ETF XRAY

ETFfolio Snapshot

By Carl Delfeld of the Chartwell ETF Advisor and Chartwell Partners Asset Management

ETFfolios (trademark pending) are baskets of exchange-traded funds that match a particular investment goal or theme. Chartwell Partners has developed 16 ETFfolios and uses them to build custom global portfolios for its private clients using a core/satellite strategy. The cores ETFfolios have the primary goal of capital preservation. The satellite or growth portfolios take on additional risk with the primary goal of capital appreciation.

The ETF selection process varies for each ETFfolio. For example, The World Economic Freedom ETFfolio is based on the Index of Economic Freedom published annually by the Heritage Foundation and the Wall Street Journal. The Global Innovation ETFfolio draws on Business Week’s annual The Most Innovative Companies Rankings which is a collaborative effort with the Boston Consulting Group. The EAFE Equal-Weight ETFfolio simple weights countries in the popular MSCI Europe, Australia & Far East Index on an equal basis rather than by market cap.

Core ETFfolios

Core Conservative ETFfolio
Fixed Income ETFfolio
Global Dividend/Income ETFfolio
Chartwell Global 30 ETFfolio

Theme ETFfolios

American Global Leadership ETFfolio
World Economic Freedom ETFfolio
Global Innovation ETFfolio
Global Strategy Long/Short ETFfolio

Rotation ETFfolios

Country Rotation ETFfolio
Country Rotation Momentum ETFfolio
Country Rotation Value ETFfolio
Global Sector Rotation ETFfolio

Regional ETFfolios

Emerging Markets ETFfolio
Asia-Pacific ETFfolio
China Strategy ETFfolio
EAFE Equal-Weight ETFfolio

Chartwell offers the above ETFfolios to investors through its asset management services and to brokerage platforms as separately managed accounts. Investment advisors may also gain access to ETFfolios through a licensing arrangement. Please call Carl Delfeld at 719.264.1503 for further information.

Irish and Malaysian ETFs Buffeted by Political Winds

By Carl Delfeld of the Chartwell ETF Advisor and Chartwell Partners Asset Management

News from Ireland (IRL) and Malaysia (EWM) underscore the need to take politics into consideration when deciding what country exchange-traded are right for your global ETF portfolio. Malaysia and Ireland are part of Chartwell Partners managed Country ETF Rotation Folio.

Mr. Bertie Ahern unexpectedly announced this morning his resignation as Irish prime minister amid continuing questions surrounding his explanation of cash donations made to him while he was finance minister in the 1990s. Mr. Ahern, Ireland’s longest serving prime minister, denied that he had ever received a corrupt payment during his political career. Nevertheless, he said that he would tender his resignation to President Mary McAleese on May 6th just ahead of the Irish referendum on the European Union reform treaty.

Mr. Ahern was a key player in engineering Ireland's economic boom as well as the breakthrough peace deal in Northern Ireland.

In Malaysia, Prime Minister Abdullah Badawi position is weakening as members of his own cabinet are supporting an open contest for key leadership posts. His UMNO Party is facing an increasingly stiff challenge from opposition parties.

The dissent comes as the three opposition parties announced yesterday that they had agreed to form a formal coalition as a credible alternative to the government reports John Burton of the Financial Times. Mr. Abdullah last week persuaded Umno to delay party elections this year from August to December, but growing criticism from the party’s ranks is posing an increased threat to the prime minister.

This is not just inside baseball. Mr. Abdullah has led reforms that have helped Malaysia become a stellar performer. Capital controls and corruption have come down. Capital structures and costs are more transparent and efficient. Part of this is due to the 2004 reorganization of the state investment agency.

Some leading companies have also be restructured. Telekom Malaysia spun off its dynamic cellular assets and Malaysian Airline System cut bloated staff and unprofitable routes. The result is that the market is up 60% in dollar terms over the past two years, comfortably besting the MSCI Asia ex-Japan index and the dividend yield has improved from 1.9% in 2003 to an estimated 3.9% last year, according to Credit Suisse, while foreign ownership has almost doubled to 25% over the same period. Well done.

How will these new political developments affect these markets? Join the Chartwell ETF Advisor and find out.

Chartwell's Equal Weight Europe, Australia & Far East ETFfolio Trumps EFA

By Carl Delfeld of Chartwell Partners and Chartwell ETF.com

The most popular and largest international exchange-traded fund on the market is the iShares MSCI Europe, Australia and Far East (EFA) ETF which is a basket of 23 well developed markets. One issue is that the countries in the (EFA) ETF basket are weighted by their market capitalization or market value.

This leads to the UK and Japan together accounting for 42% of an EFA investor's total exposure. Add Germany and France and you are up to 62%. Meanwhile, your exposure to some promising markets is miniscule; Singapore, 1.1%, Ireland, 0.65% and Sweden 2.3%.

Doesn't it make more sense to weight the countries equally?

Chartwell Partners Asset Managment has an equal-weighted EFA ETFfolio which it manages on the FOLIOfn platform. This model ETFfolio is up 30.3% exclusive of fees since it was established on June 19, 2006 while the EFA exchange-traded fund is up 20.7% during the same time frame.

The Equal Weight EFA ETFfolio is only one of the fourteen ETFfolios available to investors through Chartwell Partners. The others are:

Core Conservative ETFfolio
Fixed Income ETFfolio
Global Dividend/Income ETFfolio
World Economic Freedom ETFfolio
Country Rotation ETFfolio
Country Rotation Momentum ETFfolio
Country Rotation Value ETFfolio
Global Sector Rotation ETFfolio
Global Growth ETFfolio
Emerging Markets ETFfolio
Asia-Pacific ETFfolio
Global Long/Short Strategy ETFfolio
Global Innovation ETFfolio

Chartwell uses these folios as building blocks to develop custom global portfolios using a core/satellite strategy.

