ETF - New Opportunities and Challenges

-1-Private & Confidential

ETF - New Opportunities and Challenges

Deborah Fuhr, Independent Strategist [email protected]

Linkedin ETF Network

All views and comments are my own and are intended to be educational and not a solicitation to buy or sell any securities. I own shares in Vanguard Emerging Market ETF VWO US

Sources, Bloomberg, ICI, McKinsey, Bank of New York Mellon, ESMA, BIS, IMF, FSB, Strategic Insight, World Federation of Exchanges, Charles Schwab, October 30, 2011


Exchange Traded Funds

Exchange Traded Funds - ETFs - at a cross road

Exchange Traded Funds – are one of the greatest and most beneficial financial innovations in the past 25 years for both retail and institutional investors globally. They are funds, which are easy to use, simple, cost efficient, diversified, providing real-time access to many asset classes in a transparent fashion

ETFs are not the same as ETNs, ETCs, ETVs and ETPs

Discuss current landscape

Challenges

What needs to be done


Some history

1940 first active mutual fund

1975 first index mutual fund

1990 first ETF was launched in Canada

1993 first ETF launched in the USA

1999 33 ETFs $40 bn + 2 ETPs $2 billion

2000 first ETF launched in Europe

2005 UCITS iii – synthetic ETFs

2007 Synthetic ETF cross listed in Hong Kong

2010 – 2011 – Regulators express concerns

End of Q3 Snapshot: Global

At the end of Q3 2011, the global ETF industry had 2,916 ETFs, with 6,523 listings, assets of US$1,248.0 Bn, from 152 providers on 50 exchanges.

Overall, ETF assets are down 4.8% from US$1,311.3 Bn at year end 2010 to US$1,248.0 Bn at the end of Q3 2011.

In the third quarter of 2011, ETFs saw net inflows of US$35.4 Bn.

Fixed income ETFs saw US$14.9 Bn net inflows, equity ETFs saw US$9.7 Bn net inflows and commodity ETFs saw US$4.5 Bn net inflows.

iShares and Vanguard gathered the largest net inflows, each with US$7.1 Bn, followed by State Street Global Advisors with US$5.6 Bn net inflows.

Lyxor Asset Management experienced the largest net outflows with US$4.0 Bn.

Leveraged ETFs saw US$5.0 Bn net inflows, inverse ETFs saw US$2.0 Bn net inflows and leveraged inverse ETFs saw US$0.3 Bn net inflows.

96 new ETFs were listed in Q3 2011, with eight new providers entering the industry for the first time, while six ETFs were de-listed.

MSCI has the largest amount of ETF assets tracking its benchmarks, with US$287.7 Bn, followed by S&P with US$276.9 Bn, and Barclays Capital with US$134.7 Bn.

GLOBAL ETF INDUSTRY GLOBAL ETF & ETP INDUSTRY

Source: Bank of Israel, Bloomberg.

Including other Exchange Traded Products (ETPs), at the end of Q3 2011, the global ETF/ETP industry had 4,131 ETFs/ETPs, with 8,385 listings, assets of US$1,430.2 Bn, from 186 providers on 53 exchanges.

Overall, ETF/ETP assets are down 3.5% from US$1,482.7 Bn at year end 2010 to US$1,430.2 Bn at the end of Q3 2011.

In the third quarter of 2011, ETFs/ETPs saw net inflows of US$38.0 Bn.

Fixed income ETFs/ETPs saw US$15.0 Bn net inflows, equity ETFs/ETPs saw US$10.1 Bn net inflows and commodity ETFs/ETPs saw US$7.1 Bn net inflows.

iShares gathered the largest net inflows with US$8.7 Bn, followed by Vanguard with US$7.1 Bn net inflows and State Street Global Advisors with US$6.8 Bn net inflows.


Leveraged ETFs/ETPs saw US$5.1 Bn net inflows, inverse ETFs/ETPs saw US$2.6 Bn net inflows and leveraged inverse ETFs/ETPs saw US$0.3 Bn net inflows.

126 new ETFs/ETPs were listed in Q3 2011, with eight new providers entering the industry for the first time, while 11 ETFs/ETPs were de-listed.

MSCI has the largest amount of ETF/ETP assets tracking its benchmarks, with US$288.4 Bn, followed by S&P with US$284.3 Bn, and Barclays Capital with US$135.0 Bn.

ETF/ETP Asset Growth: Global

Source:, Bank of Israel, Bloomberg.

Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Q3-11

# ETFs 92 202 280 282 336 461 713 1,170 1,595 1,944 2,460 2,916

# ETPs 14 17 17 18 21 63 170 371 625 750 1,083 1,215

# ETFs/ETPs 106 219 297 300 357 524 883 1,541 2,220 2,694 3,543 4,131

ETF Assets $74.3 $104.8 $141.6 $212.0 $309.8 $412.1 $565.6 $796.7 $711.1 $1,036.0 $1,311.3 $1,248.0

ETP Assets $5.1 $3.9 $4.1 $6.3 $9.3 $15.9 $32.5 $54.6 $61.2 $119.7 $171.3 $182.1

ETF/ETP Assets $79.4 $108.7 $145.7 $218.3 $319.1 $428.0 $598.1 $851.3 $772.3 $1,155.8 $1,482.7 $1,430.2

Assets (US$ Bn) # Products

0

200

400

600

800

1,000

1,200

1,400

1,600

0

500

1,000

1,500

2,000

2,500

3,000

3,500

-3.5%+28.3%

+49.7%

-9.3%+42.3%

+39.7%

+34.1%

+46.2%

+49.8%+34.1%

+36.9%+90.9%

0

5

10

15

20

25Assets (US$ Bn)

5y CAGR+58.4%

YTD-11-1.6%

5y ETF only CAGR+8.0%

0

2

4

6

8

10

12

5y CAGR+50.3%

YTD-11-2.7%

Assets (US$ Bn)


0

10

20

30

40

50Assets (US$ Bn)

5y CAGR+0.5%

YTD-11+6.0%

5y ETF only CAGR

+0.3%

0

10

20

30

40

50

60Assets (US$ Bn)

5y CAGR+39.0%

YTD-11+1.0%


0

10

20

30

40

50YTD-11Assets (US$ Bn)

5y CAGR+29.4%

-1.7%


0

50

100

150

200

250

300

350YTD-11Assets (US$ Bn)

5y CAGR+41.3%

-4.9%


0

200

400

600

800

1,000

1,200YTD-11Assets (US$ Bn)

-3.8%5y CAGR

+26.4%


0

400

800

1,200

1,600YTD-11

5y CAGR+28.2%

-3.5%

Assets (US$ Bn)

5y ETF onlyCAGR+26.1%

ETF/ETP Asset Growth by Region

Source:, Bank of Israel, Bloomberg.

