%
NCB Investment Services 1 $0.0 0.0% 0 $0.0 0 0.0% $0.00 1.8% 0.0%
OTP Fund Management 1 $0.0 0.0% 0 $0.0 0 0.0% $0.00 3.8% 0.0%
NBG Asset Management 1 $0.0 0.0% 1 $0.0 0 0.0% $0.01 100.0% 0.0%
Medvesek Pusnik AM 1 $0.0 0.0% 0 $0.0 0 0.0% $0.00 3.7% 0.0%
Is Investment 1 $0.0 0.0% 0 $0.0 0 0.0% $0.00 -27.4% 0.0%
Osmosis Investment Management 1 $0.0 0.0% 0 $0.0 1 100.0% $0.00 100.0% 0.0%
Bizim Menkul Degerler 1 $0.0 0.0% 0 $0.0 0 0.0% $0.00 -0.1% 0.0%
Ak Securities 1 $0.0 0.0% 0 $0.0 0 0.0% $0.00 -0.2% 0.0%
Think Capital 5 $0.0 0.0% 0 $0.0 0 0.0% $0.00 0.0% 0.0%
HQ Fonder 3 $0.0 0.0% 0 $0.0 0 0.0% $0.00 0.0% 0.0%
Legg Mason - - - 1 - - - - - -
Garanti Bank - - - 1 - - - - - -
Hinduja Bank (Switzerland) - - - 1 - - - - - -
Qbasis Invest - - - 1 - - - - - -
Total 910 $233.7 100.0% 64 $11.2 81 9.8% $6.75 3.0%
Mar-10 YTD Change
YTD NNA
(US$ BN)
29 ETF Landscape Industry Highlights March 2010
Fixed Income, 21.7%
Country Exposure Europe - Equity, 15.3%
Regional Exposure Eurozone - Equity, 14%
Emerging Markets - Equity, 10.8%
Commodities, 7.1%
Country Exposure United States - Equity, 5.8%
Regional Exposure Europe - Equity, 5.3%
International - Equity, 5.8%
European Sector Exposure - Equity, 4.4%
Global Exposure - Equity, 4.1%
Style - Equity, 2.3%
Inverse, 1.4%
Eurozone Sector Exposure - Equity, 0.8%
Leveraged, 0.7%
Leveraged Inverse, 0.5%
Currency, 0.1%
US Sector Exposure - Equity, 0%
Mixed (Equity & Fixed Income), 0%
Alternative, 0%
Types of ETF exposure in Europe
ETFs should be viewed as a tool for both active and passive managers
Data as at end March 2010.Source: Global ETF Research & Implementation Strategy Team, BlackRock, Bloomberg.
Type of Exposure # ETFs
AUM
(US$ BN) % TOTAL # ETFs
AUM
(US$ BN) % AUM
Equity - Total 623 $160.0 68.5% 43 $5.6 3.6%
Country Exposure Europe - Equity 96 $35.7 15.3% 5 -$1.1 -3.1%
Regional Exposure Eurozone - Equity 37 $32.8 14.0% 3 -$2.2 -6.4%
Emerging Markets - Equity 88 $25.2 10.8% 4 $2.8 12.4%
Country Exposure United States - Equity 39 $13.5 5.8% 2 $1.5 12.2%
Regional Exposure Europe - Equity 49 $12.3 5.3% 2 $0.3 2.6%
International - Equity 64 $13.5 5.8% 9 $2.5 23.1%
European Sector Exposure - Equity 127 $10.2 4.4% 1 $0.0 0.1%
Global Exposure - Equity 50 $9.5 4.1% 4 $1.4 17.1%
Style - Equity 43 $5.3 2.3% 2 $0.6 13.0%
Eurozone Sector Exposure - Equity 18 $1.8 0.8% 0 -$0.2 -9.6%
US Sector Exposure - Equity 12 $0.1 0.0% 11 $0.1 233.9%
Fixed Income 158 $50.8 21.7% 10 -$0.6 -1.2%
Commodities 57 $16.6 7.1% 22 $1.4 9.2%
Inverse 38 $3.3 1.4% 8 $0.5 18.5%
Leveraged 15 $1.6 0.7% 1 $0.0 0.4%
Leveraged Inverse 9 $1.1 0.5% 0 $0.0 1.1%
Currency 4 $0.3 0.1% -2 -$0.1 -23.5%
Mixed (Equity & Fixed Income) 4 $0.1 0.0% 0 $0.0 18.1%
Alternative 2 $0.0 0.0% -1 -$0.1 -61.3%
Total 910 $233.7 100.0% 81 $6.8 3.0%
Mar-10 YTD Change
30 ETF Landscape Industry Highlights March 2010
European ETF/ETP net new assets by type of exposure
NNA – Net New Assets. Data as at end March 2010.
Source: Global ETF Research & Implementation Strategy Team, BlackRock, Bloomberg.
