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Issue No. 12 ISSN 2150-9166 European Edition

SM

August/September 2011

Magazine Index Investor

Stoxx 600 Sector Map Tactical Portfolio Update ETF of the Month THE HOTSPOTS AT A GLANCE

Rankings The Global ETF Landscape At A Glance People Antoine Moreau Ossiam ETF Feature

Defensive ETFs for Rattled Financial Markets www.etf-radar.com


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Fast Lane

Contents Issue August-September 2011 Global Summary

4

Industry Highlights Global Round-Up Top20 Global Index Provider Hot Product Debuts Upcoming Events Number Cruncher

Index Investor

6

Stoxx 600 Sector Map Tactical Portfolio Update ETF of the Month

Feature

People

11

Antoine Moreau, Ossiam ETF

Rankings

13

Assets under Management Top20 AuM Top20 ADV Best-Performer Worst-Performer

Dear Reader,

8

Defensive ETFs for Rattled Financial Markets

Last Friday, the United States lost their top credit rating and dropped from AAA to AA+. Standard & Poor's considered U.S. Treasuries to be no longer among the safest investments in the world. This will heat up the recent volatile financial markets even more.

Index Companies and People Absa (pg. 4) Antoine Moreau (pg. 11) Barclays (pg. 4) BlackRock (pg. 4) Comstage (pg. 9) Deutsche Bank (pg. 4) ETF Securities (pg. 4, 7) Eurex (pg. 4) Global X (pg. 4) IndexIQ (pg. 5) iShares (pg. 7) Lyxor (pg. 5, 7) Natixis (pg. 11)

Ossiam (pg. 11) SPDR (pg. 7) Tokyo Stock Exchange (pg. 4)

Get In Touch NORTH AMERICA americas@etf-radar.com Naples (FL) +1 239 384 6090 EUROPE, MIDDLE EAST and ASIA-PACIFIC europe.asiapacific@etf-radar.com London +44 203 519 1179

We currently believe that there is too much uncertainty to maintain a pure buy & hold passive strategy. On page 8 David Cohne is focussing on Defensive ETF's giving some advice on how your ETF portfolio could withstand a potential large drop. Also he presents some hints how to make money in declining markets with inverse ETFs. Antoine Moreau, Deputy CEO of the new French ETF player Ossiam, speaks in our exclusive interview about their motivation to enter the market and their product strategy. This includes a new equal weight ETF that is based on a minimum variance strategy which is interesting for investors in shaky markets as they intend to keep volatility under control. Enjoy reading and let us know your thoughts.

Silvan Schelling Head of Relationship Management

ETF RADAR IS A PRIVATE AND INDEPENDENT INFORMATION PROVIDER. NO STATEMENT IN THIS ISSUE IS TO BE CONSTRUED AS A RECOMMENDATION TO BUY OR SELL SECURITIES OR TO PROVIDE INVESTMENT ADVICE. PLEASE SEE OUR DISCLAIMER PAGE FOR FURTHER INFORMATION. Š 2009-2011 ETF Radar Global Investor Services. All rights reserved.

> connect@etf-radar.com

For all subscription enquiries, thoughts or general questions please contact us directly by email:

ETF Radar Magazine | Issue August-September 2011

3


Global Summary Industry Highlights ► OVERALL MARKET ETF/ETP

According to BlackRock‘s latest data, at the end of H1 2011, the global ETF industry had 2,825 ETFs with 6,229 listings and assets of US$ 1,442.7 Bn, from 146 providers on 49 exchanges around the world. This compares to 2,252 ETFs with 4,570 listings and assets of US$1,025.9 Bn from 130 providers on 42 exchanges at the end of H1 2010. In the first half of 2011, the ETF average daily trading volume in US dollars increased by +46.7% to US$68.0 Bn in June 2011. This compares to an average daily trading volume of US$77.9 Bn in June 2010.

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Taking ETFs and ETPs together, United States AUM should reach US$2 trillion in 2013, with European AUM reaching US$500 billion in 2012.

BOSTON 3rd Annual FundForum USA 07–09 November 2011 Westin Boston Waterfront

► ADVISERS CONCERNED ABOUT ETFS

Advisers are getting influenced by warnings issued by regulators about exchange-traded funds (ETFs), as per a survey conducted by Skandia, the FT reports. The survey reviewed 1,000 advisers, out of which 80% agreed with warnings from the Financial Stability Board (FSB) about the complexity of some of the products. The survey found that 46% of advisers have not used ETFs for any clients. However, out of those who had used the products, 75% said they found them suitable for just 10% of their clients.

NEW YORK CTIY ETF 360 October 12, 2011 The Metropolitan Club

Global Round-Up ► US: GLOBAL X BOOSTS INFRASTRUCTURE ETFS

► EUROPE: EUREX ADDS ETCS AS FUTURE-UNDERLYING

Global X is planning to roll out five new exchange-traded funds (ETFs). The global ETF issuer has also filed with the SEC for the Global X FTSE Toll Roads & Ports ETF, the Global X FTSE Railroads ETF, the Global X Farmland & Timberland ETF, the Global X Cement ETF and the Global X Advanced Materials ETF. With the launch of the new funds, the company will offer a total of 40 ETFs.

The international derivatives exchange Eurex announced that from 29 July 2011 it will be offering futures and options on two commodity ETCs: ETF Securities' Physical Gold ETC and the ETFS Crude Oil ETC. The Physical Gold ETP is one of the world’s largest with assets under management of over EUR 4 billion. The new derivatives complement the ETF derivatives segment of Eurex Exchange where 3 futures and 21 options on ETFs are currently tradable.

► AFRICA: GHANA TO SETUP ETF MARKET

The Ghana stock exchange has unveiled plans to list exchange-traded funds in a sign that the booming ETF market is making inroads into the African continent. The exchange has teamed up with ABSA Capital to list the commoditybacked NewGold ETF, which is already listed on the Johannesburg and Botswana Stock exchanges.