For more information and media inquiries, contact Carl Delfeld at 719.264.1503 or at cdelfeld@comcast.net

Chartwell Global 30 Folio's Nestle Raises Targets

By Carl Delfeld of the Chartwell ETF Advisor & Chartwell Partners Asset Management

Nestle, the world's largest food company and a constituent of the Chartwell Global 30 index and folio, announced that it is on track to beat sales and profit expectations.

The higher-than-expected sales, continuing productivity improvements and progressive shift into higher-margin businesses is all good news and highlights the strengths of a company like Nestle in a turbulent market. Nestlé's organic growth reached 7.4% last year and margins have been helped by its Gerber baby food business and growth in water. In addition, Nestle has been able to raise prices in key areas to offset higher input prices without a hit to sales volume. A good sign.

The Chartwell Global 30 is a folio of thirty multinational companies with about 50% of them headquartered in the U.S.. Founded in 2005, the Chartwell Global 30 is an alternative to the Dow Jones Industrial Average which it has outperformed on a consistent basis.

Call Chartwell Partners at 1-877-202-4939 for more information about the Chartwell Global 30 and the ten other ETFfolios it uses to build global portfolios.

How is the American Slowdown Impacting the Canada and Mexico ETFs

By Carl Delfeld of the Chartwell ETF Advisor and Chartwell Partners Asset Management

America has always been the market for the Canadian and Mexican economies. How will the slowdown in U.S. economy and import demand affect their respective exchange-traded funds (EWC) and (EWW)?

The US is the most important market for both Canada and Mexico, buying roughly 80% of their exports. But these are slowing together with the American economy. Canada’s gross domestic product expanded by just 0.8 per cent year-on-year in the last quarter of 2007, mainly due to a collapse in export volumes according to the Financial Times.

However, the article goes on to report that both Canada and Mexico, though, are better able to withstand US economic woes than in the past. While trade remains very important – exports are 47 per cent of Mexico’s GDP and more than a third of Canada’s, according to the Economist Intelligence Unit – both economies are more diversified. In Mexico, domestic demand is remaining strong and Canadian consumer spending is still vibrant.

The Canadian and Mexican balance sheets are also in much better shape than America giving policymakers fiscal surpluses and more flexibility to stimulate demand. Mexico’s external debt position has also greatly improved. Canada’s central bank, which has cut interest rates by 50 basis points since September, may do so again this week and this will help its overheated currency cool down and improve export competitveness.

Should you buck conventional wisdom and buy the Canadian and Mexico ETFs in the midst of a U.S. slowdown? Join Chartwell ETF and find out.

New SPDR S&P International Dividend ETF Offers More Upside but with Higher Risk

By Carl Delfeld of the Chartwell ETF Advisor

The new SPDR S&P International Dividend exchange-traded fund (DWX) seeks to track the S&P International Dividend Opportunities Index, which includes 100 tradable, exchange-listed stocks from around the world that offer high dividend yields. The stocks included in this index must have a minimum total market capitalization of $1.5 billion, a three-month average daily value traded greater than $10 million, and have traded at least 300,000 shares for each of the preceding six months.

Additionally, for inclusion in the index the stocks must meet the following stability factors: positive 5-year earnings growth and profitability - measured by positive earnings per share over the latest 12-month period. Its expense ratio will be 0.45 percent.

How does this new ETF stack up against one well known WisdomTree alternative DEFA (DWM)? It is substantially different. The analysis below is as using data as of 12/31/07 for DWX and 2/15/08 for DWM.

The index that DWX tracks has much fewer names - 100 for DWX vs. 560 for DEFA (DWM).

The country allocations also differ sharply. The top five for DEFA are UK (23%), France (12.5%), Japan (9.4%), Australia (8.8%) and Italy (7.9%). For DWX, it is UK (25%), Canada (16.8%), Australia (10.5%), Italy (7.8%) and Sweden (7.5%)

In terms of company allocations, the top holding for DEFA is 1.86% and #10 is 1.1%. For DWX, top holding is 3%, #10 is 2.3%.

Sector exposure also quite different. DEFA top 3 are Finance (28.7%), Consumer non-cyclical (14.6%) and Communications (14.3%). BWX caps sector exposure at 25% so Finance is 25% followed by consumer discretionary at (19.6%) and Energy (15.93%).

But the comparison to the Wisdom Tree DEFA ETF (DWM) is not ideal.

First, the index that DWX tracks includes exposure to emerging market countries and mid cap companies while DWM is only developed countries and large cap companies. Perhaps a combination of WisdomTree's Dividend Top 100 (DOO) and Emerging Market High Yield (DEM) ETFs would be a better comparison.

All in all, a blend of both makes sense and I have added both this month to the Chartwell ETF Global Dividend/Income portfolio.

Global Export Strength and Global ETFs

By Carl Delfeld of the Chartwell ETF Advisor and ETFfolio.com

While the jury is still out, global exchange-traded fund investors may find some encouragement in recent data that shows that global economic growth is proving to be reslient. Will this buoy global ETFs?

Exports seem to holding relatively firm despite an IMF cut in global growth projections for 2008 from 4.4% to 4.1%. An article in the Financial Times lays out some data to explain why.

export growth, is proving surprisingly resilient.