ADV
(US$ Mn)
ASSETS
(US$ Mn)
NNA
(US$ Mn)
Equity 1,891.3 164,412.3 1,506.9 8,045.4 32,724.1
Europe - Equity 1,327.8 101,574.8 (415.1) 1,230.3 18,204.7
Broad 1,208.0 88,919.6 (751.2) 1,022.6 14,817.6
Consumer Goods/Services 13.8 1,615.3 150.9 164.0 335.4
Energy 6.5 1,167.6 5.7 70.9 322.1
Financials 34.1 3,147.1 409.8 212.4 825.5
Healthcare 9.4 1,049.5 (88.1) (42.8) 145.9
Industrials 4.3 514.6 9.5 38.1 136.6
Information Technology 4.7 440.4 (13.4) 30.4 12.4
Materials 27.2 1,777.8 41.4 (19.6) 522.5
Private Equity 0.8 87.7 7.1 31.7 34.2
Real Estate 6.2 1,437.0 20.9 44.0 333.6
Telecommunications 6.6 597.6 (14.6) (312.9) 425.0
Utilities 6.0 765.7 (193.1) (2.9) 361.3
Other 0.2 55.1 - (5.7) (67.4)
North America - Equity 145.8 16,294.8 502.7 1,438.5 1,561.5
Asia Pacific - Equity 65.0 10,783.6 414.8 1,903.6 2,662.0
Global - Equity 90.4 10,475.8 81.1 1,176.5 2,799.6
EXPOSURE Q1 2010 NNA (US$ Mn) 2009 NNA (US$ Mn)
Mar-10
31 ETF Landscape Industry Highlights March 2010
NNA – Net New Assets. Data as at end March 2010.
Source: Global ETF Research & Implementation Strategy Team, BlackRock, Bloomberg.
European ETF/ETP net new assets by type of exposure (continued)
ADV
(US$ Mn)
ASSETS
(US$ Mn)
NNA
(US$ Mn)
Emerging Markets - Equity 262.3 25,283.3 923.3 2,296.5 7,496.4
Broad - EM 77.0 10,742.9 454.8 1,102.5 3,665.0
Regional - EM 28.0 3,123.2 55.8 63.0 778.8
Country - EM 157.3 11,417.2 412.8 1,131.0 3,052.7
Brazil 27.2 2,494.7 36.8 138.8 811.2
China 32.7 3,016.2 3.4 137.0 862.9
Egypt 0.1 8.1 1.5 1.5 (5.2)
Hungary 0.7 19.3 (0.3) (0.9) (0.3)
India 21.0 2,250.3 29.6 122.9 616.3
Kuwait 0.1 34.0 0.8 0.8 14.5
Malaysia 0.4 40.9 11.7 15.9 10.1
Russia 24.9 1,492.2 230.4 432.5 174.2
South Africa 3.9 268.2 23.2 70.7 64.3
South Korea 7.5 669.5 57.0 182.9 152.3
Taiwan 6.8 476.4 7.5 66.4 137.7
Thailand - - - - 30.5
Turkey 30.6 492.1 17.8 (26.8) 113.3
UAE 0.0 13.2 - - 7.2
Vietnam 1.3 141.8 (6.7) (10.7) 63.6
EXPOSURE Q1 2010 NNA (US$ Mn) 2009 NNA (US$ Mn)
Mar-10
32 ETF Landscape Industry Highlights March 2010
NNA – Net New Assets. Data as at end March 2010.
Source: Global ETF Research & Implementation Strategy Team, BlackRock, Bloomberg.
European ETF/ETP net new assets by type of exposure (continued)
ADV
(US$ Mn)
ASSETS
(US$ Mn)
NNA
(US$ Mn)
Fixed Income 326.5 51,141.7 821.0 1,408.1 9,453.3
Broad 2.1 158.1 30.9 52.2 102.3
Corporate 56.3 9,073.0 340.8 605.0 4,770.8
Covered 1.9 706.6 - 44.3 438.4
Credit Spreads 2.7 789.8 39.0 (88.1) (291.1)
Government 175.7 26,991.4 146.0 1,283.1 6,193.2
Inflation 23.8 4,356.0 19.8 56.2 2,365.8
Money Market 59.4 7,364.2 314.0 (547.0) (4,518.2)
Mortgage 4.7 1,702.6 (69.6) 2.4 392.1
Commodities 78.1 32,116.9 881.6 1,695.2 13,657.9
Broad 22.7 5,204.3 158.8 488.5 2,985.9
Agriculture 1.2 1,853.4 79.5 41.7 1,294.3
Energy 0.5 2,376.5 141.9 76.6 1,834.2
Industrial Metals 0.1 675.7 0.2 85.0 343.5
Livestock - 83.0 4.0 7.0 29.4
Precious Metals 53.6 21,924.0 497.3 996.3 7,170.7
Currency 0.7 338.4 21.5 78.1 190.7
Alternative 3.4 1,202.0 6.7 272.8 898.1
Mixed 0.7 84.0 5.2 12.4 14.8
Total 2,300.6 249,295.3 3,243.0 11,512.0 56,939.0
EXPOSURE Q1 2010 NNA (US$ Mn) 2009 NNA (US$ Mn)
Mar-10
33 ETF Landscape Industry Highlights March 2010
STOXX 600 Sector ETF net flows For the week ending 01 April 2010
• AUM in sector ETFs is now more than double the US$4.0 Bn open interest in sector futures.
• Last week saw US$46.8 Mn net inflows to STOXX 600 sector ETFs. The largest sector ETF inflows last week were in Banks with US$60.7 Mn and Media with US$20.8 Mn while Insurance experienced net outflows of US$20.0 Mn.
Index returns are for illustrative purposes only and do not represent actual fund performance.Index performance returns do not reflect any management fees, transaction costs or expenses.
Indices are unmanaged and one cannot invest directly in an index. Past performance does not guarantee future results.Source: Global ETF Research and Implementation Strategy Team, BlackRock, Bloomberg.
• Year-to-date, Media has had the largest net inflows with US$311.6 Mn net new assets, followed by Banks with US$200.9 Mn YTD. Telecommunications sector ETFs have had the largest net outflows with US$274.6 Mn YTD.