4 ETF Radar Magazine | Issue August-September 2011

► ASIA: CHINA ETFS CAN TRADE ON MARGIN

Chinese ETFs will be permitted to trade on margin by August. To qualify for margin trading, ETFs must be listed for over three months with a net asset value greater than $147 million and a minimum of 4,000 clients. Less than half of the total 26 ETFs on the Shanghai and

Shenzhen exchanges are eligible for margin trading. The entitled ETFs include the China AMC Shanghai 50 ETF, the Efund Shenzhen 100 ETF and the Hua An Shanghai 180 ETF. ► ASIA: TOKYO STOCK

EXCHANGE LISTS NEW ETNS The Tokyo Stock Exchange has accepted the listing of Japanese depositary receipts whose indicator-tracking securities are exchange-traded notes. Barclays Bank will manage the nine freshly listed ETNs. The new products will lead the total number of Tokyo ETFs and ETNs to 112. The ETNs include the iPath S&P GSCI Total Return Index JDR and the iPath S&P 500 VIX Mid-Term Futures JDR.


Global Summary Top10 Global Index Provider

HONG KONG ETF Index Investment Summit 2011 31 Aug. - 1 Sept. 2011 JW Marriot Hotel

(Ranked by AuM; Data as of July, 29 2011)

MSCI 25.4% → S&P 22.6% → Barclays Capital 8.8% ↑ STOXX 7.3% ↑ Russell 5.9% FTSE 4.2% → Dow Jones 3.8% Markit 3.3%

LONDON ETF & Indexing Investments Europe 17–19 October 2011 Guoman Tower Hotel

NASDAQ OMX 2.3%

FRANKFURT Commodities Deutschland 20-22 September 2011 Le Meriden Parkhotel

NYSE Euronext 1.2% → Other 15.2%↑

Number Cruncher

LONDON European Cup of ETFs 19–20 September 2011 Great George Street Conference Hall

Hot Product Debuts

393

750

Number of new launched ETFs worldwide since January 1, 2011.

Number of new planned ETFs/ETPs worldwide as of July 29, 2011.

Sources: Event organizers, Reuters, Bloomberg, BusinessWire, BlackRock, ETF Radar Global Research

LY X O R

SOCIETE GENERALE GROUP

► EMMA STRATEGY ETF LAUNCHED

► SET OF NEW MSCI ETFS LISTED

► NEW EMMA IBOXX ETF LISTED

Emerging Global Advisors announced the successful launch of HILO, an emerging markets fund designed to be significantly less volatile than funds based on the broadbased MSCI Emerging Markets Index. HILO is passively managed and doesn't use options, swaps, or other derivatives in its portfolio. The underlying INDXX is rebalanced annually in September.

db x-trackers recently launched a set of new MSCI ETFs. Notable is the MSCI Malaysia ETF. The country is one of the most powerful economies in South-Asia. All funds have been tradable on Deutsche Börse’s XTF segment. The product offering in Deutsche Börse’s XTF segment currently comprises a total of 858 exchange-listed index funds, making it the largest offering of all European stock exchanges.

Lyxor has launched a new emerging market sovereign fund. The Lyxor ETF iBoxx $ Liquid Emerging Markets Sovereigns has started trading on the Xetra trading platform. The bond index ETF enables investors to participate in the performance of USD-denominated government bonds of 20 emerging market countries providing highest liquidity.

Van Eck recently launched its new Market Vectors CEF Municipal Income ETF. The fund seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the S-Network Municipal Bond Closed-End Fund Index. This is a rules based benchmark for U.S. closed-end funds that are principally engaged in asset management processes designed to produce federally tax-exempt annual yield.

Ticker/ISIN: HILO TER: 0.85% p.a. CCY: USD

Ticker/ISIN: LU0514694370 TER: 0.50% p.a. CCY: USD

Ticker/ISIN: FR0010967323 TER: 0.30% p.a. CCY: USD

Ticker/ISIN: XMPT TER: 1.43% p.a. CCY: USD

► NEW MUNI BOND ETF LAUNCHED

5 ETF Radar Magazine | Issue August-September 2011


Index Investor Stoxx 600 Sector Map

Cyclicals tumble, defensive sectors lead. by Sebastian Stahn sector, the contrarian pick with the Comstage ETF STOXX 600 Construction & Materials (LU0378435639) would be the best choice. Best performing sector with a performance of +2.42% in July 2011 was the STOXX 600 Health Care Index. Especially defensive sectors showed the best performance in July. If you believe in an ongoing trend, the Comstage ETF STOXX 600 Health Care (LU0378435985) would be your best pick. n

In July the STOXX 600 Index dropped -2.79% due to the uncertainness about the US-American debt ceiling. Furthermore doubts about the development of the economy led to volatile markets. Having a look at the sector performances, the Construction & Materials Sector was the worst performing with a loss of -8.21% in July 2011. Generally cyclical stocks fell due to doubts about the economic recovery. If investors believe in a recovery of this

The Action Plan

CONTRARIAN PICK

BEST-TREND PICK

ComStage STOXX 600 Construction & Materials ETF ISIN/Ticker: LU0378435639/SXOP TER / AUM: 0.25% / 25mn. 1 Year Return: +3.70% Last Price/High/Low 52-Weeks: €43.59 / 50.23 / 37.40 Replication: Synthetic

ComStage STOXX 600 Health Care ETF ISIN/TIcker: LU0378435985/SXDP TER / AUM: 0.25% / 61mn. 1 Year Return: +19.36% Last Price/High/Low 52-Weeks: €61.27 / 62.25 / 51.08 Replication: Synthetic

RISK-REWARD-ANALYSIS

RISK-REWARD-ANALYSIS

based on an investment horizon of one month

HIGH SXOP

Construction & Materials –8.21%

Automobiles & Parts -3.87%

Telecommunications +0.92% Mon thly P erfor man ce

. As o f July

29, 2 011.

6 ETF Radar Magazine | Issue August-September 2011

Basic Resources -3.45%

Real Estate -1.75%

Personal & Household Goods +2.03%

Banks –6.71%

Insurance -6.54%

Industrial Goods & Services -5.69%

Media -5.72%

SXDP

HIGH

LOW

WORST PERFORMING SECTORS

Financial Services -2.02%

based on an investment horizon of one month

Utilities

-4.87%

Retail -2.80%

LOW

Technology -6.25%

Travel & Leisure -4.08%

Chemicals -2.52%

Oil & Gas +0.07%

Food & Beverages +0.62%

Health Care +2.43%

BEST PERFORMING SECTORS


Index Investor Tactical Portfolio Update

Defensive Duo: TIPS and gold stocks by David Cohne QUICK FACTS â–ş Increasing risks make defensive stocks and strategies attractive. â–ş Rising gold prices may heavily support gold mining stocks. The ETF Radar Tactical portfolio is a model portfolio that invests in five ETFs based on a tactical ETF rankings system. The portfolio trades at the end of each month. The holdings for August include ETF Securities DAXglobal Gold Mining Fund (DE000A0Q8NC8), iShares $ TIPS (DE000A0LGQF7), SPDR MSCI Europe Health Care ETF (FR0000001737), iShares MSCI J a p a n I n d e x F u n d (DE000A0DPMW9) and Lyxor ETF STOXX Europe 600 Daily Short

(FR0010589101). In the midst of the U.S. debt talk debacle, lingering economic issues and a not so rosy future; gold prices continue to hit record highs. Investors and traders are looking for safe havens to put their money in.