2005 2010 Q3-11

ETF $412.1 $1,311.3 $1,248.0

ETP $15.9 $171.3 $182.1

ETF/ETP $428.0 $1,482.7 $1,430.2

2005 2010 Q3-11

ETF $299.4 $891.0 $845.1

ETP $14.4 $120.8 $128.5

ETF/ETP $313.8 $1,011.9 $973.6

2005 2010 Q3-11

ETF $54.9 $284.0 $266.7

ETP $1.1 $31.3 $33.1

ETF/ETP $56.0 $315.3 $299.8

GLOBAL UNITED STATES EUROPE CANADA

2005 2010 Q3-11

ETF $10.6 $38.4 $37.7

ETP - - -

ETF/ETP $10.6 $38.4 $37.7

2005 2010 Q3-11

ETF $10.5 $53.3 $52.7

ETP - $1.5 $2.6

ETF/ETP $10.5 $54.7 $55.3

2005 2010 Q3-11

ETF $31.8 $32.2 $33.9

ETP $15.9 $0.4 $0.6

ETF/ETP $31.8 $32.6 $34.5

2005 2010 Q3-11

ETF $1.3 $10.1 $9.8

ETP - - -

ETF/ETP $1.3 $10.1 $9.8

ASIA PACIFIC (EX-JAPAN) JAPAN LATIN AMERICA MIDDLE EAST AND AFRICA

2005 2010 Q3-11

ETF $1.6 $2.3 $2.1

ETP $0.4 $17.3 $17.3

ETF/ETP $2.0 $19.7 $19.3

ETF ETP

Top 20 ETFs by Assets: Global

NameCountry

Listed TickerAssets

(US$ Mn)ADV

(US$ Mn)Q3-11 NNA

(US$ Mn)

SPDR S&P 500 US SPY US 81,232.9 34,695.9 2,998.0

Vanguard MSCI Emerging Markets ETF US VWO US 39,777.0 1,405.6 1,885.1

iShares MSCI EAFE Index Fund US EFA US 35,034.9 1,493.2 3,209.3

iShares MSCI Emerging Markets US EEM US 27,472.7 3,085.2 (2,421.4)

iShares S&P 500 Index Fund US IVV US 23,875.7 491.8 288.0

PowerShares QQQ Trust US QQQ US 21,251.2 4,361.7 393.6

iShares Barclays TIPS Bond Fund US TIP US 20,990.9 137.0 (646.2)

Vanguard US Total Stock Market ETF US VTI US 17,014.2 182.5 131.6

iShares iBoxx $ Investment Grade Corp Bond US LQD US 14,872.9 159.7 936.3

iShares Barclays Aggregate Bond Fund US AGG US 13,247.1 110.4 1,032.6

iShares DAX (DE) Germany DAXEX GY 12,567.7 228.4 6,529.2

iShares Russell 2000 Index Fund US IWM US 12,460.4 5,695.1 (738.2)

iShares Russell 1000 Growth Index Fund US IWF US 12,356.7 240.0 759.1

Vanguard Total Bond Market ETF US BND US 12,065.2 107.8 1,492.3

iShares S&P/TSX 60 Index Fund Canada XIU CN 10,001.9 345.6 785.2

iShares Barclays 1-3 Year Treasury Bond US SHY US 9,499.2 125.1 1,099.3

iShares Russell 1000 Value Index Fund US IWD US 9,478.5 132.5 (187.7)

iShares MSCI Brazil Index Fund US EWZ US 9,108.0 1,120.6 4.3

SPDR Dow Jones Industrial Average ETF US DIA US 9,104.7 1,255.5 727.3

ZKB Gold ETF Switzerland ZGLD SW 9,034.8 77.1 69.8

Total (Top 20) 400,446.5 55,450.6 18,347.5

TOP 20 ETFs BY ASSETS

Source:, Bloomberg, National Stock Exchange (NSX).

TOP ETFs as a % of TOTAL ASSETS

CategoryAssets

(US$ Mn) % of assets

Top 5 207,393.1 16.6%

Top 10 294,769.4 23.6%

Top 20 400,446.5 32.1%

Others 847,569.6 67.9%

67.9%

32.1%

Top 20 ETFs by Average Daily Trading Volume: Global

TOP 20 ETFs BY AVERAGE DAILY TRADING VOLUME

Source: Bloomberg, National Stock Exchange (NSX).

