Industry Updates

Vanguard lists Euro Stoxx 50 ETF in London

David Tuckwell

Today's listings

Vanguard lists Euro Stoxx 50 tracker in London

World's second largest issuer Vanguard is listing an ETF on the London Stock Exchange that tracks the Euro Stoxx 50, the Vanguard Euro Stoxx 50 UCITS ETF (VX5E).

The Euro Stoxx 50 is arguably Europe's leading index for Eurozone mega cap companies. Almost every major European ETF issuer has a product tracking this index. But US issuers, with the exception of iShares, have steered mostly clear of tracking it. Vanguard's entrance, however, may signal a change.

The performance of the Euro Stoxx 50 correlates quite closely with the performance of the S&P 500. And like the S&P 500, the Euro Stoxx also has a high degree of brand recognition. Here, it is interesting to note that Vanguard has chosen to use the Euro Stoxx branded index and thus pay the index license fees that come with it. Vanguard has been among the more aggressive issuers - perhaps behind only Charles Schwab - in moving away from branded indexes and towards in-house ones. But perhaps this may change as VX5E collects more assets.

VX5E's listing comes at an interesting time. It comes as Britain has decided to leave the EU and Spain is on the brink. Whether these hoe into European mega cap companies profitability remains to be seen.

It also comes as new regulations under Mifid II are being tabled in Europe. These new European regulations, which require among other things higher degrees of fee transparency, are widely predicted to be a boon for European ETFs.

Vx5E's expense ratio is currently 0.10%, which is the same as the rival product from BlackRock (CSX5), which currently holds €4.3bn in assets. On what basis Vanguard will compete with established funds tracking the same benchmark remains to be seen.

In its favour Vanguard commands enormous brand loyalty as investors worldwide trust its mutual structure (Vanguard is not structured as a for-profit public company; it is structured as a mutual, similar to a cooperative). Its structure, which means investors who own its ETFs become, in effect, owners of Vanguard, guarantees that its fees will decline long-term. Vanguard is also more generous than other issuers in returning the gains of stock lending to its investors.


Exponential ETFs lists upside down cap weighted ETF

Finance professionals tend to think market cap weighted indexes are the way to go. Academics tend to think equal weighted indexes are the way to go.

But Exponential ETFs is totally side-stepping this debate and listing an ETF on BATS that is weighted upside down, the Reverse Cap Weighted U.S. Large Cap ETF (RVRS).

RVRS will track the Solactive US Large Cap Reverse Cap Weight Index. The index takes the biggest 500 companies in the US - the S&P 500 for all appearances - and weighs them in reverse order. Thus, the biggest company by market capitalisation, Apple, would receive the lowest weighting. And the smallest of the 500 companies, News Corp or Under Armor, would receive the most.

Interestingly, the index's method would seem to imply that as companies shrink, they receive more weighting. I need to do more research on this however.

Eaton Vance lists ETMF on NASDAQ

Eaton Vance is listing a new exchange traded managed fund on NASDAQ, the Eaton Vance Floating-Rate NextShares (EVFTC), which use its patended NAV-based trading methodology.

EVFTC will invest in floating rate notes, and among them mostly in "senior loans", which the prospectus describes as mostly junk debts from domestic and foreign issuers.

If investing in foreign debts, they must be in euros, British pounds, Swiss francs, Canadian dollars, or Australian dollars. Foreign exposure cannot exceed more than 25% of the fund.

Interestingly, derivatives use is not subject to any cap or restriction. The prospectus states "There is no stated limit on the Fund's use of derivatives."

Eaton Vance has licensed out its NextShares methodology to several other companies, allowing them to also list ETMFs.

Vanguard lists total corporate bond ETF

Vanguard is listing a new ETF of ETFs, which aims to give very broad exposure to the corporate bond market, the Vanguard Total Corporate Bond ETF (VTC).

VTC will track the Bloomberg Barclays U.S. Corporate Bond Index by investing in other Vanguard ETFs that track different parts of the index. The other Vanguard ETFs it will invest in are, the Vanguard Short-Term Corporate Bond ETF (VCSH), Vanguard Intermediate-Term Corporate Bond ETF (VCIT), Vanguard Long-Term Corporate Bond ETF (VCLT).

It would appear that the intent of VTC is to compete with iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD), the world's biggest bond ETF $39.2bn assets under management.


PowerShares continues cross-listings through Europe

PowerShares has continued to cross-list its masthead products into Switzerland. Today it listed the PowerShares S&P 500 High Dividend Low Volatility UCITS ETF (HDCH).


PowerShares has cross-listed its PowerShares Preferred Shares UCITS ETF (PRFD), which tracks an index of preferred securities from blue chip companies.


BNP Paribas lists SRI ETF

French banking major BNP Paribas is listing a socially responsible investing ETF on its home turn in paris, the BNP Paribas Easy MSCI KLD 400 US SRI UCITS ETF (EKUS).

EKUS will track the MSCI KLD 400 social index, which is made up of companies with "outstanding" SRI ratings and "excludes companies whose products have negative social or environmental impacts," the index fact sheet says.

Among the top 10 weighted companies in the index are Microsoft, Google, Verizon, Merck and Coca Cola.

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