DAXglobal Gold Mining Fund (DE000A0Q8NC8) is the ETF of the month. It tracks the performance of gold mining companies. It has an expense ratio of 0.65% and $65 million under management. n

One of the oldest and most used safe havens is gold. In addition, many countries are buying gold in large quantities that is preventing gold prices to drop. This has led to increases in prices of companies involved in gold mining. The other place to be according to the ranking system is in Treasury Inflation Protected Securities or TIPs. Yields continue to drop in these bonds as prices are taking into account a very weak economy and persistent inflation fears. Based on the rankings ETFX

ETF of the Month ETFX DAXglobal Gold Mining Fund (DE000A0Q8NC8) 52-Week Range Market Cap Dividends TER Last Volume ETF Issuer Replication

EUR 31.11 - EUR 41.87 EUR 64.5 million 0.65% p.a. n/a ETF Securities Swap-based

ETF Radar Tactical Portfolio TICKER

ETF NAME

TER

AUM

WEIGHT

DE000A0Q8NC8 DE000A0LGQF7

ETFX DAXglobal Gold Mining Fund iShares $ TIPS

0.65% 0.25%

$64.5 million $316.5 million

20% 20%

FR0000001737

SPDR MSCI Europe Health Care ETF

0.30%

iShares MSCI Japan Index Fund Lyxor ETF STOXX Europe 600 Daily Short

0.59% 0.40%

$64.2 million $1.5 billion $18 million

20%

DE000A0DPMW9 FR0010589101

20% 20%

Source: Cohne Investment Group, exclusively for ETF Radar / August 1, 2011 Ranking

7 ETF Radar Magazine | Issue August-September 2011


Feature

HIG

H

Defensive ETFs for Rattled Financial Markets Currently there is too much uncertainty to maintain a buy & hold passive strategy. As strategists revised their views on the economic outlook rapidly, investors should act now. S&P meanwhile cut the US credit rating to AA, which means there is some trouble ahead. by David Cohne QUICK FACTS ► All major equity markets suffered enormous losses during the last days. ► S&P’s downgrade of the US debt may have a large impact on the markets. ► Investors should protect their portfolios now.

As we end a volatile July and enter into uncertain August, the economy and the markets are weighing heavily on investors' minds. Much of the discussion over the summer has been related to the uncertainty over American debt. Even if the default risk is meanwhile banned, the markets reacted very negative. A similar picture in Europe: All major equity markets were hammered. What 8 ETF Radar Magazine | Issue August-September 2011

does this mean for the average investor or financial professional? At the very least, it means we should really start considering defensive positions in our portfolios. Shaky markets ahead – in the US and Europe In my opinion there is too much uncertainty to maintain a buy & hold passive strategy. Too much is at risk. Even with the new debt deal, government spending is out of control. The Fed continues to print money at the cost of the buying power of the middle class American. Whether or not there is a default, American debt is likely to get downgraded to an AA rating, meaning the United States will have to pay even more interest on their debt, raising government


Feature THE PARTY IS OVER – FOR NOW

Weekly Performance (Aug 1 - Aug 5)

Performance comparison S&P500 Ultra-Short vs. S&P500, DIJA and DAX

6% 4% 2%

DAX30

0% -2%

S&P500 Ultra-Short

-4% -6%

-7,00 %

-7,73 % DAX30

8%

S&P500

DJIA

Dow Jones Ind. Av.

10%

S&P500

-12,89 %

-8% -10% -12% Jan

2011

Feb

Mar

Apr

May

costs and eventually prices of everyday goods. There is unrest in the Middle East and Northern Africa that can largely be attributed to poor economic situations in the respective countries. In addition to the United States, Europe has its own economic and austerity problems. How to defend your portfolio… This is enough to scare me. Being a quant, my portfolio decisions are based on my proprietary signals, but whether or not you invest using formulas or gut feeling, you should definitely reevaluate your ETF holdings to make sure your portfolio can withstand a large market drop. Now I am not saying that the market will indeed plummet, but you should at least very prepare. The easiest way to defend your portfolio is to go to Cash when things start getting bad. A good hint would be when interest start to skyrocket. If you don't follow any type of market timing methodology or believe in it, you could also apply a decent size hedge in your portfolio.

Jun

Jul

You should definitely re-evaluate your ETF holdings to make sure your portfolio can withstand a large drop. This can be done with inverse ETFs. We recommend the ProShares Short S&P 500 (SH) and the ProShares Short Russell 2000 (RWM). If you want to be more aggressive you could consider the double leveraged versions of those indexes with the ProShares Ultra Short S&P 500 (SDS) and the ProShares Ultra Short Russell 2000 (TWM). With focus on the European blue chip indices the DB xtrackers Short EuroStoxx 50 (LU0292106753) and the Comstage Short Dax ETF (LU0603940916) would be attractive products to defend your European equity portfolio – or just to participate on weak stock markets. Especially Germany's DAX index could test new lows near the 6.600 points level as soon as new bad news from the Southern member states of the Eurozone arrive.

9 ETF Radar Magazine | Issue August-September 2011


Feature

…also on the long run If you plan on keeping some long holdings, you should consider defensive sectors such as consumer staples, health care, and utilities that typically don't get hit as bad. You can access these sectors through the following ETFs: SPDR Consumer Staples (XLP), Stoxx Europe 600 Optimised Health Care Source ETF (IE00B5MJYY16), SPDR Health Care (XLV), MSCI Europe Health Care (FR0000001737) and the SPDR Utilities (XLU) or the STOXX Europe 600 Optimised Utilities Source ETF (IE00B5MTXK03). Companies in these sectors typically have steady and predictable earnings in both bull and bear markets. Another defensive holding is gold. Some analysts believe that gold is overpriced and some believe that it can still climb, but exposure to gold in a downturn can better help protect your portfolio. This can be accessed with the SPDR Gold (GLD).