TOP 20 ETFs as a % of TOTAL ADV

CategoryADV

(US$ Mn) % of ADV

Top 5 49,458.0 52.4%

Top 10 56,613.9 59.9%

Top 20 67,233.3 71.2%

Others 27,239.0 28.8%

NameCountry

Listed TickerAssets

(US$ Mn)ADV

(US$ Mn)Q3-11 NNA

(US$ Mn)

SPDR S&P 500 US SPY US 81,232.9 34,695.9 2,998.0

iShares Russell 2000 Index Fund US IWM US 12,460.4 5,695.1 (738.2)

PowerShares QQQ Trust US QQQ US 21,251.2 4,361.7 393.6

iShares MSCI Emerging Markets Index Fund US EEM US 27,472.7 3,085.2 (2,421.4)

Energy Select Sector SPDR Fund US XLE US 6,265.1 1,620.0 (764.8)


iShares Barclays 20+ Year Treasury Bond US TLT US 3,238.7 1,482.1 (355.1)

Direxion Daily Financial Bear 3x Shares US FAZ US 1,096.4 1,416.1 31.5


Direxion Daily Small Cap Bear 3x Shares US TZA US 811.1 1,358.9 (108.9)

Financial Select Sector SPDR Fund US XLF US 4,318.4 1,353.2 (1,507.7)

SPDR Dow Jones Industrial Average ETF US DIA US 9,104.7 1,255.5 727.3

ProShares UltraShort S&P500 US SDS US 2,859.2 1,213.1 311.9

iShares MSCI Brazil Index Fund US EWZ US 9,108.0 1,120.6 4.3

Direxion Daily Small Cap Bull 3x Shares US TNA US 890.7 1,100.7 914.0

Market Vectors Gold Miners US GDX US 8,952.2 1,084.3 2,323.4

ProShares Ultra S&P500 US SSO US 1,371.5 1,012.2 220.2

Industrial Select Sector SPDR Fund US XLI US 2,508.7 986.8 (720.9)

iShares FTSE China 25 Index Fund US FXI US 5,098.6 759.1 (223.6)

Direxion Daily Financial Bull 3x Shares US FAS US 1,319.0 733.8 985.3

Total (Top 20) 274,171.2 67,233.3 7,163.4

28.8%

71.2%

Top 20 Exchanges by Average Daily Trading Volume: Global

TOP 20 EXCHANGES BY AVERAGE DAILY TRADING VOLUME

Source:, Bloomberg.

AVERAGE DAILY VOLUME BY COUNTRY/REGION

Country/regionADV

(US$ Mn) % of ADV

US 86,284.6 91.3%

Europe 4,800.0 5.1%

Asia Pacific (ex-Japan) 1,528.2 1.6%

Canada 1,126.0 1.2%

Rest of world 733.5 0.8%

Total 94,472.3 100.0%

Exchange # ETFs# total

listingsADV

(US$ Mn)

NYSE Arca 986 986 81,524.0

NASDAQ 79 79 4,760.6

Deutsche Boerse 429 879 1,806.1

Toronto Stock Exchange 213 256 1,126.0

NYSE Euronext Paris 274 509 1,090.3

London Stock Exchange 255 782 963.5

Korea Stock Exchange 99 99 910.6

Mexican Stock Exchange 20 379 477.8

SIX Swiss Exchange 130 741 444.1

Hong Kong Stock Exchange 47 76 294.7

NASDAQ OMX Stockholm 24 64 210.5

Borsa Italiana 23 562 141.3

Shanghai Stock Exchange 21 21 140.1

Tokyo Stock Exchange 74 78 101.8

Osaka Securities Exchange 11 11 87.9

Oslo Stock Exchange 7 15 87.4

Shenzhen Stock Exchange 9 9 81.6

Taiwan Stock Exchange 15 18 51.7

BM&F Bovespa 8 8 38.7

Johannesburg Stock Exchange 28 28 26.2

Total (Top 20) 2,752 5,600 94,364.9

1.2%1.6%5.1%

91.3%

0.8%

Top 20 ETFs by Q3 2011 Net Inflows: Global

TOP 20 ETFs BY Q3 2011 NET INFLOWS


NameCountry

Listed TickerAssets

(US$ Mn)ADV

(US$ Mn)Q3-11 NNA

(US$ Mn)



db x-trackers DAX ETF Germany XDAX GY 6,841.0 89.0 3,055.9

SPDR S&P 500 US SPY US 81,232.9 34,695.9 2,998.0

Market Vectors Gold Miners US GDX US 8,952.2 1,084.3 2,323.4


Utilities Select Sector SPDR Fund US XLU US 6,596.2 366.9 1,872.0

SPDR Barclays Capital 1-3 Month T-Bill ETF US BIL US 2,599.4 85.0 1,590.9

TOPIX ETF Japan 1306 JP 8,306.2 23.2 1,553.8

Nikkei 225 ETF Japan 1321 JP 8,146.9 69.3 1,504.9

Vanguard Total Bond Market ETF US BND US 12,065.2 107.8 1,492.3

Vanguard Dividend Appreciation ETF US VIG US 7,070.7 75.6 1,320.1

Consumer Staples Select Sector SPDR Fund US XLP US 5,124.2 342.4 1,311.1

iShares Dow Jones Select Dividend US DVY US 7,015.2 78.9 1,228.0

iShares Barclays 1-3 Year Treasury Bond US SHY US 9,499.2 125.1 1,099.3

Listed Index Fund 225 Japan 1330 JP 3,996.4 67.7 1,074.6

iShares Barclays Aggregate Bond Fund US AGG US 13,247.1 110.4 1,032.6

Direxion Daily Financial Bull 3x Shares US FAS US 1,319.0 733.8 985.3

iShares iBoxx $ Investment Grade Corporate US LQD US 14,872.9 159.7 936.3

Direxion Daily Small Cap Bull 3x Shares US TNA US 890.7 1,100.7 914.0

Total (Top 20) 285,154.8 42,443.0 37,915.9

TOP 20 ETFs as a % of TOTAL NET INFLOWS

CategoryQ3-11 NNA

(US$ Mn)% of Net

inflows

Top 5 18,115.7 19.6%

Top 10 26,522.4 28.7%

Top 20 37,915.9 41.2%

Others 54,013.0 58.8%

41.2%

58.8%

69.2%75.9%

85.2%92.2%

7.8%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Top 3 Top 5 Top 10 Top 20 Others

Top 20 ETF Providers by Assets: Global

Provider # ETFs#

listingsAssets

(US$ Mn)% Market

ShareADV

(US$ Mn)Sep-11 NNA

(US$ Mn)Q3-11 NNA

(US$ Mn)

iShares 485 1,315 530,868.4 42.5% 21,961.0 3,754.7 7,121.1

SSgA 140 236 180,070.1 14.4% 44,532.5 (3,838.6) 5,564.5

Vanguard 69 110 152,916.0 12.3% 2,617.8 3,833.9 7,084.7

db x-trackers 201 791 43,037.6 3.4% 848.3 (455.8) 989.3

PowerShares 144 229 40,538.8 3.2% 4,549.1 92.5 (121.8)