# STOCKS % WEIGHT WEEKLY RANK YTD RANK 01-Apr
YTD %
CHANGE
Automobiles & Parts SXAR 14 1.8% 1.6% 18 -5.4% 17 92.7 141.2 -36.7% 8.4 -17.8 0.0 -79.7
Banks SX7R 55 15.8% 1.8% 17 -2.7% 15 381.1 1,684.4 10.8% 5.1 60.7 -0.1 200.9
Basic Resources SXPR 30 5.5% 6.6% 1 8.7% 3 392.5 1,483.1 9.1% 25.8 2.5 9.8 30.7
Chemicals SX4R 21 3.9% 3.6% 3 -2.6% 14 109.6 180.4 -19.8% 0.4 -6.9 -6.2 -34.5
Construction & Materials SXOR 28 2.8% 2.7% 14 -3.4% 16 56.4 142.9 -24.8% 0.5 0.0 0.0 -32.3
Financial Services SXFR 32 1.4% 1.9% 16 -1.5% 12 5.7 106.3 33.8% 0.2 1.4 0.0 27.6
Food & Beverage SX3R 25 7.1% 3.5% 7 3.0% 7 198.8 416.3 -20.2% 2.6 -16.7 -1.5 -114.7
Health Care SXDR 34 9.6% 1.2% 19 -0.1% 10 321.9 928.1 -3.6% 4.3 -11.3 0.0 -36.8
Industrial Goods & Services SXNR 92 8.5% 2.9% 11 7.0% 4 385.3 464.5 18.2% 1.7 4.6 0.0 39.4
Insurance SXIR 34 5.6% 3.5% 6 1.8% 9 183.9 717.7 9.6% 4.0 -20.0 -7.3 48.1
Media SXMR 27 2.1% 3.6% 4 3.0% 8 92.8 453.4 301.2% 0.5 20.8 -1.0 311.6
Oil & Gas SXER 39 10.0% 3.2% 9 -1.9% 13 468.3 1,079.7 3.4% 5.5 6.3 -6.0 69.3
Personal & Household Goods SXQR 28 4.9% 2.1% 15 6.7% 5 140.5 248.2 50.4% 3.0 0.0 0.0 68.4
Real Estate SX86R 20 1.1% 4.1% 2 -0.6% 11 7.2 75.7 -6.9% 0.1 0.5 0.5 -5.0
Retail SXRR 24 3.4% 2.8% 13 3.0% 6 139.2 137.6 -23.0% 0.5 0.0 3.2 -45.6
Technology SX8R 26 3.3% 3.3% 8 12.3% 1 198.0 277.5 42.9% 2.2 8.7 1.8 55.9
Telecommunications SXKR 20 6.3% 2.9% 12 -5.7% 18 296.8 538.3 -38.6% 3.5 9.0 -0.8 -274.6
Travel & Leisure SXTR 22 1.3% 3.0% 10 10.9% 2 77.4 94.3 6.9% 0.8 0.0 0.0 -3.8
Utilities SX6R 30 5.8% 3.5% 5 -6.6% 19 343.7 738.1 3.0% 6.4 5.0 2.2 79.5
Total 601 100.0% 2.9% 0.7% 3,891.8 9,907.8 3.3% 75.5 46.8 -5.5 304.4
SECTOR TICKER
STOXX 600ETF
5-DAY
ADV
(US$ Mn)
YTD ETF NET FLOWS
(US$ Mn)
US$ TOTAL RETURN PERFORMANCE
WEEKLY ETF NET FLOWS
(US$ Mn)
MTD ETF NET FLOWS
(US$ Mn)
ETF AUM (US$ Mn)FUTURES
OPEN
INTEREST
(US$ Mn)
34 ETF Landscape Industry Highlights March 2010
Canada ETF asset growth
Source: Global ETF Research & Implementation Strategy Team, BlackRock, Bloomberg.
0
5
10
15
20
25
30
35
Assets (US$ Bn)
0
20
40
60
80
100
120
140
# ETFs
ETF Assets $0.4 $4.0 $3.1 $3.4 $5.5 $7.4 $10.6 $13.0 $18.0 $15.7 $28.5 $32.8
# ETFs 1 3 14 15 16 16 20 26 46 77 109 132
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Mar-10
35 ETF Landscape Industry Highlights March 2010
ETF providers in CanadaRanked by AUM as at end March 2010
Source: Global ETF Research & Implementation Strategy Team, BlackRock, Bloomberg.
PROVIDER # ETFs
AUM
(US$ BN) % Total # Planned # ETFs % ETFs
AUM
(US$ BN) % AUM
% Market
Share
iShares 36 $26.3 80.2% 0 6 20.0% $3.8 16.7% 1.2%
Claymore Securities 26 $3.8 11.6% 3 1 4.0% $0.5 16.2% 0.1%
BetaPro Management 48 $2.2 6.7% 3 7 17.1% -$0.4 -14.4% -2.3%
BMO Asset Management 22 $0.5 1.5% 0 9 100.0% $0.3 100.0% 1.0%
Total 132 $32.8 100.0% 6 23 21.1% $4.3 14.9%
Mar-10 YTD Change
36 ETF Landscape Industry Highlights March 2010
• EONIA, SONIA
• Fed funds
CASH
ETF/ETP tool box
• Global
• Capitalisation (large, mid, small…)
• Sectors
• Broad markets
• Emerging markets
• Countries
• Inverse/leveraged
• Styles
– Active
– Dividend
– Fundamental
– Infrastructure
– Real estate
– Shariah
– Thematic
– Private equity
– Value
– Growth
EQUITY
• Government
• Corporate
• Credit
• Inflation
• High yield
• Mortgage backed
• Emerging markets
FIXED INCOME
2,131 ETFs with 4,133 ETF listings 718 other ETPs* with 1,025 ETP listings
Total: 2,849 products with 5,158 listings
*Other Exchange Traded Products (ETPs) include Holding Company Depository Receipts (HOLDRs), Exchange Traded Commodities (ETCs),Exchange Traded Currency products, and Exchange Traded Notes (ETNs). Data as at end March 2010.