S&P 500 & the Russell 2000. In this strategy we want to analyze what will be affected most by another financial disaster or serious market downturn. Right off the bat I would say that financial companies, real estate and the dollar could be hit hardest. Large financial firms such as banks are probably in no better shape than they were before 2008, so betting against financial firms could prove to be a nice defensive play. This can be done with the North American picks: The ProShares Short Financials (SEF) or the leveraged version, the ProShares Ultra Short Financials (SKF). Real Estate is another area that will continue to bear the b r u n t o f a n o t h e r e co n o m i c d ow n t u r n . Unemployment is still up, so people aren't buying homes and if things get worse, home prices may continue to drop, so betting against real estate is also an interesting but opportunistic defensive play. This can be down through the ProShares Short Real Estate (REK). Finally, better against the dollar can be used as a defensive play. As the Fed continues to print money and inflation takes hold, the value of the dollar will drop which makes a short or intermediate term play against the dollar another interesting opportunity. n

HIG

Some hot alternative plays The third type of defensive strategy is with specific inverse funds. In the first strategy, I covered inverse index funds that tracked the inverse return of the

H

THE CLUB OF LONELY TRIPLE-A‘S Selected sovereign S&P credit ratings (AAA and lower) Country Australia Canada Denmark Finland France Germany Hong Kong Netherlands New Zealand Norway Singapore Sweden Switzerland United Kingdom Belgium United States Abu Dhabi Kuwait Qatar China Israel Saudi Arabia Taiwan

Sovereign local currency ratings (LT/Outlook/ST) AAA/Stable/A-1+ AAA/Stable/A-1+ AAA/Stable/A-1+ AAA/Stable/A-1+ AAA/Stable/A-1+ AAA/Stable/A-1+ AAA/Stable/A-1+ AAA/Stable/A-1+ AAA/Stable/A-1+ AAA/Stable/A-1+ AAA/Stable/A-1+ AAA/Stable/A-1+ AAA/Stable/A-1+ AAA/Stable/A-1+ AA+/Negative/A-1+ AA+/Negative/A-1+ AA/Stable/A-1+ AA/Stable/A-1+ AA/Stable/A-1+ AA-/Stable/A-1+ AA-/Stable/A-1+ AA-/Stable/A-1+ AA-/Stable/A-1+

Sovereign foreign currency ratings (LT/Outlook/ST) AAA/Stable/A-1+ AAA/Stable/A-1+ AAA/Stable/A-1+ AAA/Stable/A-1+ AAA/Stable/A-1+ AAA/Stable/A-1+ AAA/Stable/A-1+ AAA/Stable/A-1+ AA+/Negative/A-1+ AAA/Stable/A-1+ AAA/Stable/A-1+ AAA/Stable/A-1+ AAA/Stable/A-1+ AAA/Stable/A-1+ AA+/Negative/A-1+ AA+/Negative/A-1+ AA/Stable/A-1+ AA/Stable/A-1+ AA/Stable/A-1+ AA-/Stable/A-1+ A/Stable/A-1 AA-/Stable/A-1+ AA-/Stable/A-1+ Source: Standard&Poor‘s as of Aug 5, 2011.

10 ETF Radar Magazine | Issue August-September 2011


People Expert Talk with

Antoine Moreau Deputy CEO, Ossiam

“Our ambition is to become the Leader of specialty ETFs.” by Silvan Schelling

VITA ► Born: 1970 ► Lives in: Neuilly (France) ► Career: Antoine Moreau is Deputy CEO and one of the founding partners of Ossiam, a french based investment management company created in 2009, which became an affiliate of Natixis Global Asset Management in 2010. Ossiam’s goal is to be the first European ETF provider dedicated to providing a full range of specialty ETFs. Antoine previously held trading positions on interest rate, fund and equity derivatives for 15 years. He was head of fund derivatives trading for Europe at Société Générale, then global head of fund derivatives and exotic equity derivatives trading at Calyon. He graduated from the Ecole Polytechnique, the ENSAE and the French Institute of Actuaries. ► My first ETF: Various iShares countries ETFs ► My favourite investments: Ossiam Minimum Variance ETFs

What was the motivation for Ossiam to enter the market? The European ETF Market is extremely competitive. Ossiam's strategy consists in focusing on specialty ETFs to gain market share by offering through our first products efficient alternatives to Market Capitalization Index Funds; then other types of ETFs will be launched. At the moment, Ossiam offers a unique range of strategies that have never been implemented through ETFs in Europe, or worldwide in the case of Minimum Variance ETFs. We feel that our positioning constitutes a real differentiation and added value compared to the main ETF players that do not currently address the market segment we are targeting. We are confident that our concentrated approach based on strong quantitative skills will be well received by Investors all around Europe. Which role plays Natixis Global Asset Management and how overlapping are your internal processes? Ossiam is a subsidiary of Natixis Global Asset Management that

offers a global multi-boutique approach putting together the unique expertise of more than 20 specialized affiliates that manage independently their range of products and have more than 750 billion USD AuM as of 31/03/2011. As part of the group, we benefit from a wide and highly sophisticated range of support skills and facilities from IT infrastructures to legal know how. Moreover, we can leverage on the global distribution network of Natixis Global Associates. The multi-boutique approach of Natixis Global Asset Management allows us to maintain a total independence in our investment objectives but also in decisions such as the choice of our partners or the selection of the counterparts of the swaps in case of synthetic replication that is performed through a competitive bidding.

How is the Ossiam's corporate structure? Natixis Global Asset Management is the majority shareholder of Ossiam with 51% of the capital while Founding partners own the remaining shares. Ossiam is now 11

ETF Radar Magazine | Issue August-September 2011


People

a structure of 14 professionals fully dedicated to the conception, structuration, management and promotion of a range of specialty ETFs. Which goals you have for this year with regards to AuM? We don't give any AuM targets; however our ambition is to become the European Leader of specialty ETFs. Which product focus you are planning? We are currently working on different products that we hope will be available for the European investor as soon as possible. In particular, we also want to offer specialty ETFs based on other asset classes than equities. We will be able to communicate on those products after the necessary authorization from regulators.