While US imports fell $13bn in December, the total 2007 import bill was still $2 trillion. The US also has a smaller share of world imports than it once did – 14 compared with 20 per cent in 2000, according to the IMF. Exports from Mexico and Canada also rose strongly in December, compared with both a year and a month earlier.

Demand for exports within Asia is also to some degree offsetting falling demand from the US and Europe. For example, Singapore’s non-oil exports to these two regions, which represent a third of its export market, fell sharply in January, but exports to China rose 10 per cent year-on-year and exports to Indonesia 6 per cent. Chinese exports, meanwhile, remain strong.

Is their something to all the de-coupling talk? Go to Chartwell ETF to learn more.

Some Welcome News on International Markets Buoys ETFs

By Carl Delfeld of the Chartwell ETF Advisor

Amid all the doom and gloom, here is some positive news that should help some international exchange-traded funds.

Japan’s economy expanded by 3.7% in the last quarter, more than double many predictions, thanks in part to a jump in exports to the rest of Asia and emerging markets. The data suggested that Japan may be more resilient to any US recession than previously thought. (EWJ) jumped nicely.

The Aussie dollar and ETF was given an added boost by an expectation-beating employment report that reinforced expectations that Australian interest rates were set to rise. Australia added 26,800 new jobs in January, far exceeding expectations for a rise of 15,000 and taking unemployment to its lowest level in more than 33 years. (EWA) snapped back after a string of bad days.

On the banking front, also some welcome news. Nordic Swedbank reported a strong 5.7% rise in fourth-quarter operating profit thanks to strong economic growth in the region, and as it remained largely immune from the turmoil in credit markets. Its shares were up 9.2%. Zurich Financial, meanwhile, announced its full-year net profit rose by 20%. Not bad.

Sweden’s central bank, the Riksbank, which is the oldest central bank in the world and a vigilant inflation hawk, surprised financial markets with a rate increase which helped firm up (EWD)

And there was also some good news about America. Today’s December U.S. trade deficit report is expected to narrow to -$61.5 bilion, much lower than the record high of -$67.6 billion posted in August 2006.

To stay on top of global markets and ETFs that track them, go to Chartwell ETF.

The Global Sector ETF Spread

By Carl Delfeld of the Chartwell ETF Advisor

The ten global exchange-traded funds that make up the S&P Global 1200 are a useful tool for ETF investors since they cover 70% of world equity value. They also allow advisors and investors the flexibility to execute a smart strategy to overweight or underweight global sectors.

So far this year, the best performing global sector has been the iShares S&P Global Healthcare Sector (IXJ) which is down 7.1% while the worst performing global sector has been the iShares S&P Global Technology Sector (IXN) which is down 14.8%. This spread of over 7% is significant but a look at a shorter timeframe highlights why a rotation strategy of shifting into undervalued sectors can pay off.

For the last ten days of January, the iShares S&P Global Materials (MXI) was up 9.1% and the Consumer Discretionary Sector ETF (RXI) was up 8.3%. Meanwhile, during the same ten days, Global Healthcare (IXJ) was down 2.8%.

The Global Consumer Discretionary Sector ETF (RXI) is up 2.24% today in mid-day trading.

The ten global sector ETFs which are listed below have anywhere from 30% to 65% invested in U.S. companies:

iShares S&P Global Consumer Discretionary (RXI)
iShares S&P Global Consumer Staples (KXI)
iShares S&P Global Health Care (IXJ)
iShares S&P Global Energy (IXC)
iShares S&P Global Industrials (EXI)
iShares S&P Global Technology (IXN)
iShares S&P Global Telecommunications (IXP)
iShares S&P Global Utilities (JXI)
iShares S&P Global Materials (MXI)
iShares S&P Global Financials (IXG)

To learn how to receive a copy of Chartwell's Global Sector ETF Investing white paper and for media inquiries, contact Carl Delfeld at 719.264.1503 or go to Chartwell ETF.

Bipolar Global ETF Fund Flows Continue in 2008

By Carl Delfeld of the Chartwell ETF Advisor and Chartwell Wealth Management

The bipolar nature of ETF investor fund flow trends in 2007 whereby money went to safety or for riskier above-average returns seems to be continuing in 2008. Other than emerging markets, money market funds were the clear winners in 2007, with inflows of $760bn during the year that lifted their assets to a record $3.1 trillion. Assets in emerging markets funds and exchange-traded funds doubled during the year, to more than $800bn. That compares with just $80bn 10 years ago according to Deborah Brewster of the FT.

Last week saw a record outflow from European equity funds, according to Emerging Portfolio Funds Research. Brad Durham, the managing director of EPFR, said: “Just the notion of US fund flows turning negative is a new phenomenon.”

The flows data, from EPFR, cover both retail and institutional investors. The latter are following the same pattern by lifting their allocations to passive indexed funds at the same time as going into higher-risk alternative investments. Brewster points out that huge inflows to emerging markets can have the effect of being a self-fulfilling prophecy, as the flow of money helps boost the prices of stocks in developing and frontier markets, lifting their already high returns.

But 2008 has been rough going as to emerging market and international country ETF returns. So far only Malaysia (EWM) is in positive territory with the Thai Fund (TF) dropping 21.3%. If you look back at 200 day returns, China (FXI) is still up 46.7% after substantial profit taking and While Ireland (IRL) has been hammered down 39.3%.

Keep on top of global and international ETFs by joining Chartwell ETF.