Source: Global ETF Research & Implementation Strategy Team, BlackRock.
• Hedge funds
• Carbon
• Volatility
ALTERNATIVES
• Developed currencies
• Emerging market currencies
• Inverse/leveraged
• Strategy (carry, momentum…)
CURRENCY
• Broad (S&P, GSCI, DJUBS, RICI, CRB…)
• Sub-indices (energy, livestock, precious metals, industrial metals, agriculture…)
• Individual commodities• Based on physically held
assets (gold, silver, platinum, palladium…)
• Based on futures• Based on forwards• Inverse/leveraged
COMMODITIES
37 ETF Landscape Industry Highlights March 2010
How can ETFs be used?
• Interim beta:Maintain exposure to given market while searching for specific market opportunity
• Cash management:Invest cash rapidly and cost effectively to gain desired market exposures
• Derivatives alternative:Broad opportunity set of Delta 1 exposures with single line cash based settlement
• Exposure management:Shift portfolio emphasis by adjusting exposures (e.g. duration, credit)
• Thematic:Implement thematic exposures (e.g. dividends, alternatives)
Tactical
• Market exposure:Implement wide variety of investment strategies using a broad range of market exposures
• Directional views:Establish broad directional market position, use long & short trades to implement market view(s)
• Core satellite:Achieve strategic focus
• Rebalancing:Adjust drift in a portfolio’s asset allocation or style
• Completion:Add uncorrelated instruments and/or asset classes to strategy
Strategic
38 ETF Landscape Industry Highlights March 2010
Why use ETFs?
• ETF units and underlying assets can be lent out to potentially offset holding costsSecurities lending
• ETFs offer a cost-effective route to diversified market exposure
• The average total expense ratio (TER) for equity ETFs in the US is 34 bps versus 93 bps (per annum) for the average equity index tracking fund and 146 bps (per annum) for the average active equity fund1
Cost effectiveness
• ETFs are listed on exchanges and can be traded at any time the market is open
• Pricing is continuous throughout the day Flexibility
• ETFs provide immediate exposure to a basket or group of securities for instant diversification
• Broad range of asset classes including equities, bonds, commodities, investment themes etc
Diversification
• ETFs offer two sources of liquidity
– Traditional liquidity measured by secondary market trading volume
– The liquidity of the underlying assets via the creation and redemption process
Liquidity
Investors can generally see the ETF composition at any given timeTransparency
1. Source: Morningstar (March 2010)
39 ETF Landscape Industry Highlights March 2010
Growth in institutional users of ETFs
Source: Global ETF Research & Implementation Strategy Team, BlackRock, Thomson Reuters.
0
500
1,000
1,500
2,000
2,500
3,000
Number of Inst i tut ions
0
500
1,000
1,500
2,000
2,500
3,000
Number of Inst i tut ions
Other 0 0 1 2 5 11 10 10 10 30 15 15
Latin America 0 0 0 4 5 8 7 19 40 36 57 68
Asia Pacific 1 1 4 11 23 19 23 35 38 51 60 79
Canada 3 7 24 32 55 68 62 58 73 77 95 101
Europe 16 29 60 152 233 302 315 351 430 461 608 618
United States 145 241 342 561 782 889 1,010 1,154 1,333 1,559 1,781 2,045
Total 165 278 431 762 1,103 1,297 1,427 1,627 1,924 2,214 2,616 2,926
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
40 ETF Landscape Industry Highlights March 2010
Global institutions reported assetsas at end December 2008
Source: Global ETF Research & Implementation Strategy Team, BlackRock, Thomson Reuters.
