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Weekly ETF Monitor for week ending 14 December 2018

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Dec 18, 2018

This week's highlights Global equities fell last week on a lower growth outlook following below expectation economic data across the regions. The S&P/ASX 200 dropped 1.4% with resources being the only positive sector for the week. Resource sector ETFs (QRE and OZR) were the top performing long-only equity funds. Offshore, the S&P 500 fell 1.3%, with financials being hit hardest. The Nikkei 225 fell 1.4%, while the EURO STOXX 50 gained 1.1%. U.S. 10-year Treasury yields rose 4 basis points and the U.S. dollar gained against most majors. The Australian dollar ended the week lower at US71.72c. Pound sterling continued to decline on further Brexit uncertainty. Precious metals pulled-back, with gold down 0.8% to US$1,239/ounce. Palladium continued its run up and is now close to 50% above its August low. ETFS Physical Palladium (ETPMPD) returned 2.7% for the week. Crude oil fell 2.7% for the week, while the broad Bloomberg Commodity Index dropped 2.7%. The Australian ETF market saw inflows of $164m into and outflows of $106m from domestically domiciled funds last week. The largest flows were into BetaShares Australia 200 ETF (A200), iShares Treasury ETF (IGB) and iShares S&P/ASX 200 ETF (IOZ).

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Weekly ETF Monitor for week ending 7 December 2018

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Dec 11, 2018

This week's highlights Global equities declined last week on growth expectations and spiralling U.S.-China trade tensions. The S&P 500 fell 4.6%, with financials being hit hardest; BetaShares Global Banks ETF (BNKS) fell 5.2% for the week. The EURO STOXX 50 dropped 3.6% as a key week in the Brexit process approaches. The Nikkei 225 fell 3.0%. Domestically, the S&P/ASX 200 ended up on positive territory, up 0.3%. Property funds (MVA and SLF) were the top domestic funds for the week. U.S. 10-year Treasury yields fell 14 basis points on lower growth expectations. Similarly Australian 10-year yields fell 15 basis points. The Australian dollar ended the week 1.3% lower at US72.08c. Pound sterling fell for a fourth consecutive week and approached its lowest levels since June 2017. Precious metals advanced, with gold up 2.4% to US$1,249/ounce. Palladium briefly topped gold as the most valuable precious metal and ETFS Physical Palladium (ETPMPD) is clearly the year's top performing ETF to date, returning 23.4% in 2018. Crude oil also gained, adding 3.3% following OPEC's agreement to cut production by more than originally anticipated. The Australian ETF market saw inflows of $120m into and outflows of $12m from domestically domiciled funds last week. The largest flows were into BetaShares Australia 200 ETF (A200) and a range of international equity funds (WDMF, NDQ and IHVV).

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Weekly ETF Monitor for week ending 30 November 2018

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Dec 03, 2018

This week's highlights U.S. equities rallied strongly last week on Fed comments that interest rates are approaching equilibrium and a truce in the trade dispute with China. The S&P 500 gained 4.9%, led higher by IT and healthcare stocks. ETFS Morningstar Global Technology ETF (TECH) was the top performing unleveraged ETF for the week, returning 6.5%. NDQ returned 5.4%, while global healthcare fund DRUG returned 5.0%. Elsewhere the EURO STOXX 50 added 1.1% and the Nikkei 225 gained 3.3%. Domestically, the S&P/ASX 200 fell by 0.9% with the biggest declines being in the mining sector. QRE and OZR were both amongst the poorest performers for the week. The Australian dollar ended the week 1.0% stronger at US73.06c. U.S. Treasury yields pulled back as rate hike expectations tapered. Crude oil halted its recent slide, gaining 1.0% for the week as expectations of an OPEC production cut firmed. Gold fell slightly to US$1,221/ounce, while platinum declined 5.4%. The broad Bloomberg Commodities Index gained 1.3%. The Australian ETF market saw inflows of $349m into and outflows of $101m from domestically domiciled funds last week. The largest flows were into and out of broad based domestic and international equity funds.

