Portfolio Products Roundup: First Trust Advisors, BlackRock, Van Eck Global, Nomura

Strong global flavor in new fund activity; Schwab tracks ETF flows; Nile marks first year

Companies went global in new mutual funds and new ETFs, as well as reporting results from global funds and moving into the automotive market. Also, Schwab announced results from its Q1 Investor Snapshot in this week’s activity.

First Trust Advisors Drives New ETF

First Trust Advisors L.P. announced that Tuesday was the first trading day for its new ETF focused on global automobile manufacture. The first automotive ETF in the industry, the First Trust NASDAQ Global Auto Index Fund (CARZ), will seek investment results that correspond generally to the price and yield, before fees and expenses, of the NASDAQ OMX Global Auto Index, which is designed to track the performance of the largest and most liquid companies making cars.

Ryan Issakainen, vice president and ETF strategist, said, “We are launching this fund as a way for investors to potentially capitalize on the trend toward increasing demand of automobiles, which has led automakers and suppliers to grow in emerging markets and consolidate operations in mature markets.” He cited Zacks Equity Research as foreseeing growth over the next ten years, with automakers in six major markets dominating the industry: China, India, Japan, Korea, Western Europe and the U.S.

He added, “J.D. Power and Associates expects auto sales in the U.S. to reach 13 million units, up 12% from 2010. However, in 2010, for the first time, emerging markets accounted for 51% of global light-vehicle sales, signaling the shift of power in the global automotive market that has been taking place during the past five years. Both China and India ended 2010 with sales of light vehicles up by more than 30%. Momentum in the emerging markets is expected to continue throughout 2011, with China as the driver for global market growth.”

BlackRock Launches India Fund

BlackRock, Inc.announced the launch of the BlackRock India Fund (BAINX) on May 9. The fund, which offers U.S.-based investors a new opportunity to invest in the world's fourth largest economy, is a joint venture with Mumbai-based DSP BlackRock Investment Managers Pvt. Ltd., one of India's leading investment management companies; it has advised the BGF India Fund since 2005 in partnership with BlackRock for offshore investors. The new fund for U.S.-based investors will join BlackRock's existing open-end mutual fund product offerings in the U.S.

"We believe India's strong growth and diversity of investment themes presents an exciting opportunity for investors over the medium to long term," said S. Naganath, president and chief investment officer of DSP BlackRock Investment Managers Pvt. Ltd.

Van Eck Adds New Regions, Lowers Fees

Van Eck Globalhas made a number of additions and changes. On Thursday, it announced the launch of its latest ETF. The Market Vectors LatAm Aggregate Bond ETF (BONO)("Bono" is Spanish for "bond") tracks an index consisting of sovereign and corporate debt securities issued by Latin American issuers and denominated in U.S. dollar, euro and local currencies of the issuers.

According to the company, the ETF "comes to market as Latin American debt markets have undergone several years of quick maturation. Limited overseas borrowing, proliferating infrastructure projects, and better transparency have all led to improved sovereign credit ratings," and these, combined with the bonds’ relatively high yields, have increased demand for both sovereign and corporate debt from the region.

Van Eck also announced on Tuesday that its Market Vectors Indonesia ETF had reached $500 million in AUM.

And on May 4, the company said it has reduced expense caps on five of its Market Vectors ETFs. The cuts, which were effective on May 1, were on Market Vectors Africa Index ETF (AFK), to 0.78% from 0.83%; Market Vectors Brazil Small-Cap ETF (BRF), to 0.62% from 0.65%; Market Vectors Junior Gold Miners ETF (GDXJ), to 0.56% from 0.59%; Market Vectors RVE Hard Assets Producers ETF (HAP), to 0.59% from 0.65%; and Market Vectors Uranium+Nuclear Energy ETF (NLR), to 0.60% from 0.62%. The company expects a resulting reduction in the funds’ net operating expenses. The reduced expense limitations are capped contractually until May 1, 2012; interest expense and certain other expenses are excluded.

Schwab Investor Snapshot for Q1 Shows ETF Assets Up 32%

Schwab announced on Wednesday that, according to its Investor Snapshot for Q1 2011, ETF assets custodied at Schwab increased to $121 billion—up 32% over the past year. Retail investor ETF assets have grown 58%, now accounting for 37% of  total ETF assets at Schwab. Other data show that in Q1 2011, assets in international fixed income ETFs have decreased 57% while U.S. fixed income ETF assets have increased 15%.

ETF flows over 12 months, according to the data, were driven equally by retail investors and RIA clients (each 47% of annual net flows). In the last quarter, U.S. equity and sector ETFs dominated flows, capturing a combined 68% of all ETF net flows.

The company also said that retail traders’ share of positive ETF flows has decreased in the past year, led in Q1 2011 by outflows from international equity ETFs (-35% net ETF flows for retail traders).

NilePan Africa Fund Gives First-Year Performance

Nile Capital Management, advisor to the Nile Pan Africa Fund, an actively managed mutual fund focusing exclusively on the African continent, on Wednesday took a look at the fund’s first-year performance and portfolio characteristics. It also highlighted Money Watch Africa, its investment blog launched in late 2010.

From inception on April 28th, 2010 through April 30th, 2011, the fund gained 22.07% annualized. During the same time period, the MSCI Frontier Markets Index gained 9.94%, the Dow Jones Africa 50 Titans Index increased 11.07% and the S&P 500 Total Return Index advanced 16.67% annualized. The fund also showed low monthly correlation to the S&P 500 (0.72) and the MSCI Frontier Markets Index (0.48). Annualized standard deviation, based on monthly returns, was 16.77%—lower than the S&P 500 (18.09%) and MSCI Frontier Markets (17.21%).

Larry Seruma, the fund’s manager and chief investment officer of Nile Capital Management, said of the results, “We are pleased to report that the Nile Pan Africa Fund not only outperformed the MSCI Frontier Markets Index during its first year of operation, but also showed low monthly correlation to the index and ... an attractive risk profile. We believe these characteristics make the fund a compelling investment tool for investors who are looking for deeper diversification of their global portfolios.”

Nomura Launches Conviction Buy List for the U.S.

Global investment bank Nomura presented its first U.S. Conviction Buy List on Tuesday. The list consists of U.S.-listed stocks that the firm expects to outperform the S&P 500 index over a 12-month period. Stocks on this inaugural list include Cablevision (CVC), Dover (DOV), Goldman Sachs (GS), Limited Brands (LTD), Marriott International (MAR), Maxim Integrated Products (MXIM), News Corp (NWSA), PetSmart (PETM), PNC Financial Services (PNC) and Viacom Inc. (VIAB).

The list will typically consist of 10 to 25 stocks, and will be rebalanced quarterly to achieve equal weighting in connection with the addition and/or deletion of any stocks. Each stock must have an average daily trading volume of at least $5 million, calculated over the preceding six months. Managed by Nomura’s head of U.S. equity research, Michael Rietbrock, and Michael Lean, deputy director of U.S. research, the list highlights the best long-only ideas generated by the firm’s fundamental equity research department.

Read last week’s Portfolio Products Roundupat AdvisorOne.com.

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