Tag Archives: seeking-alpha

Lipper Fund Flows: Muni Bonds Continue To Shine

For the fund-flows week ended October 7, the benchmark Dow Jones Industrial Average gained 628 points to settle at 16,912. Equity mutual fund investors made net redemptions of $3.9 billion this past week (of which $2.0 billion was from large-cap funds), while equity exchange-traded funds (ETFs) saw net outflows of $4.1 billion as investors backed out of SPDR S&P 500 ((NYSEARCA: SPY ), -$2.0 billion), iShares Russell 2000 ((NYSEARCA: IWM ), -$1.6 billion), and iShares MSCI Germany ((NYSEARCA: EWG ), -$375 million). The $1.8-billion Select Sector Oil & Gas SPDR ((NYSEARCA: XOP ), +$303 million) led the weekly net inflows list. Bond mutual fund investors, like their equity counterparts, took a risk-off attitude as they redeemed shares. Overall, taxable bond mutual funds saw net outflows of $2.3 billion for the week, which marked the eleventh consecutive week of outflows for the group. Also marking 11 weeks of net outflows, Lipper’s Loan Participation Funds classification (-$354 million) saw no end in sight to the bleeding. High Yield Funds suffered outflows (-$675 million) among mutual fund investors but managed to take in net inflows on the ETF side (+$1.4 billion). Overall, bond ETFs saw $4.6 billion of net inflows. The week’s biggest bond ETF net inflows went to SPDR Barclays High Yield ((NYSEARCA: JNK ) , +$1.2 billion ) , while iShares 1-3 Credit ((NYSEARCA: CSJ ) , -$137 million ) led the net outflows list. Municipal bond mutual fund investors added $528 million net to their accounts, and the funds now have had inflows for two of the past three weeks-their best showing since April. Money market funds saw net inflows of $16.8 billion, of which institutional investors added $10.2 billion and retail investors added $6.6 billion. Share this article with a colleague

Taking Stock Of International ETFs After The Sell Off

Summary Exchange-traded funds (ETFs) that track international markets started the year with tremendous promise that ultimately lost ground to a host of fundamental concerns. The hazards in China and Brazil have been well documented and weighed as a primary concern for growth in emerging market countries. The combination of these issues alongside the volatility in U.S. stocks has led to wide-spread selling in broad-based indexes over the last five months. Exchange-traded funds (ETFs) that track international markets started the year with tremendous promise that ultimately lost ground to a host of fundamental concerns. Despite the best efforts of the European Central Bank to stimulate economic growth through quantitative easing programs, both developed and emerging markets overseas have seen momentum vanish in 2015. The hazards in China and Brazil have been well documented and weighed as a primary concern for growth in emerging market countries. In Europe, the fiscally conservative German stock market was rocked by the Volkswagen scandal alongside other financial worries. The combination of these issues alongside the volatility in U.S. stocks has led to wide-spread selling in broad-based indexes over the last five months. The iShares MSCI EAFE ETF (NYSEARCA: EFA ) is the largest international exchange-traded fund with over $56 billion in total assets. EFA tracks 900 stocks in both developed and emerging foreign markets. In its market cap weighted form, the top country allocations are Japan, United Kingdom, and France. Since hitting a high in May, EFA has fallen more over 18% to the September low – just barely avoiding a drop into bear market territory . This route was initially started by weakness in emerging markets, but has seen Europe join in to drive prices lower in recent months. Like nearly all risk assets, the October rally has led to some relief of the selling pressure in EFA and barely pushed the index back into the black for the year. Another key item of note in international markets is the price action of the U.S. dollar, which sent so much money spinning into currency-hedged ETFs at the beginning of the year. The P owerShares DB USD Bull ETF (NYSEARCA: UUP ) has been decidedly flat over the last five months. Recent price action may even suggest a mild downside bias, which could lead to a test of support at $24.50 in the near future. ETFs such as the WisdomTree Europe Hedged Equity ETF (NYSEARCA: HEDJ ) benefited from the rise of the dollar as the built-in currency arbitrage worked as a tailwind in the first half of the year. Now there is less of a convincing case that the U.S. dollar will continue its rally and lend weight behind the currency hedged theme. A falling dollar would ultimately make a traditional international fund such as the Vanguard FTSE Europe ETF (NYSEARCA: VGK ) a more attractive near-term opportunity. Of course, this is predicated on the expectation that the October rally in global stocks has further room to run through the end of the year. I would sum up the state of international markets in the following bullet points: From a pure price perspective, broad-based international ETFs were leaders on the upside and consequently leaders on the downside relative to U.S. markets this year. That makes them a more aggressive play for those that are positioned for a rebound. While it appears that there are sound fundamental and technical reasons to avoid international stocks, they still offer compelling upside opportunity in the context of a well-diversified portfolio. Your allocation to this sector will likely be governed by your overarching risk tolerance. For core international exposure , I believe that it’s important to stick with broad-based indexes rather than trying to hand pick specific countries or sub-regions. The risk of hits and misses in concentrated areas make for a less compelling investment proposition. International investors should also keep one eye on the currency trends as well. Even if your fortunes aren’t tied to a currency-hedged ETF, there are still important correlations that can be gleaned from observing forex markets. Remember that a higher dollar (lower euro) favors currency-hedged positions, while a lower dollar favors traditional un-hedged exposure. The Bottom Line Growth-oriented investors can still benefit from a strong comeback in international stocks given the backdrop of global stabilization. However, it is imperative to have a counterintuitive mindset that allows you to identify opportunity on the way down and curb your enthusiasm in the late stages of a rally. Be mindful of the inherent volatility in international ETFs versus the major U.S. indexes as well.