Smart Swissie (FXP) and Samurai Currency (FXY) ETF Play

By Carl Delfeld of Chartwell Partners Wealth Management

In our Chartwell Global Strategy portfolio, we have had exchange-traded fund positions in both the Swiss Franc (FXP) and Japanese Yen (FXY). My thinking was that the probability that the Japanese yen would strengthen was higher than the long anticipated recovery in the Japanese stock market and that the Swiss franc was a better bet than many European ETFs such as Austria (EWO), Netherlands (EWN) and Belgium (EWK) which have 40% or more exposure to the financial sector.

This currency combination is also a play on the unwinding of the carry trade and general risk aversion in global markets. At some point, valuations for many financial-oriented ETFs will reach a very attractive point for re-entry.

With news of a deepening U.S. economic weakness and a downward tend expected in interest rates, the dollar dropped to a record low against the Swiss franc and its weakest level in two and a half years against the yen on Wednesday. My opinion is that while lower rates help a bit in terms of staving off a recession, their impact is steadily decreasing and the negative impact on the value of the U.S. dollar and our economic standing in the world is of much greater concern.

For more information, contact Carl Delfeld at 719.264.1503.

Chartwell ETF To Release White Paper on Global Sector ETF Strategy

By Carl Delfeld of the Chartwell ETF Advisor and Chartwell Wealth Management

Chartwell ETF will release later this month an executive summary of a white paper on a global sector rotation strategy using the ten iShare S&P global sector exchange-traded funds. These ten ETFs make up slices of the S&P Global 1200 which is a composite of seven indices considered as leaders in their respective regions. The market values of the 1,200 companies in the indices represent roughly 70% of the world’s capital markets with a market value exceeding $28 trillion.

Chartwell Partner's Wealth Management Group offers investors a Global Sector Rotation Portfolio which weights and adjusts the weightings of the ten global sector ETFs based on a top down model which is momentum led with a valuation check.

The following is a brief description of these baskets of companies.

The S&P 500 which covers 75% of U.S. markets.

The S&P Europe 350 covers 70% of the region’s market cap across 17 countries.

S&P/TOPIX 150 covers 70% of the Japanese market.

S&P/TSX 60 offers exposure to 60 large-cap, liquid Canadian companies.

S&P/ASX All Australian 50 is comprised of 50 liquid, domestic-oriented Australian companies.

S&P Asia 50 covers 50 leading companies in Asia ex-Japan domiciled in Hong Kong, South Korea, Taiwan and Singapore.

S&P Latin America 40 is a basket of 40 companies from Argentina, Brazil, Chile, and Mexico which offers exposure to 70% of the regions market cap. It is heavily weighted to Brazil and next Mexico.

The 1,200 companies from the above markets are divided into ten sector indexes that are tracked by the ten global sector ETFs.

To receive this executive summary, contact or join Chartwell ETF.

Emerging Markets Lifts Dupont and Industrial Sector ETFs

By Carl Delfeld of the Chartwell ETF Advisor

Many pundits are advising exchange-traded investors to underweight the industrial sector as the US moves into a period of weaker growth or recession. But companies like DuPont (DD) are benefiting from still-strong demand in emerging markets, as well as the boom in biofuels boosting sales of its grain seeds that go into making ethanol reports the Financial Times.

“We expect that continued growth worldwide from our agriculture and nutrition business segment and growth from all of our segments in emerging markets will more than compensate for a slower US economy,” said Charles Holliday, DuPont chairman and chief executive officer. “For the full year 2007, we will deliver 11 per cent or more earnings growth despite a slowing US economy and higher raw material prices.”

The company now expects full year 2007 earnings, due out on January 22, to be at the upper end of its previous range of $3.15 to $3.20 a share, excluding charges. DuPont also raised its earnings outlook for 2008 to $3.35 to $3.55 per share compared with a previous estimate of $3.31 to $3.52.

If you buy into the emerging market growth offsets US weakness outlook, take a look at the S&P Global Industrials (EXI) ETF which has 51% exposure to American companies. Here are its top ten holdings and their weights.

General Electric 13.8%
Siemens AG 4.0%
Boeing 2.7%
United Technologies 2.6%
UPS 2.6%
3M 2.2%
ABB 2.0%
Caterpillar 1.7%
Mitsubishi 1.5%
Emerson Electric 1.5%

Dupont is a constituent of the Chartwell Global 30 and EXI is part of Chartwell's Global Sector Rotation portfolio.

Join Chartwell ETF and receive its white paper executive summary on global sector investing with ETFs

3M's Emerging Market Sales Help the S&P Global Industrials ETF (EXI)

By Carl Delfeld of the Chartwell ETF Advisor

3M with over 50,000 products on global markets is a constituent of the S&P Global Industrials (EXI) exchange-traded fund and the Chartwell Global 30 portfolio.

Sales grew 10% in the first nine months of 2007, while gross margins increased slightly, from 22% in 2006 to 23% so far this year according to Morningstar report. The company has also improved its pipeline of new products.

3M's broad product line also lessens the likelihood that a slowing U.S. economy will stall sales growth and some of the company’s fast-growing businesses are in defensive segments of the economy, such as health care, security, transportation and education.

Rapid growth in emerging nations is clearly helping spur 3M's top line growth. Sales to developing countries, particularly those in Eastern Europe, the Middle East and Africa, have grown 19% per year since 2002. More than 60% of 3M's $24 billion in revenue over the past 12 months has come from overseas operations.

Learn more about the 10 global sector ETFs that make up the S&P 1200 at Chartwell ETF.

What are the Benefits of ADRs?