Lyxor AM 166 700 38,027.3 3.0% 1,187.3 (1,327.1) (3,997.7)

ProShares 108 126 22,491.8 1.8% 6,696.2 1,156.0 2,435.5

Van Eck 36 56 21,481.3 1.7% 1,527.2 190.0 2,439.1

Nomura AM 34 34 17,730.6 1.4% 97.1 594.0 3,010.5

Credit Suisse AM 58 298 15,798.3 1.3% 134.4 72.0 485.6

ZKB 7 12 13,856.5 1.1% 144.6 449.3 890.1

WisdomTree 47 57 11,183.6 0.9% 226.5 (677.0) 176.1

UBS GAM 57 199 10,383.8 0.8% 80.1 321.2 1,046.0

Amundi ETF 99 355 8,283.4 0.7% 170.2 129.5 645.5

Nikko AM 20 20 7,878.7 0.6% 71.6 507.1 1,548.2

Bank of New York 1 1 7,805.1 0.6% 596.6 (822.0) (1,114.4)

Commerzbank 94 373 7,735.0 0.6% 91.5 150.8 (221.6)

HSBC/Hang Seng 34 102 7,307.2 0.6% 89.5 175.1 736.7

Direxion 51 55 6,700.2 0.5% 5,823.4 693.0 2,721.1

Daiwa 23 23 6,483.8 0.5% 11.7 228.5 808.3

Others 1,042 1,431 97,438.6 7.8% 3,015.4 1,604.3 3,122.2

Total 2,916 6,523 1,248,016.1 100.0% 94,472.3 6,831.1 35,369.1


LARGEST ETF PROVIDERS as a % of TOTAL ASSETS

% of Assets

56.0%

68.5%

83.7%

91.6%

8.4%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


Top 20 ETF Index Providers: Global

Index provider # ETFs#

listingsAssets

(US$ Mn)% Market

ShareADV

(US$ Mn)Sep-11 NNA

(US$ Mn)Q3-11 NNA

(US$ Mn)

MSCI 467 1,685 287,740.8 23.1% 10,789.5 843.7 (2,954.2)

S&P 372 658 276,917.4 22.2% 48,730.5 (4,728.6) 1,443.4

Barclays Capital 100 236 134,712.8 10.8% 3,346.1 5,033.3 9,961.1

STOXX 291 975 86,377.1 6.9% 1,961.3 141.1 9,135.5

Russell 90 126 69,394.7 5.6% 12,701.9 619.0 762.3

FTSE 170 416 48,411.7 3.9% 1,479.8 (310.7) (89.5)

Markit 128 362 47,784.5 3.8% 503.2 1,566.6 1,630.3

Dow Jones 165 296 45,674.9 3.7% 3,376.1 167.4 (491.2)

NASDAQ OMX 62 124 30,057.7 2.4% 5,993.5 268.7 (139.8)

Nikkei 11 19 17,059.4 1.4% 155.2 596.8 3,375.2

Topix 54 67 16,946.6 1.4% 38.6 837.6 2,345.8

NYSE Euronext 47 88 16,553.1 1.3% 1,488.6 700.3 2,798.2

Hang Seng 14 35 12,836.3 1.0% 118.2 52.9 658.8

WisdomTree 35 42 8,636.2 0.7% 144.8 24.0 242.2

PC-Bond 30 35 8,612.6 0.7% 41.5 268.6 471.2

Indxis 8 13 8,326.6 0.7% 82.4 441.9 1,370.3

EuroMTS 29 115 7,903.2 0.6% 117.3 (614.1) (724.6)

Grupo Bolsa 13 14 7,373.6 0.6% 228.1 (65.8) 699.9

SSE 25 26 7,102.5 0.6% 142.9 99.5 36.4

Structured Solutions 38 49 4,826.1 0.4% 206.2 (79.8) 226.0

Others 767 1,142 104,768.4 8.4% 2,826.7 968.6 4,611.8

Total 2,916 6,523 1,248,016.1 100.0% 94,472.3 6,831.1 35,369.1

Source: Bloomberg.

LARGEST ETF INDEX PROVIDERS as a % of TOTAL ASSETS

% of Assets

ETFs/ETPs by Asset Class: Global

Exposure# ETFs/

ETPs#

listingsAssets

(US$ Mn)% Market

ShareADV

(US$ Mn)

Sep 2011 Net Flows (US$ Mn)

Q3 Net Flows (US$

Mn)

Equity 2,143 4,723 923,285.2 65.2% 74,922.2 (3,085.4) 10,090.2

Active 34 40 847.8 0.1% 11.4 87.2 214.2

Asia Pacific 224 492 78,147.0 5.5% 978.9 913.0 5,060.4

Europe 432 1,324 103,311.1 7.3% 2,053.9 (233.1) 5,687.0

Emerging 568 1,195 182,260.6 12.9% 9,059.4 (2,668.4) (4,385.5)

Middle East and Africa 60 62 83.2 0.0% 62.8 16.0 1.0

North America 590 1,034 473,786.1 33.5% 60,748.3 (4,530.8) (286.8)

Global (ex-US) 68 86 61,718.4 4.4% 1,739.9 3,348.9 4,144.9

Global 167 490 23,131.0 1.6% 267.6 (18.2) (345.1)

Fixed income 513 1,053 233,795.2 16.5% 4,157.0 6,598.7 14,965.9

Active 16 16 2,868.0 0.2% 39.4 (78.0) 384.0

Broad/Aggregate 14 25 26,364.8 1.9% 231.8 1,105.5 2,498.9

Convertible 4 6 723.4 0.1% 9.1 8.0 (106.1)

Corporate 86 138 45,953.8 3.2% 418.9 1,023.0 2,198.6

Covered 8 26 922.0 0.1% 1.9 (48.6) (70.6)

Credit Spreads 8 20 509.9 0.0% 7.4 34.0 (147.1)

Emerging 36 57 9,171.2 0.6% 126.4 (295.5) 744.6

Government 251 547 75,069.0 5.3% 2,486.6 1,713.3 5,382.5

Govt/Corp 17 23 12,061.9 0.9% 117.7 1,055.2 1,458.3

High Yield 19 36 17,863.1 1.3% 371.4 1,254.8 1,747.2

Inflation 27 78 29,595.0 2.1% 204.5 423.0 (662.2)

Money Market 23 74 7,446.5 0.5% 114.2 92.5 831.3

Mortgage 4 7 5,246.6 0.4% 27.9 311.5 706.6

Source:, Bloomberg.

