Synthetic ETF Providers Act to Curb Outflows
There was a big shake-up over the last few weeks at Lyxor and db X-trackers. The largest synthetic ETF providers in Europe announced they are venturing into the physical ETF space. This comes as the two companies have faced increasing competitive pressures and net outflows over the past year.
According to data from Deutsche Bank, as of November 16, Lyxor and db X-trackers had seen respective year-to-date net outflows of €168 million and €397 million. Meanwhile, Deutsche Bank data show that iShares had experienced net inflows of €10.8 billion for the year-to-date period—accounting for some 68% of net new cash flows into European-domiciled ETFs this year. As investors have begun to exhibit a strong preference for physical replication ETFs, synthetic ETF providers have been increasingly under fire for their business models that rely on synthetic products.
In response, db X-trackers announced last month that it is launching six physical replication ETFs tracking the FTSE 100, EURO STOXX 50, EURO STOXX 50 Ex-Financials, DAX, Nikkei 225, and the S&P 500 indices. These new ETFs will be listed on three exchanges in London, Frankfurt, and Milan. This move gives investors the option to track these indices using either physical or synthetic replication within the db X-trackers suite.
Meanwhile, Lyxor had previously announced its planned foray into physically replicated ETFs back in September. Lyxor plans to convert four fixed income ETFs tracking EuroMTS indices from synthetic to physical replication in December.
For more information on the evolving ETF landscape, read "ETF Wars (and Rumours of Wars)" and "Lyxor and db X-trackers Shake Things Up".
PowerShares Enters the ETF Price War
In the US, the ETF price war continues to attract new combatants. Last month, Morningstar chronicled the heightened pace of ETF fee cuts in both the US and Europe as ETF providers compete for investors' money. On November 28th, another ETF provider, Invesco PowerShares, announced it would slash expense ratios on six of its ETFs, including four ETFs linked to ex-US RAFI indices.
Ben Fulton, Invesco PowerShares managing director of global ETFs, commented on the move saying, "We continuously analyse ways to improve our overall ETF product lineup for investors. We believe the lower fees announced today better align the six funds with our existing offerings, and help position the PowerShares family of ETFs for continued growth."
For more on the Powershares decision, read their press release.
New ETF Issuance Continues to be Sluggish
Thus far in 2012, new ETF issuance has been rather light compared to historical precedent. Year-to-date, 170 ETFs have been launched in Europe compared to the 363 ETFs launched during the 2011 calendar year. In November, this slowing trend continued. Only 8 ETFs were launched in Europe.
This past month, iShares led the way with three launches on the Deutsche Börse followed by db X-trackers with two new listings on the SIX Swiss Exchange. Below are the details for the newly launched ETFs in the month of November:
On the whole, newly launched ETFs have tended to track fixed-income indices, especially those indices linked to emerging markets and corporate debt.