The reactions on the buy-side, as well as from our competitors have been extremely welcoming. What kind of investors do you mainly target and why? Equal Weight ETFs are an alternative to Market Capitalization Index Funds and will suit Institutional Investors such as long only Asset Managers and Pension Funds but also Private Investors that want to invest in an Index Fund that overweights shares of companies with a smaller Market Capitalization compared to traditional Market indices. All institutions or private investors that already invested in benchmarked equity funds are possible investors for these ETFs as they should consider these as a tool for beta diversification of their current holdings. Minimum Variance Strategies appeal to Institutional Investors and Private Investors as well, willing to position themselves on 12 ETF Radar Magazine | Issue August-September 2011

Equities with a buy and hold strategy that focuses on keeping volatility under control and aiming at minimizing drawdowns. What kind of replication do you use? Ossiam, as a policy, selects the replication method of an Index (Synthetic or Physical) in order to minimize the tracking error with the Reference Index and having in mind the best interest for the final investor. The first batch of ETFs uses Synthetic replication. The Fund Assets are invested, for at least 93%, in a basket of securities and for a maximum of 7%, in an Equity Performance Swap with an external counterparty. The Equity Performance Swap allows for the Fund to receive the performance of the tracked index while paying to the counterparty the performance of the substitute basket. For the sake of transparency and in order to respect investor's best interest: The counterparty of the Swap is selected through a bidding contest that takes into consideration the notoriety and rating of the counterparty, the price, the quality and management of the substitute basket provided by the counterparty, the bid-ask spread for increases and decreases and the cut off times. At the moment, 8 counterparties have been included in the selection process and the first swaps have been implemented with BNP Paribas and Natixis. The quality of the substitute basket is a crucial parameter for Ossiam in the selection of the counterparty. As a general rule, the composition of the substitute basket includes 100% of European Economic Area equity securities that have a first rate standing. The total amount of swaps (summing all counterparties) can't be superior to 7% of the Fund's Assets. Swaps are “restriked” at every

subscription and redemption. Every day Ossiam publishes the full composition of its ETF Assets on its website (with a delay of 2 working days because of index providers' constraints). Which reactions did you get from the buy-side - and have you got some feedbacks from your competitors? The first reactions on the buy-side, as well as from our competitors have been extremely welcoming. Our first products have gathered a lot of attention especially from institutional clients. The current uncertainty on Equity and Bonds markets has favored our Minimum Variance Strategies that offer an alternative to traditional Market Capitalization Indices, either for investors that want to tactically overweight equities with a defensive instrument trying to minimize drawdowns, or for buy and hold investors that are seeking an attractive entry point on Equity Markets. Thank you! n

Across the Atlantic:

People

Interview with Tom Lydon, ETF Trends in the Magazine’s North American Edition. www.etf-radar.com


Rankings

In association with

Top 25 ETF providers around the world ranked by Assets under Management As at end June 2011

WORLDWIDE H1-11

YTD change

# ETFs

AUM (US$ Bn)

% total

ADV (US$ Mn)

# planned

iShares

474

$620.7

43.0%

$17,801.2

16

State Street Global Advisors

137

$204.2

14.2%

$33,776.9

37

Vanguard

69

$175.5

12.2%

$1,575.2

1

Lyxor Asset Management

163

$54.4

3.8%

$941.2

1

db x-trackers

201

$52.3

3.6%

$481.4

PowerShares

142

$45.7

3.2%

ProShares

107

$23.5

1.6%

Van Eck Associates Corp

34

$23.0

1.6%

Provider

# ETFs

% ETFs

AUM (US$ Bn)

% AUM

% market share

1

0.2%

$42.1

7.3%

-1.1%

24

21.2%

$13.6

7.1%

-0.4%

4

6.2%

$27.0

18.2%

0.8%

7

4.5%

$1.0

1.9%

-0.3%

16

22

12.3%

$3.2

6.5%

-0.1%

$2,843.7

49

12

9.2%

$2.9

6.8%

-0.1%

$3,424.6

93

7

7.0%

$2.0

9.1%

0.0%

$877.0

38

5

17.2%

$3.0

15.2%

0.1%

Credit Suisse Asset Management

58

$18.3

1.3%

$89.6

0

4

7.4%

$2.7

17.1%

0.1%

Nomura Asset Management

34

$16.0

1.1%

$82.2

0

2

6.3%

-$0.4

-2.4%

-0.1%

WisdomTree Investments

46

$13.0

0.9%

$165.8

71

2

4.5%

$3.1

31.1%

0.1%

Zurich Cantonal Bank

7

$12.9

0.9%

$43.4

0

0

0.0%

$1.1

9.5%

0.0%

UBS Global Asset Management

50

$11.4

0.8%

$43.5

0

21

72.4%

$4.8

73.8%

0.3%

Bank of New York

1

$11.1

0.8%

$404.4

0

0

0.0%

-$1.1

-9.2%

-0.2%

Amundi ETF

99

$10.1

0.7%

$107.9

0

7

7.6%

$2.9

40.7%

0.2%

Commerzbank

94

$9.6

0.7%

$44.3

0

4

4.4%

$1.0

11.1%

0.0%

HSBC/Hang Seng

32

$8.6

0.6%

$70.1

4

15

88.2%

$1.2

16.1%

0.0%

Source Markets

64

$7.8

0.5%

$346.3

15

8

14.3%

$2.8

57.2%

0.2%

First Trust Advisors

59

$7.7

0.5%

$105.5

5

16

37.2%

$2.3

41.9%

0.1%

Nikko Asset Management

20

$6.9

0.5%

$55.1

0

3

17.6%

$0.3

5.1%

0.0%

Direxion Shares

51

$6.8

0.5%

$3,036.7

176

12

30.8%

$0.2

2.8%

0.0%

Claymore Investments

31

$6.5

0.5%

$27.6

9

2

6.9%

$1.0

18.3%

0.0%

EasyETF

48

$6.2

0.4%

$19.9

1

-1

-2.0%

$0.7

12.1%

0.0%

Daiwa Asset Management

23

$6.1

0.4%

$13.7

1

0

0.0%

-$0.8

-11.0%

-0.1%

ETFlab Investment

40

$5.8

0.4%

$42.6

0

5

14.3%

-$1.0

-14.2%

-0.1%

Source: BlackRock Global ETF Research and Implementation Strategy Team

13

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ETF Radar Magazine | Issue August-September 2011