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Weekly ETF Monitor for week ending 23 November 2018

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Nov 26, 2018

This week's highlights The global equity correction continued last week. The S&P 500 fell 3.8% as big technology names sold off. Apple was one of the hardest hit, falling 11.0%. BetaShares NASDAQ 100 ETF (NDQ) returned -3.8% for the week. The global energy sector also saw big moves with BetaShares Global Energy Companies ETF (FUEL) falling 4.3%. Healthcare is now the top performing US sector in 2018. Australia outperformed with the S&P/ASX 200 down just 0.3%. Financials and real estate were the top sectors and three domestic property funds, SLF, VAP and MVA, were amongst the week's top performing ETFs. The U.S. dollar regained ground last week against most majors. The Australian dollar ended the week 1.4% lower at US72.33c. U.S. Treasury yields pulled back as grown concerns dampened rate hike expectations. Crude oil continued to fall, dropping a further 10.7%. BetaShares Crude Oil Index ETF (OOO) was the poorest performing ETF for the week. Gold was flat for the week, while palladium declined 4.8%. The broad Bloomberg Commodities Index fell 2.9%. The Australian ETF market saw inflows of $212m into and outflows of $73m from domestically domiciled funds last week. The largest inflows were into domestic equity (A200, QOZ and E20) and fixed income (CRED and QPON) ETFs. Outflows were from Taiwanese equities (ITW) and domestic cash (AAA).

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Weekly ETF Monitor for week ending 16 November 2018

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Nov 19, 2018

This week's highlights Cyclical stocks (technology, consumer discretionary and energy) led equity markets lower last week. The S&P 500 fell 1.6% and the VIX remained elevated following its October spike. The EURO STOXX 50 fell 1.5% as Brexit and Italy concerns continued to develop. In Asia, Japan's Nikkei 225 dropped 2.6%, while China's Shanghai Composite provided some positive news, gaining 3.1% on strong manufacturing data. CETF was amongst the top performing ETFs for the week. Domestically the S&P/ASX 200 fell 3.2% as the overweight financials and materials sectors pulled-back. The U.S. dollar fell broadly last week as uncertainty around a December hike increased. The Australian dollar ended the week 1.5% stronger at US73.32c. Gold rallied last week, gaining 1.1% to US$1,223/troy ounce. Palladium gained 5.4% on growing auto demand supply concerns. ETFS Physical Palladium (ETPMPD) was the top performing unleveraged fund for the week. WTI crude fell 6.2% to its lowest level since last December and BetaShares Crude Oil Index ETF (OOO) was the poorest performing unleveraged ETF for the week. The Australian ETF market saw inflows of $138m into and outflows of just $7m from domestically domiciled funds last week. The largest inflows were into domestic equity ETFs (IOZ, OZF and FAIR).

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Weekly ETF Monitor for week ending 9 November 2018

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Nov 13, 2018

The week's highlights Global equity markets rallied last week in the wake of U.S. midterm elections. The S&P 500 gained 2.1% on the expectation that major policy changes would be slowed by the divided government. The EURO STOXX 50 added 0.5%, while the Nikkei 225 was flat. Domestically the S&P/ASX 200 added 1.2%, led higher by the big four banks, which posted an average gain of 4.3% for the week. Bank and property ETFs (MVB and MVA) were amongst the week's best performers. The Fed kept U.S. rates unchanged, while firming expectations of a December hike. Short-term yields rose and longer-dated yields remained near recent highs. The Australian dollar ended the week stronger at US72.26c. Commodities declined with gold down 1.9% and silver down 3.8%. WTI crude fell 4.7% to its lowest level since February and BetaShares Crude Oil Index ETF (OOO) was the poorest performing ETF for the week. The Australian ETF market saw inflows of $116m into and outflows of $23m from domestically domiciled funds last week. The largest inflows were into domestic equity ETFs (IOZ and MVW), while the largest outflows were from domestic small caps (ISO) and U.S. dollar (ZUSD). ETF Securities launched Australia's first biotechnology ETF; ETFS S&P Biotech ETF (CURE).