ETFs/ETPs by Asset Class: Global (continued)

Exposure# ETFs/

ETPs#

listingsAssets

(US$ Mn)% Market

ShareADV

(US$ Mn)


Q3 Net Flows

(US$ Mn)

Commodities 682 1,232 196,918.9 13.9% 8,761.9 644.6 7,072.5

Broad 107 216 21,209.0 1.5% 229.1 (558.1) (1,590.0)

Alternative 2 3 3.4 0.0% 0.0 - 0.4

Agriculture 130 243 12,971.2 0.9% 195.5 (277.2) (395.0)

Energy 133 231 8,025.6 0.6% 548.8 (347.4) (731.8)

Industrial metals 102 157 2,964.9 0.2% 51.7 (136.8) (501.9)

Livestock 20 39 204.8 0.0% 3.0 (19.0) (49.0)

Precious metals 188 343 151,540.1 10.7% 7,733.7 1,983.2 10,339.7

Alternative 42 74 3,746.9 0.3% 1,720.3 (350.9) (1,762.2)

Currency 78 128 6,713.5 0.5% 807.4 (150.9) (452.0)

Mixed 74 76 1,728.0 0.1% 13.8 62.6 121.3

Leveraged 216 391 16,773.1 1.2% 6,739.9 400.6 5,070.7

Inverse 220 471 12,923.2 0.9% 1,514.3 1,790.8 2,574.7

Leveraged Inverse 163 237 19,230.0 1.4% 7,979.9 769.8 348.8

Total 4,131 8,385 1,430,162.9 100.0% 106,616.7 6,680.0 38,029.9

Note: Individual product assets for ETPs in Israel are not available. An aggregate asset value for all ETPs listed in Israel as of August 2011 (latest available) has been added to the total. Source: Bloomberg, Bank of Israel.

End of Q3 Snapshot: Europe

At the end of Q3 2011, the European ETF industry had 1,208 ETFs, with 4,245 listings, assets of US$266.7 Bn, from 39 providers on 22 exchanges.

Overall, ETF assets are down 6.1% from US$284.0 Bn at year end 2010 to US$266.7 Bn at the end of Q3 2011.

In the third quarter of 2011, ETFs in Europe saw net inflows of US$6.2 Bn.

Equity ETFs saw US$3.3 Bn net inflows and US$1.3 Bn net inflows went into both commodity and fixed income ETFs.

iShares gathered the largest net inflows with US$5.8 Bn, followed by UBS Global Asset Management and db x-trackers each with US$1.0 Bn net inflows.


Leveraged ETFs saw US$0.9 Bn net inflows, inverse ETFs saw US$0.2 Bn net inflows, while leveraged inverse ETFs experienced US$0.2 Bn net outflows.

24 new ETFs were listed in Q3 2011.

STOXX has the largest amount of ETF assets tracking its benchmarks, with US$79.7 Bn, followed by MSCI with US$57.5 Bn, and Markit in third with US$20.6 Bn.

EUROPEAN ETF INDUSTRY EUROPEAN ETF & ETP INDUSTRY

Source:, Bloomberg.

Including other Exchange Traded Products (ETPs), at the end of Q3 2011, the European ETF/ETP industry had 1,763 ETFs/ETPs, with 5,360 listings, assets of US$299.8 Bn, from 46 providers on 23 exchanges.

Overall, ETF/ETP assets are down 4.9% from US$315.3 Bn at year end 2010 to US$299.8 Bn at the end of Q3 2011.

In the third quarter of 2011, ETFs/ETPs in Europe saw net inflows of US$6.8 Bn.

Equity ETFs/ETPs saw US$3.3 Bn net inflows, commodity ETFs/ETPs saw US$1.9 Bn net inflows and fixed income ETFs/ETPs saw US$1.3 Bn net inflows.

iShares gathered the largest net inflows with US$5.9 Bn, followed by UBS Global Asset Management and db x-trackers each with US$1.0 Bn net inflows.


Leveraged ETFs/ETPs saw US$0.9 Bn net inflows, inverse ETFs/ETPs saw US$0.2 Bn net inflows, while leveraged inverse ETFs/ETPs experienced US$0.2 Bn net outflows.

27 new ETFs/ETPs were listed in Q3 2011.

STOXX has the largest amount of ETF/ETP assets tracking its benchmarks, with US$79.9 Bn, followed by MSCI with US$57.6 Bn, and Markit in third with US$20.6 Bn.

ETF/ETP Asset Growth: Europe

Source:, Bloomberg.

Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Q3-11

# ETFs 6 71 118 104 114 165 273 423 636 827 1,072 1,208

# ETPs 14 17 17 17 1 2 32 80 218 281 521 555

# ETFs/ETPs 6 71 118 104 115 167 305 503 854 1,108 1,593 1,763

ETF Assets $0.7 $5.7 $10.7 $20.4 $34.0 $54.9 $89.7 $128.5 $142.7 $226.9 $284.0 $266.7

ETP Assets $5.0 $3.8 $4.0 $6.1 $0.7 $1.1 $2.1 $4.9 $6.9 $15.7 $31.3 $33.1

ETF/ETP Assets $0.7 $5.7 $10.7 $20.4 $34.7 $56.0 $91.8 $133.4 $149.6 $242.6 $315.3 $299.8

Assets (US$ Bn) # Products

0

50

100

150

200

250

300

350

400

0

200

400

600

800

1,000

1,200

1,400

-4.9%+30.0%

+62.2%

+12.2%+45.3%

+63.8%

+61.5%+69.7%+91.2%

+88.9%

+737.5%

Top 20 ETFs by Assets: Europe

NameCountry

Listed TickerAssets

(US$ Mn)ADV

(US$ Mn)Q3-11 NNA

(US$ Mn)



iShares S&P 500 UK IUSA LN 8,473.7 87.4 3.5


Lyxor ETF Euro STOXX 50 France MSE FP 5,485.2 146.7 250.1

iShares FTSE 100 UK ISF LN 4,900.7 95.8 -

iShares MSCI Emerging Markets UK IEEM LN 4,782.4 101.6 (727.4)

iShares Markit iBoxx Euro Corporate Bond Germany IBCS GY 3,841.8 18.5 (383.7)

iShares EURO STOXX 50 Germany EUN2 GY 3,699.3 70.3 611.8

iShares EURO STOXX 50 (DE) Germany SX5EEX GY 3,639.8 45.0 (321.7)

db x-trackers MSCI Emerging Market TRN Germany XMEM GY 3,557.8 66.4 (824.1)

CS ETF (CH) on SMI Switzerland CSSMI SW 3,404.5 22.8 296.5

Lyxor ETF CAC 40 France CAC FP 3,043.6 72.6 233.6

iShares MSCI World UK IWRD LN 2,798.5 48.0 (7.4)

iShares eb.rexx Government Germany 1.5-2.5 Germany RXP1EX GY 2,481.2 14.3 896.6

db x-trackers II EONIA Total Return Index ETF Germany XEON GY 2,362.3 23.0 830.7

ZKB Silver ETF Switzerland ZSIL SW 2,321.3 33.5 302.9

iShares MSCI Japan UK IJPN LN 2,140.0 15.6 178.7

db x-trackers Euro STOXX 50 ETF Germany XESX GY 2,127.1 36.8 (128.6)

db x-trackers MSCI World TRN ETF Germany XMWO GY 2,073.0 33.1 (110.7)

Total (Top 20) 89,575.6 1,326.1 10,755.5

TOP 20 ETFs BY ASSETS

Source: Bloomberg.

TOP ETFs as a % of TOTAL ASSETS

CategoryAssets

(US$ Mn) % of assets

Top 5 42,402.3 15.9%

Top 10 63,266.3 23.7%

Top 20 89,575.6 33.6%

Others 177,103.2 66.4%

33.6%

66.4%

Top 20 ETFs by Average Daily Trading Volume: Europe

TOP 20 ETFs BY AVERAGE DAILY TRADING VOLUME

Source Bloomberg.

TOP 20 ETFs as a % of TOTAL ADV

CategoryADV

(US$ Mn) % of ADV

Top 5 784.8 16.3%

Top 10 1,235.7 25.7%

Top 20 1,826.1 38.0%

Others 2,973.9 62.0%

NameCountry

Listed TickerAssets

(US$ Mn)ADV

(US$ Mn)Q3-11 NNA

(US$ Mn)


db x-trackers ShortDAX Daily ETF Germany XSDX GY 691.1 164.4 46.9


Lyxor ETF XBear CAC 40 France BX4 FP 213.7 140.6 (189.1)

Lyxor ETF DAX Germany LYXDAX GY 1,203.1 104.7 272.9

iShares MSCI Emerging Markets UK IEEM LN 4,782.4 101.6 (727.4)

iShares FTSE 100 UK ISF LN 4,900.7 95.8 -


iShares S&P 500 UK IUSA LN 8,473.7 87.4 3.5



Lyxor ETF Leverage CAC 40 France LVC FP 565.0 71.6 255.0


db x-trackers MSCI Emerging Market TRN Germany XMEM GY 3,557.8 66.4 (824.1)

Lyxor ETF Xbear FTSE MIB Italy XBRMIB IM 103.1 62.3 (151.5)

Lyxor ETF Euro Cash France CSH FP 1,648.4 50.9 88.3

Lyxor ETF LevDAX Germany LYXLEDAX GY 392.1 50.5 170.0

XACT Bear 2 Sweden XABEAR2 SS 101.5 49.5 62.3

XACT Derivat Bear Norway OBXBEAR NO 155.7 48.2 27.2

iShares MSCI World UK IWRD LN 2,798.5 48.0 (7.4)

Total (Top 20) 70,258.3 1,826.1 9,776.9

38.0%

62.0%

Top 20 ETFs by Q3 2011 Net Inflows: Europe

TOP 20 ETFs BY Q3 2011 NET INFLOWS

Source: Bloomberg.

NameCountry

Listed TickerAssets

(US$ Mn)ADV

(US$ Mn)Q3-11 NNA

(US$ Mn)