By Carl Delfeld of the Chartwell ETF Advisor

What are the benefits of ADRs and exchange-traded funds that contain a basket of ADRs?

ADRs are denominated in U.S. dollars, with the underlying security held by a U.S. financial institution overseas. The leading sponsors/issuers of ADRs are JPMorgan and the Bank of New York.
The advantages of ADRs to investors are primarily convenience and cost. For individuals, ADRs are an easy and cost-effective way to buy shares in a foreign company. They save money by reducing administration costs and avoiding foreign taxes on each transaction.

When you buy and sell ADRs you are trading in the U.S. market. Your trade will clear and settle in U.S. dollars. The depositary bank will convert any dividends or other cash payments into U.S. dollars before sending them to you. The depositary bank may arrange to vote your shares for you as you instruct.
However, keep in mind that ADRs do not eliminate the currency and economic risks that go along with investing in another country.

For example, dividend payments in euros would be converted to U.S. dollars, net of conversion expenses and foreign taxes and in accordance with the deposit agreement. This has been a welcome feature for the last few years, as the U.S. dollar has declined relative to most major currencies but it could go the other way as well.

Investor Flows Favor Emerging & Money Markets

By Carl Delfeld of the Chartwell ETF Advisor

Risk appetite returned, at least among some sources of capital, during the first week of December as EPFR Global-tracked emerging markets equity exchange-traded funds had their best week of the year in dollar terms, Financial Sector ETFs and Funds absorbed another $1 billion and High Yield Bond Funds posted inflows for the first time in six weeks. But plenty of investors remain cautious: Money Market Funds, a proxy for cash, took in another $21.3 billion.

Equity funds and ETFs geared to developed markets continue to suffer with US, Japan and Europe Equity Funds all posting outflows during the week. The combined net outflows from these three fund groups since the first week of August now stand at $45.9 billion. During that same period emerging markets ETFs and funds taken in a net $26.9 billion.

“Some of that is still attributable to the fact developed markets have more direct exposure to the US sub-prime debt crisis, and some to the fact another US rate cut – if it happens -- is going it hit Japanese and European export competitiveness” observes EPFR Global Senior Analyst Cameron Brandt. “But much of it boils down to basic performance. The average Asia ex-Japan Equity Fund’s year-to-date portfolio gain is nearly eight times larger than the 7.3% returned by their US Equity Fund counterparts and 11 times greater than the average gain posted by Global Bond Funds.”

Chartwell ETF uses input from EPFR Global provides fund flows and asset allocation data to financial institutions around the world.

OECD Economic Growth Projections May Impact ETFs

By Carl Delfeld of the Chartwell ETF Advisor

The OECD cut back its 2008 forecast for developing member countries and this could impact the performance of exchange-traded funds like Germany (EWG) and Sweden (EWD). At the same time it increased forecast for emerging countires like India (INP) and China (FXI).

In its twice-yearly Economic Outlook, the OECD forecast growth in the 30-nation area of an annual 2.1 per cent in the fourth quarter of 2008, down from its May projection of 2.7 per cent.

This would be the weakest performance since 2003, when the world economy was emerging from the fallout caused by the bursting of the technology bubble in 2000.

Jorgen Elmeskov, acting head of the economics department, said although the organisation had cut its growth forecasts "virtually everywhere in the OECD", the outlook was "actually not that bad in view of the recent shocks".

OECD cut its fourth quarter GDP growth projection from 2.7% to 2.1% for its 30 country members but raised number for China to 10.7% and India to 8.4%.

How important is economic growth in choosing country ETFs? Go to Chartwell ETF and find out.

Chartwell Launches Global Sector ETF Rotation Portfolio

Chartwell Partners, a global investment advisory firm specializing in exchange-traded funds, is launching a Global Sector Rotation portfolio for high net worth individuals and insitutions.

With an increasingly globalized economy, categorizing companies by their headquarters is becoming less useful. What business sector they are primarily engaged in is a more useful way to group companies and compare valuations and stock prices.

The following ten global sector ETFs together make up the S&P Global 1200 index containing 1,200 large and liquid companies from 29 countries with a total market value of over $28 trillion. The market cap based sector weightings range from 4.8% for the iShares S&P Global Utilities (JXI) to 23.2% for the iShares Global Financials (IXG).

iShares S&P Global Consumer Discretionary (RXI)
iShares S&P Global Consumer Staples (KXI)
iShares S&P Global Health Care (IXJ)
iShares S&P Global Energy (IXC)
iShares S&P Global Industrials (EXI)
iShares S&P Global Technology (IXN)
iShares S&P Global Telecommunications (IXP)
iShares S&P Global Utilities (JXI)
iShares S&P Global Materials (MXI)
iShares S&P Global Financials (IXG)

Chartwell global sector allocations challege these traditional market cap based weightings using a macro momentum led, valuation check model. For more information contact Carl Delfeld at 719.264.1503 or go to ChartwellETF.com.

The Simple Global ETF Portfolio

By Carl Delfeld of the Chartwell ETF Advisor

Do you wonder sometimes if we make investing far too complex and confusing? Exchange-traded funds were designed to be easy to use with all the advantages of simplicity, transparency, tax efficiency and low fees. While perhaps sub-optimal from a financial engineering point of view, the simple approach may work best for many investors.

