Tracker News

• Yet more sexy ETFs from Lyxor arrive on the market


• Four new trackers have just hit the market courtesy of SocGen's ETF specialist Lyxor. In order of excitement they are...
  
  
  
  1. A new South African ETF. This is a real first - private investors have not been able to target the booming South African markets until now. This ETF will track the FTSE JSE Top 40 of South African mega-caps and the total expense ratio (TER) on the fund is a very reasonable 0.65%. There are also dollar and sterling denominated ETF versions.
  
  
  2. An Indian Nifty Fifty fund that tracks the S&P NSE index of top Indian megacaps.This is by far the most liquid part of the Indian stockmarket and like its direct rival from Deutsche, this ETF has a fairly reasonable charge of just 0.85% per annum.
  
  
  3. A private equity index tracking ETF. The Lyxor fund tracks the Privex index of global listed private equity companies. Again there are dollar and sterling denomination funds and the TER is 0.7%
  
  
  4. Last but by no means least Lyxor has introduced a mainstream Japanese equity index fund that tracks the TOPIX index. This is a really innovative launch not because you can't buy Japanese ETFs from say iShares (they have an index fund that tracks the MSCI Japan index) but because the TOPIX is regarded as a mainstream index thats used heavily by foreign investors. Most western investors will only have heard of the Nikkei 225 but the TOPIX is possibly the more significant (and bigger) market for foreign investors and this is the first ETF to track this index (there's still no ETF that tracks the Nikkei 225).again there are dollar and sterling denominated versions of this tracker and the annual TER is a lowly 0.5%.
  
  
  
  

We'll be releasing product briefing notes on each of these new funds within the week, so for more information watch this space!

New funds from SocGen & DBX

It looks like its going to be a very busy and fruitful few months for private investors looking to use trackers and index funds. The market is getting increasingly competitive with two new entrants to the market - Lyxor (from SocGen) and Deutsche (through their DBX outfit) - both launching a huge range of new funds. Next week we'll look at the Lyxor range - 8 ETFs will be launched in the next few months, with a strong emerging markets theme - but this week we'll look at the newest player Deutsche.

They've just brought out a fascinating range of 18 ETFs, ranging from a fairly conventional range of UK FTSE trackers (the FTSE All, 100 and 250) plus two interesting dividend funds and a huge range of emerging markets funds. We've listed the new ETfs below....

DBX FTSE 100	Deutsche	XUKX	GBP	0.30%
DBX FTSE 250	Deutsche	XMCX	GBP	0.35%
DBX FTSE All Share	Deutsche	XASX	GBP	0.40%
DBX FTSE/XINHUA CHINA 25	Deutsche	XX25	USD	0.60%
DBX MSCI BRAZIL	Deutsche	XMBR	USD	0.70%
DBX MSCI JAPAN	Deutsche	XMJP	USD	0.50%
DBX MSCI KOREA	Deutsche	XKS2	USD	0.65%
DBX MSCI TAIWAN	Deutsche	XMTW	USD	0.70%
DBX MSCI USA	Deutsche	XMUS	USD	0.30%
DBX S&P CNX NIFTY INDIA	Deutsche	XNIF	USD	0.85%
DBX EM ASIA	Deutsche	XMAS	USD	0.70%
DBX MSCI EMEA	Deutsche	XMEA	USD	0.70%
DBX MSCI LATAM	Deutsche	XMLA	USD	0.70%
DBX MSCI EMERGING MARKETS	Deutsche	XMEM	USD	0.70%
DBX MSCI EUROPE	Deutsche	XMEU	USD	0.30%
DBX MSCI WORLD	Deutsche	XMWO	USD	0.45%
DBX DJ EURO STOXX SELECT DIVIDEND 30	Deutsche	XD3E	EUR	0.30%
DBX DJ STOXX GLOBAL SELECT DIVIDEND 100	Deutsche	XGSD	EUR	0.50%

We're particularly interested in two themes

• The emerging markets are very well served by these funds. Up to now Barclay's iShares has pretty much had this space to itself but Deutsche have launched a cracking range of funds. Some of the funds duplicate iShares offerings (Taiwan, Korea, Global Emerging Markets) but with slightly lower expenses - the saving is generally between 0.05 and 0.1% per annum. They've also launched some really interesting new sectors and funds like the Nifty Fifty Indian index (the TER is a slightly pricey 0.85%) which is a brilliant way of buying into liquid Indian megacaps. we also think the MSCI Latin America index is genuinely innovative and groundbreaking as is the EMEA TRN index that tracks 10 emerging markets in Eastern Europe, the Middle East and Africa.
  


• The DJ EuroSTOXX Select Dividend 30 and DJ STOXX Global Select Dividend 100 are great value large cap dividend funds that we think will become essential for any mainstream income investor. Both offer yields of 3% or more the last time we looked and the TER is low at 0.3% and 0.5% respectively.
  

Like Lyxor these funds use a method of replication called synthetic replication which means they use swap notes for a small proportion of the fund to guarantee very low tracking errors - like Lyxor, the Deutsche funds should have tracking errors of well below 0.5% per annum, even in the less liquid emerging markets.

We'll be bringing out briefing notes on many of these funds within the week so watch this space.

*Next week - the new Lyxor range of ETFs*

Autocall Reverse Convertible [SocGen]

The covered warrants and structured products experts at SocGen have been making quite a name for themselves in recent months by issuing rather strange coupon based notes. No, these aren’t coupons to help you save money on the weekly shopping, but income payouts based on certain shares or markets behaving in a pre-determined way. One product we’ve looked at in the past paid out a handsome dividend of around 15% in one year provided a basket of three drug company shares didn’t fall by more 20%. Nice idea except that one of the shares in the basket promptly went and fell by more than 20% in value, striking out that juicy income coupon.

SocGen are at it again this week with a more tempting vehicle – it’s called very inelegantly the Autocall Reverse convertible (SG41). We have to be honest and say we’re not quite too sure what all those words mean (the reverse convertible bit we think means you get paid an income as long as the underlying shares being tracked fall in value) but the product is actually quite interesting.

Here’s the skinny.

It targets the FTSE 100 index and will pay out over the next year 14p in the £, quarterly, as long as the FTSE doesn’t fall by more than 30% in value (from around 6200 to 4350). If the FTSE 100 rises in value beyond the initial level in the 1st quarter of that 1st year the note redeems and pays out one quarter of that 14p coupon i.e 3.5p. If the FTSE 100 doesn’t rise in the first quarter but does in the next quarter, you get 2 times 3.5p i.e 7p and so on and on. The important point here is that if the FTSE 100 spends the next year below 6200 and doesn’t rise above that level at any of the key quarterly observation dates in the year, you get the full 14p.

Obviously if there’s a really big correction and the FTSE 100 crashes below 4000 this note is in trouble – you lose 1% in the capital value of the note for every 1% fall in the index. But most of us don’t think the FTSE will fall by that much (if it did it would be trading at close to 8 times PE and the yield would probably be above 4%) but we do think the market is in for a tough ride over the next six months. Basically we’re moderate bears and if we’re right this note could be a great way of getting a good income from falling markets yet you’re also protected if the markets rise in value.