July ETF Themes
Michael Cafiero – Vice President ETF Trading – Knight Capital Americas, L.P.
Knight ETF Trading: Earnings season mixed with Euro Zone Concerns are making July quite turbulent from what we have seen. As a result all major indices have seen loosing steaks as we moved toward the middle of the month. We are seeing ETF volume projections overall on the rise for this month despite July’s historic relatively tepid flows.
Flows: Recapping ETF volumes for the month of June, Knight accounted for 15.6% of advertised ETF block shares traded trading in 1,490 unique ETFs. (Autex Block Data 7/2/12)
US Equity ETFs: Broad domestic inflows have been seen in the last two weeks albeit modest in SPY (SPDR S&P 500 ETF TRUST), IWM (ISHARES RUSSELL 2000), and QQQ(POWERSHARES QQQ NASDAQ100). Small cap exposure has been un-favored from what we have seen so far this month by looking at outflows of TNA (DIREXION DLY SM CAP BULL 3X) and inflows heading into its inverse counterpart TZA(DIREXION DLY SM CAP BEAR 3X). Strong flows into VUG(VANGUARD GROWTH ETF) are signaling investor’s favor towards growth.
Fixed Income ETFs: Once again we are seeing money flow back into the High Yield ETF offerings which saw major inflows in Q1 of 2012. HYG (ISHARES IBOXX H/Y CORP BOND), JNK (SPDR BARCLAYS CAPITAL HIGH), and SJNK (SPDR SHORT-TERM HIGH YIELD) all have seen significant inflows as appetites are once again looking for yield. Corporates Bond ETF exposure also has been on the rise highlighted in LQD(ISHARES IBOXX INV GR CORP BD), and PHB(POWERSHARES FNDMTL H/Y CORP). BOND (PIMCO TOTAL RETURN ETF) continues to soak up broad bond exposure flows as we have seen since its launch. Treasuries have shed assets seen in SHY(ISHARES BARCLAYS 1-3 YEAR TR) and IEI (ISHARES BARCLAYS 3-7 YEAR) although MINT(PIMCO ENHANCED SHORT MATURIT) continues to be heavily demanded for cash management and FLOT (ISHARES FLOATING RATE FUND) has seen a rise in buy side volume. Significant selling in all TIPS funds has been seen in the last month and some selling in municipals headlined by MUB(ISHARES S&P NAT AMT-FREE MUN) round out what we have seen in the Fixed Income space.
International ETFs: Emerging market funds have seen a peel back in the last few weeks as seen in both EEM(ISHARES MSCI EMERGING MKT FUND) and VWO(VANGUARD MSCI EMERGING). Flows have headed for other international broad funds including EFG (ISHARES MSCI EAFE GROWTH INDX) and FDT(FIRST TRUST DEVELP MKT EXUS). Money from the buy side is also moving into single country exposure. EWG (ISHARES MSCI GERMANY), EWW(ISHARES MSCI MEXICOINVESTAB), EWQ(ISHARES MSCI FRANCE INDEX), and EWJ(ISHARES MSCI JAPAN INDEX). Some selling to note was in both THD(ISHARES MSCI THAILAND) and EWC(ISHARES MSCI CANADA).
Currency and Commodity ETFs/ETNs: Selling in metals highlighted by GLD(SPDR GOLD TRUST) and SLV(ISHARES SILVER TRUST). Buyers in oil seen by flows into SCO(PROSHRE U/S DJ-UBS CRUDE) and selling in coal seen in KOL(MARKET VECTORS COAL ETF). For aggs we have seen buyers of CORN (TEUCRIUM CORN FUND) and sellers of MOO (MARKET VECTORS AGRIBUSINESS). In regard to currencies flows in the last few weeks have been two sided, perhaps sellers in EUO(PROSHARES ULTRASHORT EURO) are signaling some stabilization of the EURO for the moment.
Sector ETFs: Sector rotations have seen sellers of XLB(MATERIALS SELECT SECTOR SPDR) and VPU (VANGUARD UTILITIES ETF). Buyers has been seen in many funds including XLE (ENERGY SELECT SECTOR SPDR), XLF(FINANCIAL SELECT SECTOR SPDR), IYE(ISHARES DJ US ENERGY, VOX(VANGUARD TELECOM SERVICE), XLI(INDUSTRIAL SELECT SECT SPDR), and XRT(SPDR S&P RETAIL ETF).
Alternative/Specialty ETFs: REITS have seen heavy buy side flows especially in; VNQ(VANGUARD REIT ETF), IYR(ISHARES DJ US REAL ESTATE), and ICF(ISHARES COHEN & STEERS). Buyers have been also looking for alternatives in gaining some yield over the summer seen in flows into; PFF (ISHARES S&P PREF STK INDX), HDV(ISHARES HIGH DIVIDEND EQ), and DVY(ISHARES DJ SELECT DIVIDEND). MLP flows have also spiked perhaps because of the current creation suspension for AMJ(JPMORGAN ALERIAN MLP INDEX). MLPN(CREDIT SUISSE CUSHING 30 MLP), MLPA(GLOBAL X MLP ETF) and YMLP(YORKVILLE HIGH INCOME MLP) all have benefitted from this in regard to inflows.
You may reach Michael directly at mcafiero@knight.com
This communication has been prepared by the trading, market making and/or the sales personnel (“Trader”) of Knight Capital Americas, L.P. (“KCA”), a subsidiary of Knight Capital Group, Inc. (“Knight”). The information contained herein may be the personal perspective of the Knight Trader and/or commentary compiled from public sources. The information from public sources is believed to be reliable but Knight does not guarantee or represent its accuracy or completeness. The opinions and views expressed by the individual trader do not represent the opinions and views of Knight, its affiliates, officers or other personnel. No responsibility and no express or limited liability is assumed jointly or individually for any losses or damages arising out of errors, omissions, delays in the receipt of the information, or any actions taken in reliance upon the information. The information contained herein does not provide investment advice and is not a sufficient basis for an investment decision. No information contained herein should be construed as a solicitation or an offer to buy or sell any security or product. Indications of interest, opinions or views expressed by the trader are not firm orders or quotes and may not be current. No responsibility is assumed to maintain and/or update the information. KCA most likely makes a market in the securities mentioned in this document and its personnel, including those involved in the preparation or issuance of the material may take a position or action which may be inconsistent with the opinions and views expressed therein. Questions regarding the information presented herein or a request for a copy of this document should be referred to your Knight Representative.
Knight Capital Group, Inc. (“Knight”) is comprised of trading and related entities under common control such as Knight Capital Americas, L.P., Knight Capital Europe Limited (a U.K. registered broker-dealer), Knight Capital Asia Limited (a Hong Kong registered broker-dealer), Hotspot FX LLC and Knight Execution and Clearing Services LLC.