Here are my picks for a portfolio of just three ETFs that span the globe.

iShares Dow Jones U.S. Total Market (IYY), 1,634 holdings, $15 trillion of market cap, top 10 holdings equal 17%

Vanguard FTSE All-World ex-US (VEU) 2,200 stocks, 48 countries, top ten equal 9.4%, large cap, 52% midcap, 38%, smallcap 10%, UK/Japan, 35%

Vanguard Emerging Markets (VWO) Brazil, 10.5%, India, 6.3%, Taiwan, 12.4%, China 10.5%, Russia, 10%, South Africa, 8.6%, Mexico 6.3%

Some may call this the "lazy portfolio" but others call it the "smart portfolio". Some of my clients use this as their core portfolio and then layer more creative and aggressive portfolios on top of it. Be careful to get professional advice from Chartwell or another advisor as to the proper proportions of each ETF that suit your investment goals. Find out more about this strategy by going to Chartwell ETF.

Broad-Based International ETFs Lack Punch

By Carl Delfeld of the Chartwell ETF Advisor

Now you can buy most markets through an ETF with just a click of a mouse and Vanguard's new FTSE All-World ex-US ETF (VEU) allows an investor access to 48 markets in one ETF with an annual fee of just 0.25%. Incredible! And it is up 0.74% this morning in early trading.

But it is highly unlikely an investor can effectively capture global growth and valuation opportunities with just VEU. Roger Nusbaum for Random Roger's Big Picture points out that it is highly correlated to other indexes. VEU has a 0.876 correlation to the S&P 500 and a high correlation to the iShares MSCI EAFE Index (EFA). All of the diversification benefits of the component countries in VEU get blended away in such a broad-based product.

You need to be an active ETF investor and pick out countries with high potential such as Brazil (EWZ), Singapore (EWS) and Austria (EWO). This is the concept behind Chartwell ETF's World Country ETF Rotation portfolio which selects and weights country ETFs based on fundamentals and factors such as politics.

The idea is to use a broad based ETF and then layer on top of it country ETFs that you believe will sharply outperform.

Weak Dollar Aids Multinational ETFs

By Carl Delfeld of the Chartwell ETF Advisor

Conventional wisdom is that weakness in the dollar, which has hit a series of all-time lows against major currencies, benefits multinational companies and multinational exchange-traded funds in two ways: it makes their American-made products cheaper on international markets and increases the dollar value of their overseas earnings.

The Dow Jones Industrial Average and the exchange-traded fund (DIA) that tracks it, led by companies with large overseas operations, have risen nearly 9 per cent in the past six weeks. The Financial Times reports that since the Dow's previous peak in July, eight of the top ten performers have been multinational companies such as P&G, Hewlett-Packard, Johnson & Johnson and McDonald's. Many of these companies have been laggards going back as far as 2000 with small cap stocks outperforming what has been perceived by investors as low-growth multinational dinosaurs.

It might be better for some investors to buy a basket of multinationals like the before mentioned Dow Jones Industrial Average through an exchange-traded fund such as the Diamond (DIA). Year-to-date through October 1st, DIA is up a nice 11.5%. For a more global perspective, the S&P Global 100 ETF (IOO) gives you a basket of the 100 largest companies in the world. About 50% are American companies and (IOO) has done a bit better than DIA, up 12.1% so far this year.

In an effort to select the best of the S&P Global 100 while maintaining the simplicity of the Dow, Chartwell has developed the Chartwell Global 30 portfolio. It selects 30 companies from the S&P Global 100 and weights them equally. The Chartwell Global 30 is up 21.16% so far this year.

Find out more about the Chartwell Global 30 by calling 1-877-202-4939.

ProShares ETFs Hits $7 Billion Mark

ProShares exchange-traded funds provide built-in short or magnified exposure to a variety of well-known indexes, ranging from broad small-, mid-, and large-cap and style indexes to 11 sectors.

ProFunds Group today announced that its ProShares family of exchange traded funds (ETFs) passed the $7 billion mark—in just over a year after its launch. ProShares offers the first and only ETFs designed to provide short or magnified exposure to well-known market indexes.

Gaining short exposure to the markets with ProShares ETFs is convenient whereas traditional short selling requires investors to open a margin account, and you can lose more than you invest. In addition, Short ProShares can be used in some retirement accounts where short selling is prohibited.

There are two types of ProShares ETFs with 52 choices now available to investors:

Short & UltraShort ProShares – Hedge against downturns, or seek profit when markets decline, with the only ETFs designed to go up when indexes go down. For example, the Short S&P500 (SH) seeks daily investment results, before fees and expenses, that correspond to the inverse (opposite) of the daily performance of the S&P 500® Index.

Ultra ProShares – Get more exposure for your investment dollars with the only ETFs designed to double the daily performance of popular market indexes (before fees and expenses). For example, the Ultra QQQ (QLD)seeks daily investment results, before fees and expenses, that correspond to twice (200%) the daily performance of the NASDAQ-100® Index.

Used prudently, ProShares ETFs can be a welcome addition to your global ETF portfolio and the short ETFs can act like a shock absorber to cushion your portfolio in down and volatile markets.

By Carl Delfeld of the Chartwell ETF Advisor

ETF Options for Falling U.S. Dollar

The US dollar has fallen 4.5 % against the euro this year and 4 per cent against sterling, hitting a new 26-year low against the pound last week. The trade-weighted dollar index dropped to its lowest since 1992. This dollar weakness translates into a boost in performance for international and country-specific ETFs.

The reasons for continued dollar weakness include a US economy growing more slowly than many global rivals and interest rates rising fast outside the US while domestic rates remain flat not to mention anxiety over US credit and mortgage markets.

The easiest way to play the weak dollar trend is with international or country-specific ETFs. They are not hedged against the dollar so that strength in the underlying currency, such as a stronger Singapore dollar captured through the Singapore ETF (EWS), boosts returns for U.S. dollar-based investors.