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Putting the Spotlight on Defenders

Nov 11, 2018

Key Takeaways Recent market volatility has encouraged investors to position portfolios more defensively ETF Securities has a selection of products more suited to a defensive strategy ZYUS gives a low volatility approach to the US market CORE gives exposure to the historically more stable infrastructure sector GOLD provides the best-known hedge against equity market downturn and political instability Introduction Investors have battened down the hatches over the past weeks as waves of volatility have dominated the market. Maybe the market calms down and equities resurge, but now, is clear, that late cycle volatility is here and will probably become more violent at each episode. The recent equity sell-off has heightened uncertainty, with consumer sentiment nicely described by the CNN ‘Fear and Greed Index’ that looks to characterise the primary emotion driving the market (see below). Right now, this index sits at 11, or ‘extreme fear’. Why? The consensus among investors appears to be that we’re in the ‘late stage’ of the investment cycle. Wall St’s thundering run has lasted a decade – the longest ever. And the market has become increasingly wary because of that. We have seen a very large sell-off in technology sector stocks with the Nasdaq, which is often taken as a proxy for US tech, recording its worst month since 2012. This suggests that some are losing faith in the continued performance of our recent equity stars (otherwise known as team FAANG). Adding fuel to the fire, the world has been curiously watching on as China and the US continue their game of trade policy tag. As the reverberations of any decisions by these heavyweights are felt by all, this tension is creating a difficult environment for investors. Playing Defence Though we are all familiar with the old adage ‘past performance is not an indicator of future performance’, it is sometimes helpful to look back at how previous storms have been weathered. The traditional market response to a late cycle downturn can generally be characterised by a move away from higher risk equities such as technology or emerging markets, greater focus on essential sectors such as healthcare, utilities and energy, and a general movement away from equities and into cash, short-term fixed income and commodities. As the bull market nears the close of its tenth year many are considering if now is the time to reposition portfolios towards ‘defensive’ assets. So, what are the options for investors looking to rearrange their holdings into a more defensive position? ** Gold is not considered in the risk illustration for two reasons. First, there is no counterparty risk with gold whatsoever (with cash there is still sovereign risk). Second, gold has historically had low correlations with equities, so its risk characteristics work differently. Defensive Equity Solutions America If you take a glance at global headlines, the US right now may seem a difficult market to play, with high levels of uncertainty around international policy and tariffs. However, as the world’s dominant economy, many would wish to maintain some sort of equity exposure but with a defensive tilt and an eye on capital preservation as much as growth. The ETFS S&P 500 High Yield Low Volatility ETF (ZYUS) is one option that is designed to achieve this. As suggested by the name, this ETF has a low volatility filter built into its index construction. The underlying assumption is that companies that don’t exhibit aggressive price movements are less likely to be sold down heavily in a general market sell off. Specifically, the index universe (the S&P 500) is ordered to select the 75 highest yielding stocks and then the 50 least volatile of those 75 are selected creating a high dividend paying, relatively low risk portfolio based on the trailing twelve months of price data. With reference to the chart above it is clear to see that, since the VIX jumped in October, IVV has lost approximately 10% whereas ZYUS has only lost 4%. Part of the reason for this is because ZYUS has a 16% greater exposure to utilities (historically low in volatility) whilst a 17% less to information technology (historically high in volatility) (as at 30th August 2018, source: S&P). Infrastructure Another strategy investors may consider in times of heightened volatility is increasing the allocation to sectors that have historically had greater stability. One such area known for this is infrastructure. The source of this stability can be explained by looking at the industries that fall into this sector: utilities, telecoms, industrials and transport. These industries typically have high capital costs, low elasticity of demand, long business timelines and often exist as regulated oligopolies or monopolies. Their capital-intensive nature means that they are very difficult and, in some cases, like energy distribution networks, nigh impossible to disrupt. This can mean that these sectors have lower risk (as measured by standard deviation of returns) than other sectors, such as technology or real estate. The table below illustrates the substantially lower volatility of infrastructure against these sectors.

