News Summary Analysis

ROBO Advice Market To Grow To $489B By 2020
The digital advice market, or robo advice, is projected to become an even bigger industry, with $489 billion in assets under management by 2020, according to new research, and will become a more important part of an adviser’s investment proposition.

The report from Boston-based Cerulli Associates said that large, retail direct firms are driving this growth and have captured “considerable market share.” Tom O’Shea, associate director at Cerulli, said robo advisers offer low minimum and low cost portfolios, and it coincides with expanding interest in passive investing.

ZyFin Plans World’s First Indian Bond ETF
Indian macro analytics firm ZyFin plans to launch ETFs in Europe, including the world’s first Indian fixed income ETF, expanding ways that investors can access higher yields and emerging markets.

ZyFin, which was founded in 2011, will domicile the ETF in Ireland and has announced plans to grow its range, including smart beta ETFs, in Europe.

Sanjay Sachdev, executive chairman and co-founder, said that the firm expects to launch further fixed income and equity ETFs to offer “easy access” to global investors who want to tap into India.

ETFs Aren’t The Cheapest Choice
ETFs are more expensive than traditional index tracking funds—if you only take so-called clean share classes on passive trackers into account, according to new research.

Research from ratings and consultancy shop Defaqto found that ETFs usually come out best when comparing passive fund costs due to the legacy commission loaded into certain share classes of index tracking funds, which were widely available before the Retail Distribution Review.

The RDR was implemented in January 2013 and banned advisers from selling products and funds for commission, and only “legacy” commission payments were allowed to continue in some cases.

Lyxor Switches €7.6B Euro Stoxx ETF To Physical Replication
Lyxor switched its €7.6 billion Euro Stoxx 50 fund, the largest such ETF in the world, to physical replication on 2 Nov., as it announced plans to have 50% of its total ETF assets physically tracking their indexes by the end of 2016.

The provider is following a Europe-wide trend in which various ETF firms are switching certain ETFs from synthetic to physical replication to improve tracking performance.

Lyxor will also make further switches, such as with its MSCI World and Topix funds, amounting to more than half of its €25 billion ETF range in physical replication by the end of 2016.

Arnaud Llinas, head of ETF and indexing at Lyxor, said the move was to “improve performance—improve tracking error, tracking difference and liquidity.”

Smart Beta Gets More Complex
Smart beta funds have exploded in popularity to a total of 844 exchange traded funds worldwide with $497 billion in assets, according to Morningstar’s latest report. But there’s a catch.

In its research called “A Global Guide to Strategic Beta Exchange-Traded Products,” Morningstar found that so-called strategic beta indexes of new ETPs are becoming more complex and harder to understand.

“As these strategies become increasingly nuanced, looking to infuse elements of an active manager’s thinking into an index, investors’ collective due-diligence burden will continue to increase commensurately,” it read.

ETF Securities Launches Europe’s First Cybersecurity ETF
ETF Securities launched Europe’s first ETF to track cybersecurity-focused companies, allowing investors to tap into a growing market.

The ETFS ISE Cyber Security GO UCITS ETF listed in London and costs 0.75% in annual fees, in partnership with ISE ETF Ventures. The ticker is USPY for USD and ISPY for Sterling. The ETF tracks an index of 33 companies and is physically replicated.

The launch follows a similar fund in the U.S., the PureFunds ISE Cyber Security ETF (HACK|C-36), which has grown to $1.1 billion since launching in November 2014.

TrackInsight Expands ETF Ratings Service
French-based advisory group Koris International expanded its ETF ratings service, allowing investors to make more informed decisions when picking investment vehicles.

TrackInsight, which launched in June this year, has expanded from rating 520 to 549 Europe-listed ETFs, and now provides detailed information on a total of 731 ETFs, jumping up from 650 funds.

Jean-Rene Giraud, CEO of Koris, told ETF.com that 136 of the analysed ETFs received a rating of between three and five stars, which show a good record of tracking error and tracking difference. TrackInsight only rates ETFs that have a three-year consistent track record and have at least €50 million in assets under management.

ETF Inflows Defy Market Volatility
Figures from ETFGI found that Europe-listed ETFs gathered $11.45 billion in August, hitting the third highest amount of monthly net inflows, as investors flocked to European equities.

Furthermore, during the week of 24 to 28 Aug., when the VIX spiked to 40 points, Europe ETF inflows jumped to $3.8 billion, the strongest weekly figure since early February, data from BlackRock revealed, as investors were taking a positive bet on macro recovery and the European quantitative easing programme.