Resources

Managing volatility for your clients

Apr 02, 2020

The current COVID-19 concerns have rattled markets, with advisers fielding calls from concerned clients. In some cases, advisers may choose to add tilts or hedges for their clients’ investments, while for others, it will be better to stay the course. There are a range of ways to manage market volatility in a portfolio, some universally valuable, others dependent on the individual clients. In this paper, we’ve highlighted some of the most common. Download now In your discussions with clients, these principles can be a helpful starting point in reinforcing your approach and providing comfort in uncertain times. 1. Diversification Reinforcing the value of diversification with your clients can be as simple as the analogy of not having all your eggs in one basket. The current environment has reinforced the importance of diversification within asset classes and sectors, with some companies able to benefit (ie supermarkets) and others needing to close down (i.e. travel and tourism companies). 2. Incorporating more stable, less cyclical investments Holding companies which are able to consistently operate regardless of market conditions, such as essential services infrastructure, can assist in buffering portfolios against falling markets. 3. Alternative investments Investments which are designed to perform differently to equity and bond markets can range in complexity. Gold is a simple asset with a low or even negative correlation with other asset classes which has acted as a safe-haven investment across a number of market events over time. 4. Strategic tilts For some investors, incorporating short-term tilts alongside the long-term core strategy can assist in managing market volatility. Depending on the strategy, this could mean adding a tilt to high growth (and therefore ‘riskier’ assets) or adding more defensive position. ETFs can be an effective tool for managing volatility for your clients. Beyond characteristics including liquidity and cost-efficiency, the wide range available, broad exposures and instant diversification mean they can be suitable across investor types. For more information on our range of ETFs and using them in your clients’ portfolios, please contact us on: Sales Trading Phone +61 2 8311 3488 Email: sales@etfsecurities.com.au Phone +61 2 8311 3483 Email: primarymarkets@etfsecurities.com.au

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India: A Long-Term Opportunity Amidst the Current Panic

Apr 01, 2020

Key highlights India, like all other markets, has been deeply affected by COVID-19 However, this has now reset company valuations to highly attractive levels When the markets begin to recover there are strong reasons to believe India can flour-ish anew One of the easiest, most cost-efficient ways to get exposure to India for Australians is via the ETFS Reliance India Nifty 50 ETF (ASX code: NDIA) India: Current State of Play In the past month, the Indian stock market has undergone one of the sharpest corrections in history. Growth forecasts have seen sharp downgrades and India is no exception, with expected weakness for the remainder of the year. While these concerns are real, global policymakers have responded to this crisis with unprecedented levels of monetary and fiscal stimulus. Still, the panic in the market is visible in record levels of volatility which has led to deep cuts across most sectors. Market Valuations Return to GFC Levels After this sharp correction, market valuations have returned to near record lows not seen since the GFC. (Source: Blomberg & IMF Estimates) Policy support is expected to continue for a prolonged period and it is hoped that the COVID-19 epidemic will begin to subside in the second half of the year. With this in mind and given valuations are at near record lows, it seems the fallout of this epidemic is already priced in. While nobody can predict the extent to which the markets will continue to fall, or how long it will take for the current situation to return to normal, most market experts agree that current market valuations are attractive. Therefore, this could represent an attractive buying opportunity for long-term investors. Why India can recover Fiscal Response: If the COVID-19 epidemic results in prolonged lockdown a fiscal stimulus of at least 2% of GDP is likely. As an example of past stimulus, during the GFC additional expenditure amounting to 3% of GDP was provided [1] Strong Monetary Response: The RBI is expected to cut rates by at least 100bps, with the first rate cut of 75bps announced on the 30th of March [2] Rapid sequential growth for H2: Given India is a domestic consumption country, assuming COVID-19 can be contained and the lock down laws lifted, consumption can pick back up rapidly, without the reliance on international inflows [3] Access To India: ETFS Reliance India Nifty 50 ETF (ASX code: NDIA) One of the simplest ways to access the Indian stock market is through the ETFS Reliance India Nifty 50 ETF (ASX code: NDIA). NDIA tracks the Nifty50 Index, providing exposure to the top 50 large cap Indian companies (covering approx. 60% of the Indian market), most of which are currently available at their multi-year lows. Advantages of investing in the Nifty 50 index: Low cost Eliminates non-systematic risks like stock picking/portfolio manager selection Provides building blocks for portfolio construction Provides exposure to the top 50 blue chip companies who are, potentially, less likely to feel the long-term effects of the COVID-19 shut down For more information on ETFS Reliance India Nifty 50 ETF, please contact us on: Sales Trading Phone +61 2 8311 3488 Email: sales@etfsecurities.com.au Phone +61 2 8311 3483 Email: primarymarkets@etfsecurities.com.au

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Weekly ETF Monitor for week ending 27 March 2020