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Rankings Top 10/Top 5 ETFs by Assets under Management As at end June 2011

UNITED STATES ETF SPDR S&P 500 Vanguard MSCI Emerging Markets ETF iShares MSCI EAFE Index Fund iShares MSCI Emerging Markets Index Fund iShares S&P 500 Index Fund PowerShares QQQ Trust iShares Barclays TIPS Bond Fund Vanguard Total Stock Market ETF iShares Russell 2000 Index Fund iShares Russell 1000 Growth Index Fund

Bloomberg ticker SPY US VWO US EFA US EEM US IVV US QQQ US TIP US VTI US IWM US IWF US

AUM (US$ Mn) $89,227.2 $48,702.2 $40,810.7 $40,204.7 $28,279.8 $24,368.2 $20,509.1 $20,338.2 $16,683.8 $13,981.6

ADV ('000 shares) 148,564 19,791 17,529 58,105 2,715 45,740 746 1,297 59,529 1,867

ADV (US$ Mn) $19,913.5 $954.6 $1,075.8 $2,777.4 $365.0 $2,666.9 $82.6 $90.5 $4,976.4 $115.2

Bloomberg ticker DAXEX GY IUSA LN ZGLD SW IEEM LN MSE FP XDAX GY ISF LN XMEM GY SX5EEX GY IBCS GY

AUM (US$ Mn) $10,719.7 $9,573.8 $8,445.9 $7,060.0 $6,723.6 $6,269.3 $6,003.2 $5,568.2 $5,560.1 $4,614.0

ADV ('000 shares) 3,503 7,530 12 1,187 3,301 686 10,024 900 1,246 116

ADV (US$ Mn) $343.0 $100.5 $31.1 $55.5 $140.5 $72.2 $98.3 $41.5 $53.0 $19.9

Bloomberg ticker STX40 SJ STANSX SJ STXDIV SJ STXFIN SJ BIPINF SJ

AUM (US$ Mn) $1,016.4 $348.8 $156.7 $124.6 $123.9

ADV ('000 shares) 1,136 1 730 85 51

ADV (US$ Mn) $4.9 $0.0 $0.2 $0.1 $0.1

Bloomberg ticker 2823 HK 2800 HK 2833 HK 510050 CH 2828 HK 159901 CH 2821 HK STW AU 0050 TT 069500 KS

AUM (US$ Mn) $7,849.4 $7,532.7 $4,097.9 $3,141.8 $2,840.8 $2,708.8 $2,450.1 $2,412.1 $2,292.5 $2,267.7

ADV ('000 shares) 65,926 19,653 62 263,678 1,432 480,861 2 199 15,936 1,445

ADV (US$ Mn) $111.4 $60.8 $1.9 $81.3 $24.6 $56.0 $0.3 $9.5 $34.5 $38.2

Bloomberg ticker 1321 JP 1306 JP 1330 JP 1308 JP 1320 JP

AUM (US$ Mn) $6,883.5 $6,874.9 $3,130.7 $3,095.8 $2,691.1

ADV ('000 shares) 368 2,636 271 249 72

ADV (US$ Mn) $44.7 $28.0 $33.0 $2.6 $8.8

EUROPE ETF iShares DAX (DE) iShares S&P 500 ZKB Gold ETF (CHF) iShares MSCI Emerging Markets Lyxor ETF Euro STOXX 50 db x-trackers DAX ETF iShares FTSE 100 db x-trackers MSCI Emerging Market TRN Index ETF iShares EURO STOXX 50 (DE) iShares Markit iBoxx Euro Corporate Bond

MIDDLE-EAST/AFRICA ETF SATRIX40 STANLIB SWIX 40 Fund Satrix Dividend Plus SATRIX Financials Bips Government Inflation Linked Bond Fund

ASIA-PACIFIC ETF iShares FTSE A50 China Index ETF* Tracker Fund of Hong Kong (TraHK) Hang Seng Index ETF China AMC SSE 50 Hang Seng H-Share Index ETF E Fund SZSE 100 ABF Pan Asia Bond Index Fund SPDR S&P/ASX 200 Fund Polaris Taiwan Top 50 Tracker Samsung Kodex200 ETF

JAPAN ETF NIKKEI 225 ETF TOPIX ETF Listed Index Fund 225 Listed Index Fund TOPIX Daiwa ETF NIKKEI 225 Source: BlackRock Global ETF Research and Implementation Strategy Team

ETF Radar Magazine | Issue August-September 2011

14 10


Rankings Top 20 ETFs by Assets-under-Management and Average Daily Volume As at end June 2011

WORLDWIDE

ETF

Bloomberg AUM ADV ticker (US$ Mn) (US$ Mn)

ETF

Bloomberg ticker

ADV ADV (US$ Mn)

AUM (US$ Mn)