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Weekly ETF Monitor for week ending 2 November 2018

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Nov 06, 2018

This week's highlights Global equity markets bounced last week as volatility subsided in the run-up to this week's U.S. midterm elections. The S&P 500 ended the week up 2.4%, while the EURO STOXX 50 added 2.5% and the Nikkei 225 jumped 5.0%. Leveraged funds aside, the top performing ETFs for the week were global robotics funds (RBTZ and ROBO), which returned in excess of 6%. Asia Pac funds also performed strongly. Bearish equity funds, unsurprisingly, dominated the worst performers list. The Australian dollar ended the week stronger at US71.93c. U.S. 10-year Treasury yields rose 14bps and expectations of a December hike by the Fed firmed on strong U.S. employment data. Gold traded in a tight range, ending the week slightly lower at US$1,233/ounce, while platinum rose 4.3%. WTI crude fell 6.6% to US$63.14/bbl as U.S. sanctions on Iranian exports commenced. The Australian ETF market saw inflows of $447m into and outflows of $264m from domestically domiciled funds last week. The largest inflows were into domestic equity ETFs (VAS, VHY and STW), while global broad-based equity funds (VGS and VGAD) also attracted strong flows. The bulk of outflows were also from domestic equities (IOZ).

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Weekly ETF Monitor for week ending 19 October 2018

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Oct 23, 2018

This week's highlights Global equity markets stabilised last week. The S&P 500 ended the week flat, while the EURO STOXX 50 rose 0.5% and the Nikkei 225 fell 0.7%. Defensive sectors outperformed, with ETFS S&P 500 High Yield Low Volatility ETF (ZYUS) being amongst the top performers. Global infrastructure funds were the top performers with MICH and GLIN returning 2.2% for the week. Domestically, the S&P/ASX 200 ended the week 0.7% higher. Real estate was the top performing domestic sector, with MVA, SLF and VAP all amongst the week's top ETFs. The Australian dollar ended the week slightly higher at US71.19c, while the U.S. dollar gained against both the euro and yen. In fixed income, U.S. 10-year Treasury yields rose 3bps and Italian government bonds sold off sharply as the budget conflict between the populist Italian government and the EU escalated. Gold gained 0.7% to US$1,216/ounce, its third consecutive weekly gain. WTI crude fell 3.1% to US$69.12/bbl. The Australian ETF market saw inflows of $179m into and outflows of $77m from domestically domiciled funds last week. The largest inflows were into domestic equity ETFs (A200, IOZ, MVW and STW). The largest outflows were from bearish Australian equities (BBOZ) and U.S equity and cash ETFs (IJR, USD and NDQ).

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Weekly ETF Monitor for week ending 12 October 2018

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Oct 16, 2018

This week's highlights The global equity selloff picked-up pace last week as U.S. 10-year Treasury yields rose above 3.2% and U.S.-China trade conflict continued to concern investors. The S&P/ASX 200 fell 4.7%, its biggest weekly decline since early 2016. The S&P 500 fell 4.1%, led lower by the cyclical technology, financial and industrial sectors. The EURO STOXX 50 fell 4.5%, while the Nikkei 225 dropped 4.6%. Bearish equity funds (BBOZ, BBUS and BEAR) were the top performers for the week, along with gold mining ETFs, with MNRS and GDX returning 6.2% and 5.2% respectively. Global robotics and AI funds (ROBO and RBTZ) were amongst the poorest performers. U.S. 10-year Treasury yields hit a new 7-year high above 3.25% before pulling back to end the week at 3.16%. The U.S. dollar pulled-back. The Australian dollar ended the week at US71.14c. Gold rallied 1.1% to US$1,217/ounce on safe-haven buying and is now more than 4.2% above its August lows. WTI crude fell 4.0% to US$71.34/bbl. The Australian ETF market saw inflows of $215m into and outflows of $47m from domestically domiciled funds last week. The largest inflows were into domestic cash and equity ETFs (AAA, STW and IOZ). The largest outflows were from U.S dollar and U.S. equity ETFs (USD, IVV and IJR).

