Tag Archives: investing

Prudential Launches Global Absolute Return Bond Fund

By DailyAlts Staff Prudential Investments has a reputation for being a “blue-chip” or conservative asset manager – it even has the word “prudent” right in its name. With those who suggest unconstrained or absolute-return bond funds are inherently imprudent or especially risky, Prudential would beg to differ – the firm’s lineup of so-called “nontraditional” bond funds recently extended to three with the launch of the Prudential Global Absolute Return Bond Fund (MUTF: PAJAX ). The Prudential Global Absolute Return Bond Fund is essentially the international version of the well-established Prudential Absolute Return Bond Fund (MUTF: PADAX ). Both funds have an “absolute return” mandate, which means they pursue long-term positive returns, regardless of market conditions. What makes the new fund different is that it keeps at least 40% of its assets invested in foreign securities, including those from emerging markets. Prudential’s new fund is managed by Michael Collins, Robert Tipp, and Arvind Rajan, all of whom are managing directors at the firm. Mr. Collins is also Prudential’s Senior Investment Officer, while Mr. Tipp is Chief Investment Strategist and Head of Global Bonds, and Mr. Rajan is Head of Global Macro. Together, the three portfolio managers invest the new fund’s assets in a wide variety of asset classes – including bonds and other debt instruments, mortgage- and asset-backed securities, currencies, and derivatives – in pursuit of its investment objectives. They also target the fund’s “dollar-weighted effective duration” at -5 to +5 years. As stated earlier, this is at least the third nontraditional bond fund in Prudential’s lineup – the others include the Prudential Unconstrained Bond Fund (MUTF: PUCAX ) and the previously mentioned PADAX. PUCAX, which launched on July 9 of this year, had respective one- and three-month returns of +2.02% and -0.59%, through October 31, ranking in the top 8% and 36% Morningstar’s Nontraditional Bond category for the respective periods. PADAX, which debuted in March of 2011, returned +0.93% and -0.52%, respectively for the one and three months ending October 31, but a more impressive +1.27% (annualized) for the three years ending this most recent Halloween. Shares of the new Prudential Global Absolute Return Bond Fund are available in A (PAJAX), C (MUTF: PAJCX ), Q (MUTF: PAJQX ), and Z (MUTF: PAJZX ) classes. A and C shares have respective net-expense ratios of 1.20% and 1.95%, while Q and Z shares both have fees of 0.95%. Both A and C shares have minimum initial investments of $2,500, while Q and Z shares have no minimum for qualifying investors. For more information, view a copy of the fund’s prospectus . Past performance does not necessarily predict future results.