iShares eb.rexx Government Germany 1.5-2.5 Germany RXP1EX GY 2,481.2 14.3 896.6

db x-trackers II EONIA Total Return Index ETF Germany XEON GY 2,362.3 23.0 830.7


CS ETF (IE) on MSCI Japan Switzerland CSJP SW 859.4 1.8 457.2

ZKB Gold ETF (CHF) H Switzerland ZGLDHC SW 1,112.2 17.4 400.7

iShares eb.rexx Government Germany (DE) Germany RXRGEX GY 1,548.9 10.3 359.7

db x-trackers II iBOXX Euro Germany TR Germany XBTR GY 497.1 1.0 357.8

iShares BarCap Euro Corp Bond ex-Financials UK IEXF LN 724.0 14.2 309.4

ZKB Silver ETF (CHF) Switzerland ZSIL SW 2,321.3 33.5 302.9

UBS ETF MSCI Emerging Markets TRN SF I Switzerland EGUSIS SW 1,150.5 1.7 301.4

CS ETF (CH) on SMI Switzerland CSSMI SW 3,404.5 22.8 296.5

ETFlab Dt. Boerse EUROGOV Germany 1-3 Germany ETFGS13 GY 360.9 1.0 277.5

Lyxor ETF DAX Germany LYXDAX GY 1,203.1 104.7 272.9

Lyxor ETF Leverage CAC 40 France LVC FP 565.0 71.6 255.0


Lyxor ETF Leveraged FTSE MIB Italy LEVMIB IM 312.9 40.9 246.2

db x-trackers MSCI EM Asia TRN Index Germany XMAS GY 1,208.7 13.5 239.7


Total (Top 20) 51,749.0 978.6 16,484.6

TOP 20 ETFs as a % of TOTAL NET INFLOWS

CategoryQ3-11 NNA

(US$ Mn)% of Net

inflows

Top 5 11,924.1 42.0%

Top 10 13,869.2 48.7%

Top 20 16,484.6 58.1%

Others 11,888.9 41.9%

41.9%

58.1%

67.0%

78.1%

92.2%99.5%

0.5%0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


Top 20 ETF Providers by Assets: Europe

Provider # ETFs#

listingsAssets

(US$ Mn)% Market

ShareADV

(US$ Mn)Sep-11 NNA

(US$ Mn)Q3-11 NNA

(US$ Mn)

iShares 173 773 99,249.7 37.2% 1,330.3 (527.8) 5,845.4

db x-trackers 172 719 41,968.0 15.7% 777.5 (440.7) 978.8

Lyxor AM 164 658 37,532.7 14.1% 1,184.6 (1,242.9) (3,785.3)

Credit Suisse AM 58 298 15,798.3 5.9% 134.4 72.0 485.6

ZKB 7 12 13,856.5 5.2% 144.6 449.3 890.1

UBS GAM 57 199 10,383.8 3.9% 80.1 321.2 1,046.0

Amundi ETF 99 355 8,283.4 3.1% 170.2 129.5 645.5

Commerzbank 94 373 7,735.0 2.9% 91.5 150.8 (221.6)

Swiss & Global AM 16 32 5,791.4 2.2% 92.7 112.3 556.4

Source 65 70 5,214.6 2.0% 202.1 116.3 (749.2)

ETFlab 40 80 4,895.2 1.8% 70.8 (77.0) 35.1

EasyETF 48 70 4,702.0 1.8% 25.3 28.0 (228.8)

XACT 25 56 2,848.3 1.1% 282.5 29.8 209.5

HSBC/Hang Seng 26 92 1,426.7 0.5% 45.6 165.2 278.8

RBS 26 105 1,374.9 0.5% 20.1 90.4 171.4

PowerShares 19 65 1,256.0 0.5% 16.2 (15.6) (52.4)

SSgA 27 90 1,010.6 0.4% 8.2 (74.2) (124.7)

BBVA AM 10 10 958.2 0.4% 3.9 - -

ETF Securities 30 103 913.6 0.3% 65.3 11.4 98.1

Marshall Wace LLP 3 4 275.4 0.1% 3.6 23.8 (24.0)

Others (19) 49 81 1,204.6 0.5% 50.2 32.0 161.4

Total 1,208 4,245 266,678.8 100.0% 4,800.0 (646.1) 6,216.4

Source: Bloomberg.

LARGEST ETF PROVIDERS as a % of TOTAL ASSETS

% of Assets

Top ETF Providers by Assets, Split by Replication Type

Provider # ETFs#

listingsAssets

(US$ Mn) # ETFs#

listingsAssets

(US$ Mn) # ETFs#

listingsAssets

(US$ Mn)

iShares 170 762 98,724.0 3 11 525.7 173 773 99,249.7

db x-trackers - - - 172 719 41,968.0 172 719 41,968.0

Lyxor AM - - - 164 658 37,532.7 164 658 37,532.7

Credit Suisse AM 42 202 14,998.7 16 96 799.5 58 298 15,798.3

ZKB 7 12 13,856.5 - - - 7 12 13,856.5

UBS GAM 33 143 7,666.8 24 56 2,717.0 57 199 10,383.8

Amundi ETF 3 11 814.8 96 344 7,468.7 99 355 8,283.4

Commerzbank 2 8 39.7 92 365 7,695.3 94 373 7,735.0

Swiss & Global AM 16 32 5,791.4 - - - 16 32 5,791.4

Source 7 7 333.1 58 63 4,881.5 65 70 5,214.6

ETFlab 38 76 4,878.4 2 4 16.8 40 80 4,895.2

EasyETF 10 16 2,563.2 38 54 2,138.7 48 70 4,702.0

XACT 4 8 1,631.4 21 48 1,216.8 25 56 2,848.3

HSBC/Hang Seng 26 92 1,426.7 - - - 26 92 1,426.7

RBS - - - 26 105 1,374.9 26 105 1,374.9

PowerShares 16 56 1,229.8 3 9 26.2 19 65 1,256.0

SSgA 27 90 1,010.6 - - - 27 90 1,010.6

BBVA AM 8 8 946.8 2 2 11.3 10 10 958.2

ETF Securities - - - 30 103 913.6 30 103 913.6

Others (20) 31 33 712.3 18 48 492.3 52 85 1,480.6

Total 440 1,556 156,624.3 765 2,685 109,779.1 1,208 4,245 266,678.8

Source: Bloomberg.

