December 12, 2011

Top Portfolio Products: Global X Adds Greece ETF; Vanguard Cuts Purchase Fee

Deutsche Bank/Invesco introduce two ETNs; Cole launches nonlisted REIT; more

New products introduced over the last week include a new Greece-centric ETF from Global X, a purchase fee cut on a Vanguard fund, and two new ETNs from Deutsche Bank and Invesco.

In addition, Cole launched a nonlisted REIT; two new NASDAQ-linked ETFs premiered from Global X; Matthews added a fixed-income Asia fund; Touchstone chose BNY Mellon to provide mutual fund services; and Guggenheim added three new fixed-income strategies.

Here are the latest developments of interest to advisors:

1) Global X Funds Launches First Greece ETF

Global X Funds on Thursday launched the Global X FTSE Greece 20 ETF (GREK), the first ETF listed on the New York Stock Exchange targeting Greece. It tracks the FTSE/ATHEX 20 Capped Index, designed to reflect broad-based equity market performance in Greece and comprised of the top 20 companies listed on the Athens Exchange ranked by full market capitalization. As of December 1, 2011, the Underlying Index’s three largest stocks were National Bank of Greece, Coca-Cola HBC, and Greek Organisation of Football Prognostics SA.

Since reaching a peak market capitalization of over $220 billion in 2007, the market cap of the Athens Stock Exchange has fallen nearly 90% to under $28 billion as of November 2011 (Bloomberg). While there is no guarantee that the Greek economy will recover to previous levels, current valuations may create an attractive entry point for the long-term investor.

2) Vanguard Reduces Purchase Fee on Emerging Markets Index Fund

Vanguard announced Wednesday that the purchase fee on the Investor, Admiral, Signal, Institutional, and Institutional Plus Shares of the Vanguard Emerging Markets Stock Index Fund (VEMAX, VEIEX) has been reduced from 0.50% to 0.25%. The fee reduction follows an announcement by Brazil, the second-largest country holding of the fund, that it is eliminating a tax on foreign investments in equities and certain fixed-income securities that has been in place since 2009. This tax elimination is expected to lower the fund’s transaction costs. As a result, Vanguard was able to reduce the purchase fee. The fund’s exchange-traded shares are not subject to the purchase fee.

Unlike loads or sales commissions, purchase fees are paid directly to a fund to cover the costs of purchasing securities, including brokerage commissions and market impact costs. The fees allocate the costs of investing new cash directly to the investors making the new share purchases. Without the fees, a fund’s existing shareholders would have to bear the transaction costs, and the fund could experience reduced investment performance and increased tracking error with respect to its target benchmark.

3) Deutsche Bank and Invesco PowerShares Launch ETNs Linked to Inflation or Deflation Expectations

Deutsche Bank and Invesco PowerShares Capital Management, LLC announced Tuesday the launch of two exchange-traded notes (ETNs) that provide investors with exposure to US inflation or deflation expectations. These will be the first ETNs to give investors the opportunity to take long or short exposure to changes in the market’s expectations of future inflation implied by the difference in yields between a notional long or short position in U.S. Treasury Inflation Protected Securities (TIPS), and an offsetting notional position in U.S. Treasury bonds with approximately equivalent terms to maturity.

The PowerShares DB US Inflation ETN (INFL) and PowerShares DB US Deflation ETN (DEFL) will be listed for trading on the NYSE Arca and are senior unsecured obligations issued by Deutsche Bank AG, London Branch. The price of each ETN is based on a gain or loss of $0.10 per ETN for each 1-point increase or decrease in the level of the DBIQ Duration-Adjusted Inflation Index or the DBIQ Duration-Adjusted Deflation Index, as applicable, combined with the monthly returns of the DB 3-Month T-Bill Index, less an investor fee.