Firm Reported Assets
Number of
Institutions
Reported
Assets
(US$ Mn)
Number of
Institutions
Reported
ETF Assets
(US$ Mn)
Number of
Institutions
Reported
ETF Assets
(US$ Mn)
>50 Billion 39 5,404,681 28 68,250 71.8% 1.3%
20-50 Billion 113 3,505,831 84 69,810 74.3% 2.0%
10-20 Billion 125 1,763,371 71 35,571 56.8% 2.0%5-10 Billion 205 1,481,979 98 15,356 47.8% 1.0%
1-5 Billion 1,216 2,638,240 428 41,249 35.2% 1.6%
500-1000 Million 864 610,428 246 14,123 28.5% 2.3%
250-500 Million 1,196 421,369 323 13,359 27.0% 3.2%
100-250 Million 2,141 345,296 535 11,739 25.0% 3.4%
<100 Million 31,542 303,393 686 4,710 2.2% 1.6%
Total 37,441 16,474,589 2,499 274,167 6.7% 1.7%
Firm Type
Number of
Institutions
Reported
Assets
(US$ Mn)
Number of
Institutions
Reported
ETF Assets
(US$ Mn)
Number of
Institutions
Reported
ETF Assets
(US$ Mn)
Investment Managers 7,061 11,817,584 2,443 176,880 34.6% 1.5%
Bank and Trust 493 419,345 158 15,959 32.0% 3.8%
Endowment Fund 17 11,477 8 1,811 47.1% 15.8%Finance Company 2 6 - - 0.0% 0.0%
Foundation 44 11,043 2 4 4.5% 0.0%
Hedge Fund 1,030 349,620 356 14,194 34.6% 4.1%
Insurance Company 136 160,902 16 1,670 11.8% 1.0%
Investment Advisor 4,462 10,209,252 1,857 134,501 41.6% 1.3%
Pension Fund 226 553,665 38 8,692 16.8% 1.6%Private Equity 331 41,858 7 21 2.1% 0.0%
Sovereign Wealth Fund 15 45,210 1 28 6.7% 0.1%
Venture Capital 305 15,206 - - 0.0% 0.0%
Brokerage Firms 143 338,226 45 86,869 31.5% 25.7%
Strategic Entities 30,237 4,318,779 11 10,418 0.0% 0.2%
Holding Company 501 254,762 5 3,210 1.0% 1.3%
Government Agency 97 640,813 - - 0.0% 0.0%Corporation 29,639 3,423,204 6 7,207 0.0% 0.2%
Total 37,441 16,474,589 2,499 274,167 6.7% 1.7%
% Of ETF Users
% Of ETF UsersReported ETF UsersAll Reporting Firms
All Reporting Firms Reported ETF Users
41 ETF Landscape Industry Highlights March 2010
Types of institutional users of ETFs
Source: Global ETF Research & Implementation Strategy Team, BlackRock, Thomson Reuters.
Type of Institution 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Investment Advisor 109 200 319 549 802 923 1,023 1,167 1,380 1,564 1,946 2,152
Hedge Fund 9 20 30 73 114 144 152 180 209 285 340 438
Bank and Trust 14 19 30 67 92 109 120 139 161 174 189 193
Pension Fund 5 8 9 15 22 28 28 33 45 36 45 48
Brokerage Firm 14 11 15 15 16 25 28 31 37 40 45 48
Insurance Company 13 19 27 39 50 60 65 66 74 80 23 17
Endowment Fund 1 1 1 3 3 3 5 5 7 8 9 9
Private Equity 0 0 0 0 0 0 0 0 1 4 7 9
Holding Company 0 0 0 0 0 1 2 3 3 4 3 5
Corporation 0 0 0 0 1 1 1 1 4 16 5 4
Foundation 0 0 0 0 1 0 2 1 2 3 3 2
Sovereign Wealth Fund 0 0 0 0 0 0 0 0 0 0 0 1
Venture Capital 0 0 0 1 2 3 1 1 1 0 1 0
Grand Total 165 278 431 762 1,103 1,297 1,427 1,627 1,924 2,214 2,616 2,926
42 ETF Landscape Industry Highlights March 2010
Growth in institutional users of ETFs
Source: Global ETF Research & Implementation Strategy Team, BlackRock, Thomson Reuters.
Country 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
United States 145 241 342 561 782 889 1,010 1,154 1,333 1,559 1,781 2,045
United Kingdom 9 12 15 25 37 55 61 55 79 87 112 120
Canada 3 7 24 32 55 68 62 58 73 77 95 101
Switzerland 0 3 7 19 26 35 31 48 62 62 92 94
Spain 1 2 8 32 47 60 62 61 70 76 76 76
Germany 1 1 1 6 14 19 21 29 35 43 60 70
France 0 2 10 24 29 32 30 36 47 42 56 59
Luxembourg 0 1 4 10 10 13 14 16 20 19 32 33
Italy 4 6 7 14 20 26 26 25 24 23 41 30
Mexico 0 0 0 0 0 0 0 0 7 11 19 24
Sweden 0 0 2 7 12 15 17 16 17 19 20 22
Austria 0 0 0 3 9 11 11 7 8 12 22 21
Argentina 0 0 0 0 0 0 0 6 18 7 20 21
Hong Kong 0 0 1 4 11 10 10 7 12 12 19 19
Taiwan 0 0 0 0 0 0 5 14 12 12 10 19
Chile 0 0 0 4 5 6 6 12 15 18 18 18
Liechtenstein 0 0 0 0 0 1 0 2 3 10 14 16
Singapore 0 0 2 4 6 5 5 9 7 10 13 16
Portugal 0 0 0 2 3 3 5 7 13 16 16 14
Belgium 1 1 4 6 9 9 11 12 13 13 16 12
Greece 0 0 0 0 2 5 5 9 9 9 7 11
Netherlands 0 0 0 0 0 1 4 8 13 10 11 9
Australia 0 0 0 0 0 0 0 1 2 8 7 8
Japan 1 1 1 3 6 4 3 4 5 8 9 7
Norway 0 0 0 0 2 3 3 3 3 4 7 7
Malaysia 0 0 0 0 0 0 0 0 0 1 2 7
South Africa 0 0 0 0 3 7 7 5 4 20 7 6
Finland 0 0 0 1 3 4 3 3 3 3 7 6
Denmark 0 0 0 1 1 2 3 2 1 4 5 5
Ireland 0 1 2 2 6 6 7 8 5 3 5 5
Bermuda 0 0 0 1 2 3 3 3 3 6 4 5
Brazil 0 0 0 0 0 0 0 0 0 0 0 4
Iceland 0 0 0 0 1 1 1 1 2 2 2 3
India 0 0 0 0 0 0 0 0 0 0 0 2
Czech Republic 0 0 0 0 1 1 0 3 3 2 3 2
Poland 0 0 0 0 1 0 0 0 0 0 2 2
Virgin Islands (US) 0 0 0 0 0 1 0 0 1 2 1 2
Cayman Islands 0 0 0 0 0 0 0 1 1 1 2 1
Hungary 0 0 0 0 0 0 0 0 0 1 1 1
Bahamas 0 0 0 0 0 0 0 0 0 0 1 1
Peru 0 0 0 0 0 2 1 1 0 0 0 1
Thailand 0 0 0 0 0 0 0 0 0 0 0 1
Colombia 0 0 0 0 0 0 0 0 0 0 0 0
Slovenia 0 0 0 0 0 0 0 0 0 1 1 0
Barbados 0 0 1 1 0 0 0 1 1 1 0 0
43 ETF Landscape Industry Highlights March 2010
ETF portfolios
Sample portfolios are for illustrative purposes only and should not be construed as a recommendation to purchase or sell, or an offer to sell, or a solicitation of an offer to buy any security.Source: BlackRock.