SPDR S&P 500

SPY US

$92,053.3 $25,886.6

SPDR S&P 500

SPY US

$25,886.6

$92,053.3

Vanguard MSCI Emerging Markets ETF

VWO US

$50,280.3

iShares Russell 2000 Index Fund

IWM US

$5,134.9

$16,618.0

iShares MSCI EAFE Index Fund

EFA US

$39,620.2 $1,119.7

PowerShares QQQ Trust

QQQ US

$2,673.9

$22,845.7

iShares MSCI Emerging Mkts Index Fund EEM US

$38,748.8 $2,245.3

iShares MSCI Emerging Markets

EEM US

$2,245.3

$38,748.8

iShares S&P 500 Index Fund

$27,609.6

Energy Select Sector SPDR Fund

XLE US

$1,535.4

$9,009.9

$22,845.7 $2,673.9

Financial Select Sector SPDR Fund

XLF US

$1,166.8

$7,308.8

IVV US

PowerShares QQQ Trust

QQQ US

$742.4

$358.6

iShares Barclays TIPS Bond Fund

TIP US

$20,944.2

$83.7

iShares MSCI EAFE Index Fund

EFA US

$1,119.7

$39,620.2

Vanguard Total Stock Market ETF

VTI US

$20,077.0

$129.3

iShares MSCI Brazil Index Fund

EWZ US

$891.4

$12,781.2

iShares Russell 2000 Index Fund

IWM US

$16,618.0 $5,134.9

iShares Barclays 20+ Yr Treasry Bd

TLT US

$839.0

$2,888.9

iShares iBoxx $ Investm. Grd. Corporate

LQD US

$13,777.3

$88.2

SPDR Dow Jones Ind. Av. ETF

DIA US

$742.8

$9,639.3

iShares Russell 1000 Growth Index Fund

IWF US

$13,554.9

$119.6

Vanguard MSCI Emerging Mkt ETF VWO US

$742.4

$50,280.3

iShares MSCI Brazil Index Fund

EWZ US

$12,781.2

$891.4

Direxion Daily Small Cap Bull 3x Shs TNA US

$725.0

$764.2

iShares Barclays Aggregate Bond Fund

AGG US

$11,851.0

$115.2

Industrial Select Sector SPDR Fund

XLI US

$675.4

$4,004.3

iShares Russell 1000 Value Index Fund

IWD US

$11,638.3

$103.8

Direxion Daily Small Cap Bear 3x Shs TZA US

$658.8

$612.3

iShares S&P/TSX 60 Index Fund

XIU CN

$11,504.6

$361.9

iShares FTSE China 25 Index Fund

FXI US

$643.7

$7,157.6

iShares S&P MidCap 400 Index Fund

IJH US

$11,479.8

$76.9

ProShares Ultra S&P500

SSO US

$628.7

$1,681.9

IYR US

$572.0

$3,795.9

MDY US

$11,086.3

$404.4

iShares Dow Jones US Real Estate

DAXEX GY

$10,877.3

$129.2

SPDR S&P Retail ETF

XRT US

$563.1

$568.5

Vanguard Total Bond Market ETF

BND US

$10,242.4

$70.5

Materials Select Sector SPDR Trust XLB US

$532.7

$2,666.3

iShares S&P 500

IUSA LN

$9,907.5

$88.1

Market Vectors Gold Miners

$500.3

$6,832.1

S&P 400 MidCap SPDR iShares DAX (DE)

Source: BlackRock Global ETF Research and Implementation Strategy Team

► EMERGING MARKETS AND BOND EXPOSURE EN VOUGE

► LEVERAGED ETFS STILL DESIRED BY TRADERS

Within the Assets-under-Management rankings a couple of Emerging Markets funds like VWO, EFA, EMM still dominate the league table. Also ETFs linked to fixed-income indices attracted some inflows.

With regards to the most liquid ETFs in the market (measured by the ADV), interestingly one could see an increased usage of leveraged funds like the TNA, TZA and SSO.

15 ETF Radar Magazine | Issue August-September 2011

GDX US


Rankings Top 30 Best Performing ETPs As at end of June 2011

WORLDWIDE

ETF/ETP ETFS Leveraged Sugar ETC ETFS Leveraged Sugar (DE) ETC ETFS Short Wheat ETC ETFS Short Wheat (DE) ETC iPath DJ-UBS Sugar TR Sub-Idx ETN Source S&P GSCI Sugar TR T-ETC ETFS Sugar ETC Direxion Daily Semicondct Bear 3X Shares Horizons BetaPro COMEX Silver Bear ETFS Sugar (DE) ETC ProShares UltraShort Silver iPath Short Extended Russell 2000 TR ETN PowerShares DB Crude Oil Dble Short ETN Horizons BetaPro NYMEX Crude Oil Bear ProShares UltraShort DJ-UBS Crude Oil PowerShares DB Commodity Dble Short ETN UBS Bloomberg CMCI Sugar EUR Hdgd ETC UBS Bloomberg CMCI Sugar CHF Hdgd ETC UBS Bloomberg CMCI Sugar USD ETC iPath Pure Beta Sugar ETN NEXT FUNDS TOPIX-17 Electric Power & Gas Daiwa ETF TOPIX-17 Electric Power & Gas ETFS Leveraged Lead ETC ETFS Short Grains DJ-UBSCI ETC Hyundai Hi Shares Insurance ETF Equity Horizons BetaPro NYMEX Natural Gas Bear ETFS Short Cotton ETC EasyETF Dow Jones Luxury EUR Lyxor ETF Daily Double Short SMI A Horizons BetaPro S&P/TSX Glbl Gold Bear

Listing Region Europe Europe Europe Europe North America Europe Europe North America North America Europe North America North America North America North America North America North America Europe Europe Europe North America Asia-Pacific Asia-Pacific Europe Europe Asia-Pacific North America Europe Europe Europe North America

1 Mth 38.46% 37.29% 20.44% 19.43% 18.67% 18.32% 18.31% 17.94% 17.50% 17.31% 16.50% 15.96% 15.19% 14.30% 13.87% 13.82% 13.46% 13.21% 13.20% 13.20% 13.07% 12.96% 12.33% 12.29% 12.11% 12.07% 11.77% 11.64% 11.56% 11.52%

12 Mth 208.14% 160.34% -24.81% -36.47% 98.15% 95.72% 95.73% -65.01% -80.17% 65.36% -85.42% -31.43% -37.45% -36.03% -45.42% -39.54% -39.57% 105.82% -35.80% 16.98% 27.18% -59.05% 58.83% -13.35% -8.30%

Net assets Inception (USD) 1.34% 8,849,032 33.80% 6,103,443 13.03% 8,186,638 7.87% 5,646,570 20.86% 38.05% 4,168,473 9.82% 62,472,778 -56.98% -71.63% 31,511,187 6.98% 43,089,349 -78.67% -45.03% 27.23% -11.51% 69,701,952 -30.69% 8.26% 11.19% 6,883,206 -16.99% -18.19% -32.47% 4,147,102 -2.04% 1,132,639 11.06% 1,961,555,136 48.71% 77,616,015 -21.24% 20,812,617 16.40% 10,132,985 3.34% -59.61% 33,218,139

Source: GlobalFundData/Morningstar as of August 3, 2011

► SUGAR, WHEAT AND SILVER This month selected agricultural goods performed very well again – especially for long sugar and short wheat. Also Short-ETPs on Silver still rank on the top even if the spot price rose within July.

