ETF XRAY

Utility ETFs Take Top Position From Real Estate ETFs

A lot has been written recently on the Utilities sector. Utility ETFs have surpassed the Real Estate sector as the top performing sector since January 2006. Each of the five ETFs is up in excess of 29% over the last 15 months. IShares DJ Utility Sector Index fund (IDU) leads the way with 33.60%. Vanguards Utilities Vipers (VPU) is close behind with 33.58%. The sector as a whole is up 31.98%.

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By DE Smith | MyPortfolioView.com

ETF Global Fund Data Points to Caution

Flows into most EPFR-tracked equity fund and exchange-traded fund groups during the second week of April were, with the notable exception of Global and Western European equity funds, modest at best as investors worrieded about the outlook for the US and global economy. Steady flows continued into Emerging Market equity funds and ETFs, taking year to date flows back into positive territory, while US equity funds and ETFRs lost money for the third time in the last four weeks. Investors continue to favor global utilities and real estate ETFs while retreating from energy and technology ETFs. Investors are becoming a bit more conservative but still maintain strong but more focused interest in emerging market ETFs and seem to putting more emphasis on value.

Global equity funds and ETFs have been the big winner this year. These funds benefited from their large exposure to Western Europe, where several of the major equity markets are at or around six-year highs as investors respond to mergers and acquisitions activity and the perception that economic growth in the region will exceed previous forecasts.

Direct China exposure is falling back while Japan equity funds and ETFs were hit by redemptions for the fifth time in the past six weeks. I have noticed that in particular, the small cap sector has been hit hard recently. Investors seem to be holding their fire until they see a more sustained rebound in consumer confidence. This may be an opportunity because the vast majority of large Japanese companies are not tied to the Japanese home market but rather to the global economy.

By Carl Delfeld of the Chartwell ETF Advisor

ETF Options as Risk Management

Many exchange-traded fund (ETF) investors don't realize that many ETFs have options that can be used as an excellent risk management tool. Options are the right to buy (called a call) or to sell (called a put) a stock at a certain price before a certain date. These rights have value and are themselves bought and sold on stock exchanges at evolving prices that reflect the fortunes of the underlying stock or ETF and the time left in the contract.

ETFzone describes some of the ways these options can be used. Want to lock in profits from a recent run-up in an ETF without selling the position and triggering taxes? Want to buy insurance against a drop in an emerging market like China? These and other defensive strategies can be obtained with the nearly 70 ETF options currently available. Although many large stocks offer options, trying to engage in many at once becomes a nightmare of expense, tracking and paperwork. ETFs make defensive options easy.

Here is just one example of how we have used options. In the beginning of 2006, we bought a put option on the China ETF (FXI) giving us the right to sell it at a price close to its then current price for out to 18 months. This gave us the security to then buy FXI which was up 84% during the rest of the year. If a market is all beaten up but you don't know if the worst is over - you could buy a call option and see what happens.

By Carl Delfeld of the Chartwell ETF Advisor

ProShares Inverse ETFs Cushion Portfolios

Exchange-traded fund or ETF investors can sometimes hedge their bets by using inverse or short ETFs to tactically benefit from falling prices.

ProShares Advisors offers 29 short ETFs covering various sectors and levels of leverage and the ETFs are designed to be used for tactical asset allocation rather than strategic investing because long-term shorts will always lose money.

Jesse Emspak of IBD explains that rather than shorting individual securities, which would cost a lot in margin interest, the ETFs use swaps. In these swaps, one party (the ETF) assumes a short position while the counterparty can offer cash or take a long position. The ETF simply promises the value of the shares involved. Rydex has 96 ETFs in the pipeline.

Investors can also purchase put options for many of the iShares ETFs. For example, you can purchase a put option on the China iShare (FXI) which gives you the right to sell at a specific price up to 18 months out.

By Carl Delfeld of the Chartwell ETF Advisor

Free ETF Global Portfolio Guidebook

The Chartwell ETF Advisor is offering investors a free ETF guidebook to help them build smart, tax-efficient, diversified low cost global ETF portfolios.

The ETF guidebook, “The New Global ETF Investor”, written by Chartwell ETF President Carl Delfeld, starts with ETF basics and explains why ETFs have grown so quickly amongst independent investors and investment advisors. It then outlines ETF portfolio strategies to capture global growth and value and describes some of the ETF investment options on the market.

It includes rules for building an ETF portfolio and techniques to manage risk and stay out of trouble.

Mobius on ETFs?

By Carl Delfeld of the Chartwell ETF Advisor

It is unlikely that Mark Mobius, global stockpicker for Franklin Templeton funds is a big fan of ETFs but he offers some investment criteria in the a recent Financial Times interview that can be applied to ETFs.

Remember that most ETFs have a high concentration in the top ten companies in its ETF basket. ETFXRAY likes to do an analysis of a composite of these top ten ETF companies. Here is what Mr. Mobius believes is most important in evaluating a company (or ETF): price/earnings ratio, price.book value, price/nav, debt/equity, dividend yield, return on equity, reurn on invested capital.

Investors may also benefit from looking at 200 day moving averages and knowing where giants like Franklin Templeton are putting their cash to work.

ETFXRAY Offers

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Complimentary ETF Global Guidebook
ETF Model Portfolios and Newsletter
ETF Portfolio Management & Consulting

Swedish Currency ETF Rises with Rate Increase

By Carl Delfeld of the Chartwell ETF Advisor

The Sweden exchange-traded-fund or ETF (EWD) held steady today and the Swedish Krona currency ETF (FXS) increased by nearly 2% in morning trading as the Swedish central bank or Riksbank raised the benchmark interest rate.

The Swedish central bank raised its key repo rate on Thursday by 25 basis points to 3.25 per cent, the highest level since mid-2003, and said there may be only one more tightening to come over the next six months.

The rate rise today was the seventh increase since the start of 2006 and was widely expected in financial markets. Official figures released at the same time as the Riksbank announcement showed Swedish inflation running at 1.9 per cent year-on-year in January, up from 1.6 percent in December. The Swedish crown hit a three-month low against the euro and fell versus the dollar after the rate move and CPI figures.

Carl Delfeld, President of the Chartwell Global ETF Advisor will lead a group of individual investors to Sweden during the third week of June 2007 to learn more about investment opportunities in Sweden as well as visit historical and cultural sites.

Active ETFs On the Way

The Securities and Exchange Commission (SEC) may soon issue recommendations allowing the first actively managed exchange-traded funds according to a Wall Street Journal report today, quoting a lawyer in the agency's division of investment management.

John Spence of MarketWatch writes that active ETFs are seen as significant potential breakthrough for one of Wall Street's hottest investments. "An actively managed ETF would be a major milestone," said Dodd Kittsley, director of ETF research at State Street Global Advisors.

All ETFs -- baskets of securities that trade on exchanges like stocks -- that are currently listed on U.S. exchanges follow various market benchmarks and sector indexes rather than a manager actively running the portfolio and picking stocks.