4 REIT ETFs To Buy After The Weak Jobs Report

Real estate investment trusts or REITs certainly have reasons to cheer. The disappointing U.S. jobs data for September has pushed the possibility of a rate hike in the near term further into the dark. Headline job gains for September came in at 142,000 versus estimates of 200,000. Further, average hourly earnings in the month moved south. According to the CME FedWatch Tool , there is now a negligible 6% possibility of a rate hike at the October 28 meeting and a 39% probability at the December 16 meeting, down from 44% before the release of the weak jobs data. This means that REITs will continue to draw leverage from the near zero interest rate in nearly a decade for refinancing their debts. Lower interest rates lead to a lower borrowing cost for the REITs on which they are highly dependent for acquisitions, development and redevelopment activities. Till September this year, REITs raised $49 billion in initial capital, debt and equity capital offerings (IPOs – $1.4 billion, Secondary Common – $20.3 billion, Secondary Preferred – $2.1 billion and Secondary Debt – $25.3 billion). Apart from ultra low interest rates, the capability to generate higher dividend yields makes the investment case for REITs very strong. This is especially true when treasury yields are hovering near its lowest level since April and is down from its peak of 2.5% in June. The U.S. law requires REITs to distribute 90% of their annual taxable income in the form of dividends. This has been one of the biggest enticements for investment in REITs amid global uncertainties, both in the money and commodities markets. In fact, dividend yield of REITs came in better than the market. As of September 30, 2015, the dividend yield of the FTSE NAREIT All REITs Index was 4.44% while the yield of the FTSE NAREIT All Equity REITs Index was 3.97%. With this, REITs outstripped the 2.28% dividend yield offered by the S&P 500 (read: REIT ETFs for Income and Diversification ). ETFs in Focus In the backdrop of weak jobs report, it looks like it’s the right time to bet on the sector through ETFs, so as to reap the benefits in a safer way. We have picked four ETFs that have posted handsome gains in the past five days as well as in the past one month (see all Real Estate ETFs here). iShares U.S. Real Estate ETF (NYSEARCA: IYR ) Launched in 2000, IYR follows the Dow Jones U.S. Real Estate Index that measures the performance of the real estate industry of the U.S. equity market. The fund comprises 119 stocks with Simon Property Group Inc. (NYSE: SPG ), American Tower Corporation (NYSE: AMT ) and Public Storage (NYSE: PSA ) as the top holdings. IYR has garnered more than $4 billion assets and trades in a solid volume of nearly 10 million shares per day. The fund charges 43 bps in fees and has a dividend yield of 3.4%. It has returned 4.2% in the past five days and 5.8% over the last one month (as of October 7, 2015). It has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook. SPDR Dow Jones REIT ETF (NYSEARCA: RWR ) Functioning since 2001, RWR seeks investment results of the Dow Jones U.S. Select REIT Index. The fund consists of 98 stocks that have equity ownership and operate commercial real estate, with the top holdings being Simon Property Group Inc., Public Storage and Equity Residential (NYSE: EQR ). The ETF has amassed nearly $3 billion in assets and trades in a volume of 334,000 shares each day. It charges 25 bps in fees from investors per year and has a dividend yield of 3.3%. RWR gained 4% in the past five days and 7.8% in the past one month. It carries a Zacks ETF Rank #3 with a Medium risk outlook. Schwab U.S. REIT ETF (NYSEARCA: SCHH ) This fund debuted in 2011 and tracks the total return of the Dow Jones U.S. Select REIT Index. The fund consists of 99 stocks that own and operate commercial real estates. The top three holdings are Simon Property Group Inc., Public Storage and Equity Residential. SCHH has gathered $1.6 billion in assets and trades in an average volume of 386,000 shares. It charges a meager 7 bps in fees and has a distribution yield of 2.4%. The fund gained 4.1% in the past five days and 8.2% in the past one month. It holds a Zacks ETF Rank #3 with a Medium risk outlook. PowerShares KBW Premium Yield Equity REIT Portfolio ETF (NYSEARCA: KBWY ) Introduced in 2010, the fund follows the BW Nasdaq Premium Yield Equity REIT Index that measures the performance of 24 to 40 small- and mid-cap equity REITs in the U.S. It consists of 30 stocks with Government Properties Income Trust (NYSE: GOV ), Senior Housing Properties Trust (NYSE: SNH ) and STAG Industrial Inc. (NYSE: STAG ) being the top three holdings. The fund has roughly $107 million in AUM and trades in a volume of 21,000 shares per day. It charges 35 bps in annual fees and offers a robust dividend yield of 5.6%. KBWY returned 4.5% in the last five days and 7.6% in the past one month. It carries a Zacks ETF Rank #3 with a Medium risk outlook. Link to the original post on Zacks.com