Rydex also offers a series of foreign currency ETFs such as the CurrencyShares British Pound Sterling (FXB), the CurrencyShares Euro (FXE), and the CurrencyShares Canadian Dollar (FXC).

A couple of Chartwell's seven model ETF portfolios have a small position in PowerShares DB G10 Currency Harvest (DBV) which is up 14% year-to-date. It tracks 10 currencies, going long on the three top tier currencies with the highest interest rates and going short on three currencies with the lowest interest rates. DBV is currently long on the Australian dollar, the New Zealand dollar and the Pound sterling and short on the Japanese yen, the Swiss franc and the Swedish kroner.

This is not a bad return but relying primarily on interest rates ignores other key factors. It is also a good idea to have some emerging market currency plays in your portfolio. Take for example, the Brazilian real and the Brazil iShare (EWZ). Brazil has been on a spree of cutting interest rates over the past two years and its currency has strengthened considerably. Consumer demand, exports, and investment have been fueling economic growth and a stronger currency has helped keep a lid on inflation. The real has appreciated against the US dollar from R3.95 to one dollar in late 2002 to R1.86 to one dollar last week.

Then there is the PowerShares U.S. Dollar Bearish Fund (UDN) that track the New York Board of Trades U.S. Dollar Index. This index is the most popular measure of the dollar against other currencies; the Euro has a 58% position; Japanese yen 14%; British pound 12%; Canadian dollar 9%; Swedish krona 9%; Swiss franc 3%.

By Carl Delfeld of the Chartwell ETF Advisor

European Funds and ETFs Suffer Outflows

Exchange-traded fund investors can gain from tracking where the big global equity managers are placing their bets. For the second week in June showed redemptions from Western European equity funds and ETFs totaled $1.74 billion - and an additional $200 million flowed out of these funds on June 14 according to EPFR Global’s new daily fund flow service despite a day of strong fund performances. Solid growth, data showing wages growing faster than inflation, the ECB’s assertion that interest rates are still accommodative and the Swiss central bank’s recent hike all suggest interest rates in this region have yet to peak, raising fresh questions about the strength of future corporate earnings and M & A activity.

Japan and China funds extended their losing runs and global equity funds also suffered a rare week of net outflows. Pacific Equity Funds were hit with redemptions for a third straight week as they continue to pay for their heavy exposure to Japan and China. But year-to-date outflows from China and Greater China fund groups now total $4.8 billion versus combined net inflows of $10.46 billion during 2006

EPFR Global noted that among the week’s winners were Emerging Markets Bond Funds and Latin America equity funds. But the most eye-catching numbers were posted by US equity funds, which chalked up net inflows of $9.8 billion – largely on the strength of a $10.2 billion net inflow into the SPDR S&P 500 ETF – and renewed interest in growth stocks.

Posted by Carl Delfeld of the Chartwell ETF Advisor

Latin American ETFs Gain, China Suffers Negative Flows

Investors continued to reduce their direct exposure to Chinese equities and exchange-traded funds during the first week of June, pulling over $1 billion out of China and Greater China Equity Funds tracked by
EPFR Global for the second week in a row. But they pumped another $810 million into Latin America Equity Funds, adding to their indirect bet on the Chinese economy’s robust growth and its demand for raw materials. ETFs and funds geared to developed markets had a mixed week. Japan ETFs and equity funds extended their losing streak. But US equity funds posted inflows on the strength of an exceptionally good week for Large Cap Growth Funds as interest rate fears took a brief holiday before resuming at mid week, European equity funds were back in the black and global equity funds and ETFs extended their winning streak to 13 straight weeks.

There was a strong suggestion in this week’s data that investors are looking for dips to buy into. Flows and fund performance were, for the most part, inversely correlated. The four equity fund groups that posted the best portfolio performance – Japan, Pacific, EMEA and Asia ex-Japan equity funds – all posted net outflows, while relative laggards such as European, Global and Latin America equity funds attracted fresh money.

At the country level Brazil has been the star in recent weeks. But Mexico Equity Funds took in $149 million during the week ending June 6, handily distancing Brazil Equity Funds in terms of flows as a percentage of assets under management.

Find out more by joining the Chartwell ETF Advisor

Global Investing With Exchange Traded Funds

IShares S&P Global 100 Index Fund (IOO) is a great addition to any portfolio. Owning IOO is an excellent way to have exposure to global large-cap stocks, as represented by the Standard & Poor's Global 100 Index. The top four holdings: 1) Exxon Mobil Corp 5%, 2) General Electric 4.02%, 3) Citigroup Inc. 2.79%, 4) Microsoft Corp, 2.75%.

Percentage of holdings by Country: 1) United States 46.59%; 2) United Kingdom 13.44%; 3) France 8.64%; 4) Germany 6.82%; 5) Switzerland 6.25%; 6) Japan 5.66%; 7) Spain 3.81%; 8) Netherlands 3.41%; 9) Finland 1.09%; 10) Australia 0.94%; 11) South Korea 0.87%; 12) Belgium 0.68%; 13) Sweden 0.61%; 14) Italy 0.53%; 15) Canada 0.34%.

(Click image for larger view)

DE Smith of MyPortfolioView

Higher GDP Growth Buoys German ETF

The German exchange-traded fund (EWG) already includes top world class multinationals such as Siemens, BASF and BMW but the kicker is stronger German growth and consumer spending numbers. The German economy grew by 3.6 per cent year-on-year in the first quarter, a stronger-than-expected performance given the headwind of higher taxes earlier this year.