4) Cole Real Estate Investments Launches Daily NAV Nonlisted REIT

Cole Real Estate Investments announced Wednesday the launch of its latest investment offering: the Cole Real Estate Income Strategy (Daily NAV), Inc. The nonlisted REIT offering, marketed as “Cole Income NAV Strategy,” will invest in commercial real estate, with a primary focus on retail, office and industrial assets. It will not be traded on an exchange, but is registered with the SEC. Shares for individual investors will be made available through RIAs and broker-dealer wrap accounts. Investors will not pay upfront selling commissions for shares.

Cole Capital Corporation, an affiliate of the sponsor, Cole Real Estate Investments, will be the dealer-manager of the offering and will offer Cole Income NAV Strategy’s shares on a best-efforts basis.

5) Global X Funds Launches ETFs Linked to the New NASDAQ 400 and 500 Indexes

Global X Funds launched on Tuesday two new funds: the Global X NASDAQ 500 ETF (QQQV) and the Global X NASDAQ 400 Mid Cap ETF (QQQM). These are the first products linked to the new benchmark indexes on the NASDAQ. QQQV and QQQM track the NASDAQ 500 Index and the NASDAQ 400 Index, respectively.

The NASDAQ 500 Index measures the performance of 500 of the largest domestic and international nonfinancial securities listed on NASDAQ based on market capitalization. The NASDAQ 400 Index measures the performance of the top 400 mid-capitalization domestic and international nonfinancial securities listed on NASDAQ.

6) Matthews Launches Its First Asia Fixed-Income Fund

Matthews International Capital Management, LLC, advisor to the Matthews Asia Funds, announced Tuesday its first dedicated fixed-income investment strategy, the Matthews Asia Strategic Income Fund, intended as a lower volatility product than the firm’s other funds, offering the potential for attractive yield and diversification.

Managed by Teresa Kong and comanaged by Gerald Hwang and Robert Horrocks, Ph.D., the fund will seek total return over the long term, with an emphasis on income. It invests primarily in bonds and other debt securities of Asian corporate and sovereign issuers in both local and hard currencies, and seeks high, risk-adjusted return by investing across the capital structure and across currencies. Both investor (MAINX) and institutional (MINCX) class shares are available for this Fund.

7) Touchstone Investments Selects BNY Mellon to Provide Mutual Fund Services

Touchstone Investments announced Tuesday that it has selected BNY Mellon Asset Servicing to provide mutual fund accounting and administration, transfer agency and blue sky services for the Touchstone Funds, which have more than $7 billion in assets and more than 110,000 shareholder accounts. BNY Mellon will also provide call center servicing and regulatory services for the 42 mutual funds.

BNY Mellon currently provides fund accounting and administration services for more than 164 fund complexes with $1.3 trillion in assets in more than 1,500 funds, shareholder recordkeeping services to over 95 million shareholder accounts and middle-office outsourcing services to over 70 clients worldwide.

8) Guggenheim Investments Expands Offerings on Three Fixed-Income Strategies

Guggenheim Investments announced Wednesday three new strategies previously only available to institutional investors: Guggenheim Total Return Bond Fund (GIBAX), Guggenheim Macro Opportunities Fund (GIOAX) and Guggenheim Floating Rate Strategies Fund (GIFAX). The funds are team managed, with Scott Minerd, chief investment officer for Guggenheim, serving on the team for each of the funds.

GIOAX offers a tactical, risk-managed strategy targeting strong total return regardless of the direction of the overall market. The portfolio team includes Minerd, Kevin Gunderson, who has nine years of industry experience, and James Michal, who has six years of experience. GIBAX invests primarily in high-quality, investment-grade debt securities. Along with Minerd, Anne Walsh, senior managing director with 27 years of experience, and Jeffrey Abrams, senior managing director with over 12 years of experience, manage the fund.

GIFAX seeks to provide total return, and invests primarily in bank loans and other senior, secured floating-rate securities. Minerd, Michael Damaso, senior managing director and head trader with 12 years of industry experience, and Gunderson manage the fund.

Read last week’s Top Portfolio Products at AdvisorOne.com.

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