44 ETF Landscape Industry Highlights March 2010
• ETFs in the core:
– A broad market index
– Exposure to diversified baskets of securities
– Optimised core: sector, style or country indices
• ETFs in the satellite:
– Concentrated, focused ETFs
– Sector and style
– Individual countries and regions
– Alternative asset class
Core-Satellite: ETFs can be used in the core portfolio, as well as in the satellite
45 ETF Landscape Industry Highlights March 2010
*A fund may price a security using a different pricing source than used by the Index Provider itself.Source: Fixed Income Index Guide, BlackRock.
• Understanding index methodology is the key to selecting and using ETFs
• Investors must understand the differences in pricing sources*, frequency of pricing updates and what prices are being captured
– Where (one bank or consortium..)
– When (intraday, daily, weekly..)
– What (bid, mid, dirty…)
Fixed Income Index Guide
46 ETF Landscape Industry Highlights March 2010
Commodity index comparisonReuters Jefferies
CRB IndexS&PGSCI
Dow Jones UBSCommodity Index
Rogers International Commodity Index (RICI)
Source: Global ETF Research & Implementation Strategy Team, BlackRock, S&P, Dow Jones, Lyxor, RICI Handbook 2009.
Energy
Livestock
Precious M etals
Industrial M etals
Agriculture
Energy
Livestock
Precious M etals
Industrial M etals
Agriculture
Energy
Livestock
Precious M etals
Industrial M etals
Agriculture
Energy
Livestock
Precious M etals
Industrial M etals
Agriculture
Commodity Measure S&P GSCI
DJ-UBS
Commodity
Index
Reuters
Jefferies CRB
Rogers
International
Commodity
Index (RICI)
Energy 65.29% 33.00% 39.00% 44.00%
WTI Crude Oil $/barrel 34.77% 13.75% 23.00% 21.00%
Brent Crude Oil $/barrel 12.11% - - 14.00%
RBOB Gasoline $cents/gallon 4.69% 3.71% 5.00% 3.00%
Heating Oil $cents/gallon 3.88% 3.65% 5.00% 1.80%
Gasoil $/metric ton 4.31% - - 1.20%
Natural Gas $/mmBtu 5.53% 11.89% 6.00% 3.00%
Livestock 6.37% 6.68% 7.00% 3.00%
Live Cattle $cents/pound 3.45% 4.29% 6.00% 2.00%
Feeder Cattle $cents/pound 0.66% - - -
Lean Hogs $cents/pound 2.26% 2.40% 1.00% 1.00%
Precious Metals 4.00% 10.75% 7.00% 7.10%
Gold $/troy oz 3.61% 7.86% 6.00% 3.00%
Silver $/troy oz 0.39% 2.89% 1.00% 2.00%
Palladium $/troy oz - - - 0.30%
Platinum $/troy oz - - - 1.80%
Industrial Metals 6.67% 20.33% 13.00% 14.00%
Aluminium $/metric ton 2.32% 7.00% 6.00% 4.00%
Copper $/metric ton 2.78% 7.31% 6.00% 4.00%
Lead $/metric ton 0.42% - - 2.00%
Nickel $/metric ton 0.57% 2.88% 1.00% 1.00%
Tin $/metric ton - - - 1.00%
Zinc $/metric ton 0.58% 3.14% - 2.00%
Commodity Measure S&P GSCI
DJ-UBS
Commodity
Index
Reuters
Jefferies CRB
Rogers
International
Commodity
Index (RICI)
Agriculture 17.65% 29.23% 34.00% 31.90%
Wheat $cents/bushels 4.54% 4.80% 1.00% 7.00%
Kansas Wheat $cents/bushels 1.00% - - -
Corn $cents/bushels 4.85% 5.72% 6.00% 4.75%
Soybeans $cents/bushels 3.00% 7.60% 6.00% 3.35%
Soybean Oil $cents/pound - 2.88% - 2.17%
Soybean Meal $/short ton - - - 0.75%
Cotton $cents/pound 0.96% 2.27% 5.00% 4.20%
Sugar $cents/pound 2.02% 2.99% 5.00% 2.00%
Coffee $cents/pound 0.87% 2.97% 5.00% 2.00%
Cocoa $/metric ton 0.41% - 5.00% 1.00%
Orange Juice $cents/pound - - 1.00% 0.66%
Rubber JPY/kilogram - - - 1.00%
Lumber $/1k board fleet - - - 1.00%
Canola CAD/metric ton - - - 0.67%
Rice $/cwt - - - 0.50%
Oats $cents/bushels - - - 0.50%
Azuki Beans JPY/bag - - - 0.15%
Barley CAD/metric ton - - - 0.10%
Greasy Wool AUD/kilogram - - - 0.10%
TOTAL 100.00% 100.00% 100.00% 100.00%
Data as of: Mar-09 Jan-09 Jan-09 Feb-09
47 ETF Landscape Industry Highlights March 2010
• ETF Landscape Quarterly Global Handbook includes the price tickers, index tickers, annual total expense ratio (TER), dividend policy, fund structure, assets under management (AUM), average daily volume, index replication method as well as the websites for the providers, exchanges, and index providers to assist in comparing the various products that are currently available.