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Mar 31, 2020

This week's highlights Equity markets rallied last week on the announcement of significant stimulus measures across the globe. The top performing equity funds for the week offered a range of exposures from global property (REIT), Japan (HJPN), gold miners (MNRS) and energy companies (FUEL). On the negative side, Indian equities (NDIA and IIND) reacted to aggressive lock-down measures and Australian banks lagged the domestic market. Precious metals rebounded strongly from the previous week’s declines. Gold benefited from haven buying and a slowdown in financial deleveraging. Platinum and palladium both saw big jumps on supply concerns linked to mine shutdowns due to coronavirus. Palladium fund ETPMPD was the week’s top performer, returning 31%. Oil continued its decline, while the Australian dollar rally saw AUDS amongst the top performers and YANK, USD and ZUSD amongst the poorest. Total flows into domestically domiciled ETFs were $515m, while outflows totalled $553m. Bearish funds BBOZ and BBUS saw large inflows alongside equity funds A200, IHVV and STW, gold (GOLD) and US dollar cash (USD) also saw strong flows. IVV saw the largest outflows as investors looked for hedged exposures. Emerging market bonds (IHEB) also saw large outflows. Bearish domestic fund BBOZ was the most traded fund for the third week running, followed by broad-based funds STW and VAS. GOLD again saw above average trading. ETFS S&P Biotech ETF (CURE) has outperformed the S&P 500 by over 3% since the COVID-19 sell-off commenced. CURE holds positions in a number of companies that are at the forefront of the search of a cure or vaccine for the virus.

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Weekly ETF Monitor for week ending 20 March 2020

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Mar 24, 2020

This week's highlights Another week of extreme volatility saw the S&P/ASX 200 fall 13%, the S&P 500 drop 15% and the VIX peak above 85. Bearish ETFs (BBUS, BBOZ and BEAR) were the top performing funds, while foreign currency funds (YANK, ZUSD, USD and EEU) also saw strong gains for the week as the AUD fell to 17-year lows. Amongst long-only equity funds, gold miners (GDX) bounced back and Japan (IJP) saw modest gains. On the negative side, leveraged funds (GGUS and GEAR) were significant decliners along with oil (OOO). Real estate funds, both domestic (MVA, SLF and VAP) and international (REIT and DJRE) were also amongst the hardest hit. Precious metals mostly declined for the week. Silver and platinum saw big dips, while palladium stabilised. Gold dropped 2% in US dollar terms, but gained ground in AUD. Total flows into domestically domiciled ETFs were $297m, while outflows totalled $918m. Domestic equity funds including STW, GEAR and MVW saw the largest inflows. Cash and fixed income funds (IHEB, AAA, BILL, IAF, QPON, IHHY and CRED) saw significant outflows. Bearish domestic fund BBOZ was the most traded fund for the second week running, followed by broad-based funds VAS and STW. GOLD saw above average trading.

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Weekly ETF Monitor for week ending 13 March 2020

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Mar 17, 2020

This week's highlights COVID-19 and Saudi Arabia’s aggressive moves to ramp up oil supply saw for one of the most volatile weeks ever across financial markets. Bearish ETFs (BBOZ, BBUS and BEAR) were the top performing funds, while foreign currency funds (YANK, ZUSD, USD, EEU and POU) also saw strong gains for the week. Amongst long-only equity funds, only China ETFs (CETF and IZZ) saw green. On the negative side, there were many. Energy companies were hit hardest – FUEL fell 27% for the week. Gold miners were also hit hard, despite the metal trading flat in AUD terms. European equity funds (HEUR) were also amongst the biggest decliners. Precious metals were not immune. Gold dropped 7% is US dollar terms, but held its ground in AUD. Palladium gave up most of its recent gains, dropping nearly 30%. Oil ETF OOO fell 23% for the week. The Australian dollar fell below US62c for the first time since 2008. Total flows into domestically domiciled ETFs were $460m, while outflows totalled $468m. Domestic equity funds dominated flows with A200 and STW seeing the largest inflows and IOZ seeing the largest outflows. GOLD, QAU and USD saw strong haven flows, while crude oil fund OOO saw speculative inflows following the massive price drop. Bearish domestic fund BBOZ was the most traded fund last week, followed by broad-based funds VAS, STW and IOZ. Other leveraged funds, BBUS and GEAR, saw above average trading. ETFS Enhanced USD Cash ETF (ZUSD) returned 7.8% for the week, benefiting from the strengthening US dollar and the stability of cash amidst the turmoil in more volatile asset classes.

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Weekly ETF Monitor for week ending 6 March 2020

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Mar 10, 2020

This week's highlights Gold miners headlined the top performers in a turbulent week, with MNRS and GDX seeing returns in excess of 8%. Defensive sectors, including healthcare (DRUG), consumer staples (IXI) and infrastructure (IFRA) were also amongst the top performers alongside bearish funds BBOZ and BEAR. Financial sector ETFs (MVB, OZF, QFN and BNKS) were the week’s poorest performers, with high beta plays such as India (NDIA) and technology (TECH) also seeing declines. Gold continued to push higher, trading above US$1,690/oz towards the end of the week. Hedged gold (QAU) added 3.7%, while palladium (ETPMPD) dropped 8.0%. Oil saw big declines, with OOO dropping 7.8%. The Australian dollar regained ground, adding close to 3% for the week and AUDS was amongst the week’s top performing funds. Total flows into domestically domiciled ETFs were $424m, while outflows totalled $181m. iShares S&P/ASX 200 ETF (IOZ) and ETFS Physical Gold (GOLD) saw the largest inflows for the week. BetaShares Australian High Interest Cash ETF (AAA) saw the bulk of the week’s outflows. VAS was the most traded fund last week, followed by IOZ. BBOZ and MGE saw above average volumes.

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