4 Wealthy ETFs Of 2015

Thanks to unique strategies, creativity, transparency, diversification benefits, enhanced tax competences, low turnover and low cost, the global ETF industry has seen explosive growth, snapping up a large market share from mutual funds and hedge funds. In fact, overcoming all the odds and uncertainties in the market, the ETF industry surpassed hedge funds for the first time this year (read: How ETFs Are Overtaking Hedge Funds ). Low cost has been one of the biggest crowd pullers into the ETF world. Globally, the industry has over 6,000 products with AUM of more than $3 trillion from 271 providers listed on 63 exchanges in 51 countries at the end of October, as per ETFGI . It has gathered $287.3 billion in new capital in the first 10 months of the year, up 22.3% year over year. About 60.8% ($174.8 billion) of the total inflows came from the U.S. ETFs while 23.8% came from Europe. Canada and Japan products account for $10.1 billion and $35 billion of inflows, respectively. The rapid growth can primarily be attributed to currency hedging strategies, smart beta and factor investing. In particular, currency hedging is the most sought after ETF strategy of this year due to strength in U.S. dollar brought about by the global monetary easing policies against the Fed tightening policy. This is because the currency hedged funds look to strip out currency exposure to a foreign economy via the use of currency forwards or other instruments that bet against the non-dollar currency while at the same time offer exposure to foreign stocks. After that, investors are embracing smart stock-selection techniques and strategies to alleviate the risks in the market through smart beta products. The smart beta strategy helps to capture market inefficiencies in a transparent way by adding extra metrics like dividends, volatility, revenue, earnings, momentum, equal weight and other fundamental factors to the market cap or rules-based indices. It takes specific factors from the active management universe at a lower cost and instills it in a passive listed fund (read: 5 Smart Beta ETFs to Beat the Choppy Market ). Given this, we have highlighted four ETFs that are enjoying incredible AUM growth this year. Deutsche X-trackers MSCI EAFE Hedged Equity ETF (NYSEARCA: DBEF ) – AUM Growth: 93.2% This ETF, with an asset base of around $13.7 billion and average daily volume of more than 3.9 million shares, emerged as the biggest winner in the currency hedge space. It has pulled in about $12.8 billion in capital so far this year. This fund targets the developed international stock market with no currency risk and tracks the MSCI EAFE US Dollar Hedged Index. In total, the product holds 917 securities in its basket with none holding more than 1.93% share. However, it is skewed toward the financial sector, which makes up for one-fourth of the portfolio, while consumer discretionary, industrials, consumer staples and health care round off the top five with double-digit exposure each. Among countries, Japan takes the top spot at 23%, closely followed by United Kingdom (18%), France (10%) and Switzerland (10%). The fund charges 35 bps in fees per year from investors and has gained 6.1% so far this year. It has a Zacks ETF Rank of 3 or ‘Hold’ rating. QuantShares U.S. Market Neutral Anti-Beta ETF (NYSEARCA: BTAL ) – AUM Growth: 90.7% This fund invests in low beta securities and simultaneously in short high beta stocks of approximately equal dollar amounts within each sector. It seeks to deliver the spread return between low and high beta stocks. This can easily be done by tracking the Dow Jones U.S. Thematic Market Neutral Anti-Beta Index. This approach results in long and short positions in 200 stocks, in equal proportions. The fund is expensive, charging 1.49% in fees per year and trades in a good volume of about 142,000 shares per day. BTAL is unpopular having AUM of $9 million, out of which $8.16 million has been scooped up this year. The fund is down 2.9% in the year-to-date timeframe. WisdomTree Europe Hedged Equity Index ETF (NYSEARCA: HEDJ ) – AUM Growth: 75.8% HEDJ has gathered about $15.7 billion in capital since the start of 2015 that has boosted its asset base to over $20.7 billion. The ETF tracks the WisdomTree Europe Hedged Equity Index holding 128 securities with each security holding no more than 6.08% of assets. It is also pretty well spread across a number of sectors with consumer staples, industrials, consumer discretionary, financials and health care taking double-digit exposure each. Among countries, Germany (25.9%), France (24.5%), the Netherlands (17.1%) and Spain (16.6%) dominate the holdings’ list. The fund charges 58 bps in annual fees and sees an average daily volume of about 4.9 million shares. It has surged 11.7% in the year-to-date timeframe and has a Zacks ETF Rank of 3 or ‘Hold’ rating. First Trust Dorsey Wright Focus 5 ETF (NASDAQ: FV ) – AUM Growth: 72.8% This ETF tracks the Dorsey Wright Focus Five Index, which provides targeted exposure to the five First Trust sector and industry-based ETFs that Dorsey, Wright & Associates (DWA) believes have the maximum chance of outperforming the other ETFs in the selection universe. Securities with high relative strength scores (strong momentum) are given higher weights. Currently, the product has the highest exposure to the biotech sector via the First Trust NYSE Arca Biotechnology Index ETF (NYSEARCA: FBT ) at 24.8%, followed by the First Trust DJ Internet Index ETF (NYSEARCA: FDN ) and the First Trust Health Care AlphaDEX ETF (NYSEARCA: FXH ) at 21.3% and 19.4%, respectively. It has attracted over $3.2 billion, propelling its total AUM to $4.4 billion. FV trades in solid volumes of more than 2.1 million shares a day on average but charges a higher 94 bps in fees. The ETF has returned 4.2% in the year-to-date timeframe. Link to the original post on Zacks.com