Physical ETFs Synthetic ETFs All ETFs

59.2%

71.3%

83.6%

16.4%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Top 3 Top 5 Top 10 Others

ETF Index Providers: Europe

Index provider # ETFs#

listingsAssets

(US$ Mn)% Market

ShareADV

(US$ Mn)Sep-11 NNA

(US$ Mn)Q3-11 NNA

(US$ Mn)

STOXX 280 944 79,682.3 29.9% 1,737.3 456.1 9,383.9

MSCI 298 1,358 57,493.2 21.6% 840.3 (1,467.0) (2,397.0)

Markit 112 338 20,579.6 7.7% 153.0 535.7 (480.6)

FTSE 94 304 17,888.7 6.7% 384.8 (120.1) (520.7)

S&P 66 263 14,608.8 5.5% 180.1 222.8 40.8

Barclays Capital 28 128 9,688.1 3.6% 111.6 182.0 107.7

EuroMTS 29 115 7,903.2 3.0% 117.3 (614.1) (724.6)

NYSE Euronext 35 72 6,511.4 2.4% 347.3 12.3 411.9

NASDAQ OMX 28 82 4,532.7 1.7% 247.5 81.6 11.5

Dow Jones 39 104 4,039.1 1.5% 60.4 (269.2) (896.1)

Hang Seng 7 26 1,200.8 0.5% 18.9 (48.3) (128.9)

Topix 5 16 693.3 0.3% 7.9 38.2 (64.6)

Nikkei 3 11 439.0 0.2% 3.4 (42.1) (18.6)

Russell 6 27 387.3 0.1% 9.9 (68.7) (122.6)

Structured Solutions 2 3 123.9 0.0% 0.6 (7.8) (2.4)

S-Network 3 15 85.4 0.0% 0.5 (3.0) (8.5)

CSI 1 6 82.5 0.0% 0.5 - -

Intellidex 1 4 12.6 0.0% 0.0 - -

Others 171 429 40,726.9 15.3% 578.6 465.4 1,625.4

Total 1,208 4,245 266,678.8 100.0% 4,800.0 (646.1) 6,216.4

Source: Bloomberg.

LARGEST ETF INDEX PROVIDERS as a % of TOTAL ASSETS

% of Assets

ETFs/ETPs by Asset Class: Europe

Exposure# ETFs/

ETPs#

listingsAssets

(US$ Mn)% Market

ShareADV

(US$ Mn)


Q3 Net Flows (US$

Mn)

Equity 770 2,906 168,691.9 56.3% 2,759.5 (2,112.0) 3,322.2

Asia Pacific 62 286 12,021.0 4.0% 115.3 129.1 167.1

Europe 379 1,235 94,157.4 31.4% 1,701.4 (116.3) 7,020.5

Emerging 164 674 28,281.4 9.4% 523.8 (1,925.7) (3,002.3)

North America 83 351 23,178.4 7.7% 269.1 (157.0) (547.6)

Global 82 360 11,053.7 3.7% 149.7 (42.1) (315.5)

Fixed income 211 668 56,965.3 19.0% 544.7 584.3 1,281.4

Active 4 4 236.4 0.1% 0.6 (2.9) 53.6

Broad/Aggregate 6 15 636.6 0.2% 9.6 (35.0) (77.2)

Corporate 22 67 10,796.7 3.6% 115.6 103.7 (455.9)

Covered 8 26 922.0 0.3% 1.9 (48.6) (70.6)

Credit Spreads 8 20 509.9 0.2% 7.4 34.0 (147.1)

Emerging 8 25 1,581.3 0.5% 17.3 7.4 6.6

Government 117 377 27,893.0 9.3% 235.2 575.3 1,586.8

High Yield 3 12 875.2 0.3% 11.8 28.5 (6.7)

Inflation 15 56 4,508.2 1.5% 30.4 (185.0) (472.3)

Money Market 19 63 7,381.8 2.5% 111.9 92.5 821.0

Mortgage 1 3 1,624.1 0.5% 3.0 14.5 43.3

Source:, Bloomberg.

ETFs/ETPs by Asset Class: Europe (cont.)

Exposure# ETFs/

ETPs#

listingsAssets

(US$ Mn)% Market

ShareADV

(US$ Mn)


Q3 Net Flows

(US$ Mn)

Commodities 461 943 61,488.9 20.5% 774.2 201.2 1,879.9

Broad 79 173 7,357.4 2.5% 58.8 (430.1) (1,154.5)

Alternative 1 2 1.4 0.0% 0.0 - 0.4

Agriculture 97 200 3,909.6 1.3% 27.1 (83.3) (257.7)

Energy 88 177 3,241.6 1.1% 30.1 (136.4) (304.1)

Industrial metals 69 116 1,516.3 0.5% 11.3 (37.6) (161.5)

Livestock 17 35 117.4 0.0% 0.7 (5.0) (24.9)

Precious metals 110 240 45,345.1 15.1% 646.3 893.5 3,782.2

Alternative 21 47 1,585.7 0.5% 12.8 (184.6) (582.5)

Currency 33 60 242.7 0.1% 2.0 (0.3) (60.9)

Mixed 6 6 123.5 0.0% 0.5 - -

Leveraged 89 253 3,341.8 1.1% 390.1 (49.2) 898.8

Inverse 124 369 5,164.6 1.7% 353.6 502.0 235.1

Leveraged Inverse 48 108 2,159.8 0.7% 466.7 181.5 (185.6)

Total 1,763 5,360 299,764.2 100.0% 5,304.1 (876.9) 6,788.6

Source: Bloomberg.


How ETFs are Used

Equitise cash

Core/satellite

Market exposure

Cash management

Rebalancing Hedge


Opportunities

Multi-asset class investing is growing

Pension products are allowing ETFs

Fee based advisory business and direct retail

Bank of New York Mellon/Strategic Insight – among 30,000 financial advisors - 28% of wrap accounts are ETFs

Charles Schwab –

Rest of world – products pay for distribution but there is a move to fee based advisory – global trend

RDR – Retail Distribution Review UK

Australia

Belgium


Thank you

Thank you

Any questions

Deborah Fuhr, Independent Strategist [email protected]

Linkedin ETF Network

All views and comments are my own and are intended to be educational and not a solicitation to buy or sell any securities. I own shares in Vanguard Emerging Market ETF VWO US

Sources, Bloomberg, ICI, McKinsey, Bank of New York Mellon, ESMA, BIS, IMF, FSB, Strategic Insight, World Federation of Exchanges, Charles Schwab, October 30, 2011

Documents

ETF - New Opportunities and Challenges