16 ETF Radar Magazine | Issue August-September 2011


Rankings Top 30 Worst Performing ETPs As at end of June 2011

WORLDWIDE

ETF/ETP ETFS Leveraged Wheat (DE) ETC ETFS Leveraged Wheat ETC UBS Bloomberg CMCI Wheat CHF Hdgd ETC UBS Bloomberg CMCI Wheat EUR Hdgd ETC UBS Bloomberg CMCI Wheat USD ETC ETFS Leveraged Cotton (DE) ETC ETFS Wheat (DE) ETC UBS Bloomberg CMCI Platinum EUR Hdgd ETC ETFS Leveraged Cotton ETC Source S&P GSCI Wheat TR T-ETC ETFS Wheat ETC ETFS Leveraged Grains DJ-UBSCI (DE) ETC ETFS Leveraged Grains DJ-UBSCI ETC ETFS Carbon ETC iPath Global Carbon ETN Direxion Daily Semicondct Bull 3X Shares ProShares Ultra Silver ETFS Leveraged Silver (DE) ETC Horizons BetaPro COMEX Silver Bull ETFS Leveraged Silver ETC ETFS Short Sugar (DE) ETC ETFS Leveraged Agri DJ-UBSCI (DE) ETC ETFS Cotton (DE) ETC ETFS Short Sugar ETC ETFS Leveraged Agri DJ-UBSCI ETC ETFS Leveraged Crude Oil (DE) ETC iPath DJ-UBS Cotton TR Sub-Idx ETN ETFS Cotton ETC Source S&P GSCI Cotton TR T-ETC Horizons BetaPro NYMEX Crude Oil Bull Source: GlobalFundData/Morningstar as of August 4, 2011

â–ş WEAK WHEAT PRICES Wheat prices in western Europe and the US were lower as worries about the outlook for both economies rose.

17 ETF Radar Magazine | Issue August-September 2011

Listing Region Europe Europe Europe Europe Europe Europe Europe Europe Europe Europe Europe Europe Europe Europe North America North America North America Europe North America Europe Europe Europe Europe Europe Europe Europe North America Europe Europe North America

1 Mth -34.15% -33.59% -28.86% -28.40% -28.29% -26.28% -25.96% -25.73% -25.65% -25.34% -25.33% -23.48% -22.83% -20.38% -20.00% -19.80% -19.37% -19.17% -18.71% -18.48% -17.30% -16.98% -16.70% -16.60% -16.27% -16.18% -16.16% -15.99% -15.99% -15.95%

12 Mth -11.02% 5.33% 166.70% -14.54% 215.68% 1.37% 1.16% 50.52% 78.16% -13.62% -13.49% 62.53% 164.47% 145.69% 185.87% 190.81% -65.73% 71.58% 65.55% -59.43% 103.08% -7.56% 97.84% 95.95% 96.52% 6.57%

Inception -45.85% -58.98% 21.44% -10.71% -1.59% -12.86% -8.33% -23.21% -29.60% -13.37% -21.60% 11.86% 109.50% 30.73% 111.25% 12.32% -34.03% -6.32% 5.52% -25.06% -16.75% -57.89% 13.74% 8.29% 55.94% -53.78%

Net assets (USD) 49,970,019 72,448,667 1,476,502 95,351,501 2,140,695 3,641,700 138,244,677 2,521,843 3,353,158 1,002,019 31,479,481 99,338,590 41,856,559 9,247,651 11,078,136 24,685,925 13,407,639 16,061,555 89,734,401 35,790,708 13,708,445 279,658,686


Disclaimer Important notice to our readers General Information The views and expectations presented in the analyses, data and product presentations in this publication should not be viewed as investment recommendations of and by the ETF Radar Magazine or any of affiliates or associates. Investors should seek independent professional advice. Contributors of this publication and/or its affiliates may invest in or act as a market maker for the securities or indices or other products referred to in this publication for own account or the account of a third party. Editorial contributors may also have a business relationship with issuers of such securities or providers of such indices or products and may represent members of such issuers' or providers' decision-making bodies. While the information in this publication has been obtained from sources believed to be reliable, neither the ETF Radar Magazine nor any contributor makes any representation as to accuracy or completeness. The ETF Radar Magazine does not act as an registered investment advisor or fiduciary for anyone unless otherwise agreed. Any evaluations in this publication reflect only the author's opinion at the time of the analysis. The opinions, forecasts, assumptions, estimates, derived valuations and target price(s) contained in this material are as of the date indicated and are subject to change at any time without prior notice. This publication is general and for information only and does not constitute any form of recommendation, an offer to sell or a solicitation to buy any security or other financial instrument. Prospective investors should understand the risks associated with the products mentioned in this publication and should reach an investment decision on the basis of the information in the relevant offering circulars. Neither the staff of the ETF Radar Magazine nor any other person shall be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary loss or damages, including without limitation lost profits arising in any way from the information contained in the material. All designated trademarks and brands are the property of their respective owners. Additional Information All figures are subject to market fluctuation and change. Investments that are concentrated in a specific sector or industry may be subject to a higher degree of market risk than investments that are more diversified. An index is not managed and is unavailable for direct investment. Total returns assume reinvestment of all distributions, including dividends and capital gains. Reinvestment does not assure a profit or protect against a loss in declining markets. Total returns do not include commissions, fees, other transaction variables or the effects of taxation. Past performance does not guarantee or predict future results. The investment discussed may not be suitable for all investors. Investors must make their own decisions based on their specific investment objectives and financial circumstances. This communication is not an offer to sell or solicitation of offers to buy any securities mentioned herein. This report is not a complete analysis of every material fact in respect to any fund or fund type. The opinions expressed here reflect the judgment of the author as of the date of the report and are subject to change without notice. Statistical information has been obtained from sources believed to be reliable but its accuracy is not guaranteed. The ETF Radar Magazine does not render legal, accounting or tax advice. Please consult your tax or legal advisors before taking any action that may have tax consequences. The performance provided is past performance, which does not guarantee future results and current performance may be lower or higher than the performance data quoted. The investment return and principal value will fluctuate when sold and may be worth more or less than the original cost. EXCHANGE TRADED FUNDS ARE SOLD BY PROSPECTUS. PLEASE CONSIDER THE INVESTMENT OBJECTIVES, RISK, CHARGES AND THE PROSPECTUS, WHICH CONTAINS THIS AND OTHER INFORMATION, CAN BE OBTAINED FROM THE ETF SPONSOR OR YOUR FINANCIAL ADVISOR. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY. EXPENSES CAREFULLY BEFORE INVESTING.

www.etf-radar.com ETF Radar Magazine | Issue August-September 2011

18


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ETF Radar Magazine Issue Aug-Sept 2011 (European Edition)