• ETF Landscape Monthly Industry Review provides an up-to-date snapshot of the latest key industry trends with a view to helping professional investors make more informed decisions
• Sign up at no cost by sending your business card details to: [email protected]
ETF Landscape reports
48 ETF Landscape Industry Highlights March 2010
Call 1-800-iShares to request a prospectus, which includes investment objectives, risks, fees, expenses and other information that you should read and consider carefully before investing.
Investing involves risk, including possible loss of principal. Diversification may not protect against market risk. With short sales, you risk paying more for a security than you received from its sale. There are special risks associated with margin investing. As with stocks, you may be called upon to deposit additional cash or securities if your account equity, including that which is attributable to ETFs, declines. There is no guaranteethat there will be borrower demand for shares of the iShares Funds, or that securities lending will generate any level of income. Distributions paid out of the Fund's net investment income, including income from securities lending, if any, are taxable to investors as ordinary income. Buying and selling shares of iShares Funds will result in brokerage commissions.
In addition to the normal risks associated with investing, international investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations. Emerging markets involve heightened risks related to the same factors as well as increased volatility and lower trading volume. Securities focusing on a single country and narrowly focused investments may be subject to higher volatility.Bonds and bond funds will decrease in value as interest rates rise. An investment in the Fund(s) is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
Although market makers will generally take advantage of differences between the NAV and the trading price of iShares Fund shares through arbitrage opportunities, there is no guarantee that they will do so. Shares of the iShares Funds may be sold throughout the day on the exchange through any brokerage account. However, shares may only be redeemed directly from a Fund by Authorized Participants, in very large creation/redemption units. There can be no assurance that an active trading market will develop or be maintained.
The iShares Funds ("Funds") that are registered with the US Securities and Exchange Commission under the Investment Company Act of 1940 are distributed in the US by SEI Investments Distribution Co. (SEI). BlackRock Fund Advisors (BFA) serves as the investment advisor to the Funds. BFA is a subsidiary of BlackRock Institutional Trust Company, N.A., a subsidiary of BlackRock Inc., none of which is affiliated with SEI. This material does not constitute an offer or solicitation to sell or a solicitation of an offer to buy any shares of any Fund (nor shall any such shares be offered or sold to any person) in any jurisdiction in which an offer, solicitation, purchase or sale would be unlawful under the securities law of that jurisdiction.
The iShares Funds are not sponsored, endorsed, issued, sold or promoted by Cohen & Steers Capital Management, Inc., Dow Jones & Company, Inc., European Public Real Estate Association ("EPRA®"), FTSE International Limited ("FTSE"), FTSE/Xinhua Index Limited ("FXI"), iBoxx®, J.P. Morgan Securities Inc., MSCI Inc., Morningstar Inc., The NASDAQ OMX Group, Inc., National Association of Real Estate Investment Trusts ("NAREIT"), New York Stock Exchange, Inc., Russell Investment Group or Standard & Poor's, nor are they sponsored, endorsed or issued by Barclays Capital. None of these companies make any representation regarding the advisability of investing in the Funds. Neither SEI, nor BlackRock or any of their affiliates, are affiliated with the companies listed above. FXI does not make any warranty regarding the FTSE/Xinhua Index. "FTSE" is a trade- and servicemark of London Stock Exchange and The Financial Times Limited; "Xinhua" is a trade- and servicemark of Xinhua Financial Network Limited.
Information on funds and securities is provided strictly for illustrative purposes and should not be deemed an offer to sell or a solicitation of an offer to buy shares of any funds or securities, that are described in this report.
The strategies discussed are strictly for illustrative and educational purposes and should not be construed as a recommendation to purchase or sell, or an offer to sell or a solicitation of anoffer to buy any security. There is no guarantee that any strategies discussed will be effective. The information provided is not intended to be a complete analysis of every material fact respecting any strategy. The examples presented do not take into consideration commissions, tax implications or other transactions costs, which may significantly affect the economic consequences of a given strategy. The information provided is not intended to be tax advice. Investors should be urged to consult their tax professionals or financial advisors for more information regarding their specific tax situations. Neither BlackRock nor SEI provide investment or tax advice.
This document is an independent market commentary document based on publicly available information and is produced by the ETF Research & Implementation Strategy team.
This document does not provide investment advice and the information contained within should not be relied upon in assessing whether or not to invest in the products mentioned. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. The securities discussed in this commentary may not be suitable for all investors.
The trademarks and service marks contained herein are the property of their respective owners. Third-party data providers make no warranties or representations of any kind relating to the accuracy, completeness, or timeliness of the data they provide and shall not have liability for any damages of any kind relating to such data.
© 2010 BlackRock Advisors (UK) Limited. All rights reserved. iShares® is a registered trademark of BlackRock Institutional Trust Company, N.A. All other trademarks, servicemarks or registered trademarks are the property of their respective owners. iS-2384-0310.