The fiscal picture is also improving with Germany expecting to deliver its first balanced budget in 40 years by the end of the decade based on stronger tax revenues.

Based on this new estimate, the German Finance Ministry said the total state deficit, including the social security system, federal, regional and local government budgets, could reach zero by 2010, while the federal government could achieve the first surplus since 1969 a year later.

By Carl Delfeld of the Chartwell ETF Advisor

ETFs For Overvalued Markets

It may be time to blend a little bit of inverse exchange-traded funds in your global ETF portfolios. Short ProShares are the only ETFs designed to go up when markets go down (and vice versa). Jennifer Openshaw of TheStreet.com writes that they are a good alternative to short selling individual stocks or ETFs because they don't require a margin account, require less capital to get a desired exposure, and offer more diversification than a single stock.

Openshaw illustrates how the ProShares Short Nasdaq QQQ ETF (PSQ)works. The fund rises in value matching the drop in the index. A 5% index drop would cause PSQ to rise about 5%. If you are looking for a bit of leverage, the ProShares Ultra series doubles your bet. Buy Ultra Nasdaq QQQ ProShares ETF (QID) will go up double the rate of the decline in the underlying index. If the index drops 5%, your investment gains 10%. Likewise, it'll go down at double the rate if the index goes up.

ProShares offers 29 ETFs that are designed to move in the opposite direction of their indexes.

By Carl Delfeld of the Chartwell ETF Advisor

China's Stock Market Turnover Dominates

It was an historic day for China's stock markets as the value of shares traded on China’s stock markets on Wednesday was greater than the rest of Asia combined – including Japan – helping the benchmark index to breach the 4,000 mark for the first time. This is just one day after my blog about Japan's shrinking share of world market capitalization.

A report by Jamil Anderlini of the FT mentioned that this was almost certainly the first time that turnover at the Chinese bourses had exceeded that of the rest of Asia. The Shanghai stock exchange recorded Rmb255.3bn ($33.2bn) in turnover on Wednesday, while the smaller Shenzhen exchange saw Rmb121.6bn ($15.8bn) worth of shares change hands, bringing the combined total for the mainland Chinese market to Rmb376.9bn ($49bn) – 21 per cent higher than the previous record set at the end of April.

To put hings into perspective, as recently as March 30, trading volume on the Chinese markets was $16.4bn, while six months ago it was only $5bn a day. The benchmark Shanghai Composite Index up 1.6 per cent to close at 4,013.09, less than two months after it passed the 3,000 mark and some estimate that 300,000 new brokerage accounts are opened every day in China!

By Carl Delfeld of the Chartwell ETF Advisor

Is Spanish ETF Facing Slowdown?

The Spain exchange-traded fund (EWP) has been a superstar with its economy growing for fourteen straight years but its stock market stumbled a bit last week losing 3% of its value. Some are questioning whether its best days are behind it as construction and property markets cool a bit.

But many Spanish firms like Santander, a huge banking group, and Ferrovial, a construction giant, have spent billions buying foreign businesses. The Economist highlights that much of this expansion overseas has been financed with large borrowings leading to a rising level of corporate debt.

The Spanish economy is a mix of world class companies, huge inflows of tourists but little domestic manufacturing and overall poor productivity. Can the boom continue and will it hit a speed bump or slow down in a manageable way as overheated property markets in both Australia and the UK have evolved. In addition, younger people in Spain are oozing with confidence in part due to sharp improvements in education. Spain in some ways resembles a bit the Irish economic revolution which transformed Ireland from the basket case of Europe to a current per capita income higher than the UK.

By Carl Delfeld of the Chartwell ETF Advisor

Does a Weak Dollar Help US ETFs?

How do changes in the value affect US companies and US exchange-traded funds? It is not as straight forward as it looks. First, a falling dollar raises the dollar value of foreign sales. Big US multinationals receive roughly half of their total sales from overseas. For S&P 500 companies it is about 30 per cent of their sales overseas compared with 15 per cent for smaller companies in the Russell 2000) When the dollar weakens, the value of those sales grows. Hence international “mega-cap” companies, laggards for years, have recently outperformed. A weak dollar im­proves the case for big US stocks.

But as John Authers points out, globalization also affects costs and the proportion of cots a company decuts from revenue to determine profitability. Plus, look at Europe, the stronger euro has not hurt their share prices even though they are even more international in terms of sales than most American firms.

One of the reasons European ETFs are doing so well this year is the stronger Euro. Remember, international ETFs are not hedged against the US dollar so a weaker dollar will help their returns.

By Carl Delfeld of the Chartwell ETF Advisor

Big Mergers Drive Markets and ETFs

One of the factors driving global markets and the exchange-traded funds that track them are big mergers. Here are just a few and the ETFs that are affected by the activity.

The Swiss Nestle company will buy the Gerber baby-food business from the Swiss pharmaceutical multinational Novartis in a $5.5 billion all cash deal (EWL)

Barclays Bank PLC of Britian bid $91 billion for the Netherlands' largest bank ABN Amro NV (EWU), (EWN)

French leading retailer Carrefour is aiming to become the same in Brazil by buying Atacadao (EWQ) , (EWZ)

British pharma AstraZeneca is buying US based MedImmune for $16 billion (EWU)

In general, these transactions boost share prices not to mention generate some nice fees for financial firms involved in the deals.

By Carl Delfeld of the Chartwell ETF Advisor

Don't Forget SPDR International ETFs