Retailers Need A Christmas Miracle

XRT is showing huge weakness in a number of areas. I think the selloff in the sector is just getting started and that XRT is toxic. There are individual names I like in retail but the ETF should be avoided or shorted. The recent market selloff has hit a number of sectors and names but more than most, the retailers, shown here using the SPDR S&P Retail ETF (NYSEARCA: XRT ), have been crushed. Weak earnings reports from just about everyone includi ng Macy’s (NYSE: M ), Nordstrom (NYSE: JWN ), Cabela’s (NYSE: CAB ) and Fossil (NASDAQ: FOSL ), ju st to name a few, have investors on edge and selling anything and everything retail related of late. The chart below shows just how ugly things have gotten and with the Christmas shopping season upon us, one may expect XRT to outperform. However, I’m not so bullish. (click to enlarge) The sector as a whole has been struggling since the market hit its highs back in July. XRT failed to break out and make a new high at that time and that signaled the top in a big way. Since that time we’ve seen an epic break down and the XRT and individual names alike have been pummeled to varying degrees. The culprit has been terrible earnings reports from a number of retailers as pockets of strength are very difficult to find these days and that means investors are selling first and asking questions later. Certainly, this is not the sign of a healthy sector. We’ve seen weakness in all sectors within the broader retail industry including handbags, general line retailers, apparel, and the list goes on. No one has been spared from the recent rout and it seems that the Christmas shopping season is set to be weaker than last year’s. Black Friday must be strong or the XRT could fall off a cliff in the coming weeks because Q3 earnings from various retailers have done nothing but fuel pessimism. Looking at the chart above, the daily timeframe looks like it is trying to bottom. There is a lot of support in the $40 to $42 area from a previous channel XRT eventually broke out of so there is some hope for bulls there that if the channel can hold, XRT may form a base in this area. In fact, the momentum indicators are showing some divergences as lower lows in price are not being met with lower lows in momentum, a bullish sign that the selling is abating somewhat. That is certainly not a reason to buy the ETF but it does mean that if XRT can stop the bleeding, we have a potential base forming in the short term. Over the long term, the picture is much less rosy. This chart shows XRT on the weekly time frame over five years and as we can see, the longer term is much more bearish. (click to enlarge) XRT blasted through the uptrend that was in place form the 2011 lows earlier this year, a very bearish development. It has also been making new lows in the momentum indicators since April, well before the actual top in price occurred. This was a signal to get out as buying interest was waning significantly. We continue to see momentum on the weekly time frame coming in very weak and in a bearish range and that is extremely bearish for the stock right now over the medium term. The same support levels apply here but the weekly time frame looks a lot worse than the daily chart. That would indicate there is the potential for some mean reversion in the short term but longer term, a lot of damage needs to be repaired before XRT can move higher. And given the rock bottom sentiment and terrible fundamentals right now, that seems like a tough road ahead. If we compare relative strength in the XRT to the broader market – as represented by the SPDR S&P 500 Trust ETF ( SPY) – we can see the selloff is not tied completed to the broader weakness in equities. This is a story of sector-specific weakness and that also bodes particularly poorly for XRT heading into the holiday season. (click to enlarge) We can see that XRT goes through very clear trends against the broader market of outperformance and underperformance and has been doing so for years. The problem is that the recent underperformance has been sharp and brutal as relative strength broke through the support that was formed for almost all of 2014. In other words, retail couldn’t really be weaker right now as it slices through its former uptrend and support levels including relative strength. If we look at the momentum indicators on the relative strength chart, they are horrendous. Momentum continues to get more and more oversold instead of bouncing and that is one of the most bearish things that can occur. In short, the latest round of underperformance for XRT looks set to continue and that looks bad for the ETF heading into Q4 reports. Fundamentally, I think this is also the wrong time to buy XRT. December is typically a pretty strong period for retail stocks because of the Christmas shopping season but this year, sentiment has flipped entirely. Anything retail-related is getting crushed even when decent results are posted. Bellwethers like Macy’s and Nordstrom were decimated on relatively small misses/guidance cuts simply because sentiment is beyond negative at this point. In short, the environment for retail stocks is so unfavorable right now that I don’t think it matters what news comes out; it is all being taken as bearish at this point. I think there are individual names within the sector that can be bought including the ones I linked to above. Some stocks have been beaten down like they are going out of business and that is simply not the case. My favorite pick in the retail space right now is Macy’s but I like others as well. What I don’t like is the sector as a whole as weaker names are driving the XRT lower and I think all evidence is pointing to more downside action in XRT. Sentiment is showing no signs of bottoming, the fundamentals are weak after a rough Q3 reporting season and the charts really couldn’t be worse. If you want to be in retail, please don’t buy XRT; pick the names you like the most and go that way because this sector is falling like a rock.