* Not FDIC Insured * No Bank Guarantee * May Lose Value
FOR INSTITUTIONAL USE ONLY - NOT FOR PUBLIC DISTRIBUTION
Presentation to
6th Annual Global ETF Awards
Dinner and Workshop
Mr. John LiChief Int’l Business OfficerChina Asset Management
2
6 10 1015
21
33
4553
58 59 61 60
3275.40
1938.87
2676.08
0
20
40
60
80
100
120
140
0.00
500.00
1000.00
1500.00
2000.00
2500.00
3000.00
3500.00
Number of Fund Management Companies Total AUM (RMB billion)
2
Overview of China’s Fund Industry
By the end of 2009
• Total AUM of RMB 2676.08 billion (USD 393.54 billion)
• 2453.51 billion outstanding units
Sources: TX Info
33
Overview of China’s Fund Industry
By the end of 2009, there are 621 funds, including
• 590 open-end funds and 31 closed-end funds
• 612 investing in domestic market and 9 investing in global market
• 569 active managed funds and 52 passive managed funds, including 9 ETFs
Different Types of Funds (by AUM)
Sources: TX Info
44
Overview of China’s Fund Industry
By the end of 2009, there are
• 60 fund management companies
• 27 are state-owned, and 33 are joint-ventures
Fund Management Companies
Sources: TX Info
55
Overview of China’s Fund Industry
Top Ten Asset Management Companies in China
By Mutual Fund AUM as of December 31, 2009
Source: China Galaxy Fund Research Center.
Ranking Fund Companies Num of FundsFund AUM
(Billion RMB)Market Share
1 ChinaAMC 25 265.76 9.93%
2 E-Fund 19 159.52 5.96%
3 Harvest 19 156.42 5.85%
4 Bosera 18 150.46 5.62%
5 Southern 21 122.27 4.57%
6 GF 12 110.47 4.13%
7 Dacheng 16 106.05 3.96%
8 Hua An 16 93.02 3.48%
9 BoCom Schroders 11 92.39 3.45%
10 Yinhua 13 74.71 2.79%
66
Index Funds in China
• China has 52 index funds including 9 ETFs, 3 ETF-link funds, 3 closed-end index funds and 37 open-end index funds.
• By the end of 2009, the total AUM of all index funds sums to RMB 358.78 billion (USD 52.76 billion).
Index Funds vs. Active Funds (by AUM)
Sources: TX Info
77
Index Funds in China
• In 2009, the total AUM of index funds increased RMB 250 billion (USD 36.76 billion), the fasted growth in China’s fund history.
• Year 2009 witnessed 29 new launches of index funds, including 4 ETFs, 3 ETF-link funds as well as 22 open-end index funds.
Sources: TX Info
88
ETFs in China
As of December 31, 2009, total outstanding units of ETFs are 36.34 billion Units, and the total AUM of all ETFs sums to RMB 66.19 billion (USD 9.73 billion).
ETFInception
DateAUM (RMB
billion)Outstanding Units
(billion)Manager
1 China 50 ETF 20041230 25.48 9.98 ChinaAMC
2 E Fund Shenzhen 100 ETF 20060324 12.15 2.87 E Fund
3 Hua An SSE 180 ETF 20060413 4.07 5.28 Hua An
4 China SME ETF 20060608 3.76 1.43 ChinaAMC
5 AIG-Huatai SSE Dividend ETF 20061117 5.40 1.92 AIG-Huatai
6 SSE Central SOEs Index ETF 20090826 2.73 1.58 ICBC-Credit Swiss
7SSE 180 Corporate Governance ETF
20090925 7.07 7.74 BoComm Schroders
8 SZSE Component ETF 20091204 4.13 4.13 Southern
9 SSE Mega-Cap ETF 20091229 1.41 1.41 Bosera
Sources: TX Info
99
ChinaAMC ETFs in 2009
China 50 ETF China SME ETF
Difference of Return* -0.82% -2.50%
Annualized Tracking Error 1.09% 1.93%
Net Subscription (million units) -955 -116
Average Premium/Discount 0.40% 0.18%
Average Daily Turnover 9.18% 6.66%
*: Not considering dividend distribution.
1010
QFII Investments in ETFs
The “Interim Measures on Administration of Domestic Securities
Investment by Qualified Foreign Institutional Investors (QFII)”
implemented in November 2002.
In May 2003, UBS AG and Nomura Securities became the first batch of QFIIs and UBS started trading in A share market in July 2003.
By the end of 2009, 94 companies obtained QFII licenses, and thetotal quota attained was USD 16.67 billion.
China 50 ETF, the first ETF launched in mainland China in 2004, attracted our first batch of more than twenty QFII investors.
By the end of March 2010, the total AUM of QFII investments in ChinaAMC’s ETFs and other funds is approximately USD 83.8 million.
1111
QDIIs’ Investment in ETFs
The “Interim Measures on Administration of Overseas Securities
Investment by Qualified Domestic Institutional Investors (QDII)”
implemented in July, 2007.
Currently, 89 domestic companies, including 22 banks, 23 insurance
companies, 3 trust companies, 32 fund management companies and
9 securities companies, obtained QDII licenses, and the total quota
attained so far is USD 65.03 billion.
There are 12 QDII funds in the market, total AUM of RMB 74.84
billion (USD 11 billion).
ChinaAMC launched one of the first QDII funds - ChinaAMC Global
Select Fund. By the end of 2009, the total AUM of the fund was RMB
20.27 billion (USD 2.98 billion), the largest QDII fund in China, and
4.84% of the asset was invested in ETFs.
1212
New Development
It’s very possible to launch QDII ETFs in near future