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ETFAQ

Oct 10, 2018

The educational guide to Australian Exchange Traded Funds (ETFs)

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Weekly ETF Monitor for week ending 5 October 2018

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Oct 08, 2018

The S&P/ASX 200 fell 0.4% last week as real estate and industrials declined. Offshore the S&P 500 dropped 1.0% as the technology sector fell. The EURO STOXX 50 fell 1.6%. Japan's Nikkei 225 was also down 1.4%. The U.S. dollar strengthened last week following the Fed action; the Australian dollar fell 2.4% to US70.52c, the euro fell 1.7%, while the yen fell 2.4%. The BetaShares Strong Australian Dollar Hedge Fund (AUDS) was the poorest performing ETF for the week, falling 6.0%. Betashares Strong US Dollar Hedge Fund ETF (YANK) was the top performing fund for the week with a return of 5%. Commodities strengthened with the broad Bloomberg Commodities Index gaining 2.0%. WTI crude added 1.5% for the week, while gold ended the week higher at US$1,204/ounce. ETFS Physical Silver ETF (ETPMAG) was the top performing commodity ETF for the week, followed by ETFS Physical Gold ETF (GOLD) returning 4.8% and 3.9% respectively. The Australian ETF market saw inflows of $118m into and outflows of $44m from domestically domiciled funds last week. The largest inflows were into domestic equity and cash ETFs (MVW and AAA) and fixed income ETF (RCB). The largest outflows were from BetaShares Australia 200 ETF (A200).

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Global Infrastructure: Designed for Retirees

Oct 07, 2018

Key Takeaways: • Infrastructure assets are considered by many advisers as ideal for retirees • CORE gives a cost effective, diversified and international exposure to this sector • CORE has outperformed many active funds over the past year, debunking the myth that active is always best in this sector

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Weekly ETF Monitor for week ending 28 September 2018

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Oct 02, 2018

This week's highlights The S&P/ASX 200 added 0.2% last week as gains in energy and resources sectors offset declines in financials. Offshore the S&P 500 dropped 0.5% with financials underperforming following the Fed's 0.25% rate hike. BetaShares Global Banks ETF (Hedged) (BNKS) was the poorest performing ETF for the week, falling 2.8%. The EURO STOXX 50 fell 0.9% as Italy came under pressure. Japan's Nikkei 225 gained 1.1%, hitting levels not seen since 1991. Technology-biased funds (HACK and NDQ) were the top performing equity funds for the week. The U.S. dollar strengthened last week following the Fed action; the Australian dollar fell 0.9% to US72.24c, the euro fell 1.2%, while the yen fell 1.0%. Commodities generally strengthened with the broad Bloomberg Commodities Index gaining 1.0%. WTI crude added 3.5% for the week, while gold ended the week lower at US$1,191/ounce. ETFS Physical Palladium (ETPMPD) was the top performing ETF for the week, followed by BetaShares Crude Oil Index ETF (OOO). The Australian ETF market saw inflows of $192m into and outflows of $38m from domestically domiciled funds last week. The largest inflows were into global equity ETFs (IHWL and IWLD) and fixed income ETFs (CRED and QPON). The largest outflows were from BetaShares Australian High Interest Cash ETF (AAA) and iShares Core S&P 500 ETF (IVV).

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Weekly ETF Monitor for week ending 21 September 2018

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Sep 25, 2018

This week's highlights The S&P/ASX 200 gained 0.5% last week, attributable to the resources sector. Offshore developed markets gained, the S&P 500 was up again by 0.9%, while the EURO STOXX 50 gained 2.6%. Japan's Nikkei 225 also gained 3.4%. ETFS Physical Palladium (ETPMPD) had another strong week returning 4.3%, whilst the VanEck Vectors ChinaAMC A-Share ETF (CETF) was the best performing, with a return of 4.4% for the week.  The U.S. dollar weakened last week. The Australian dollar gained 1.9% to reach US72.9c. U.S. 10-year Treasury yields increased by 7 basis points.  Commodities were up. Gold ended the week at US$1,200/ounce, while Silver gained 1.7%. WTI crude gained 2.6% to US$70.78/bbl. The Bloomberg Commodities Industrial Metals Index also gained, up 2.36%. The Australian ETF market saw inflows of $113m into and outflows of $29m from domestically domiciled funds last week. The largest inflows were into equity ETFs including MVW, STW, FAIR and MVR. Outflows were spread across a range of different exposures.

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Weekly ETF Monitor for week ending 14 September 2018

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Sep 18, 2018

The S&P/ASX 200 gained 0.4% last week, with resources stocks bouncing back. Offshore developed markets gained, the S&P 500 was up by 1.2%, while the EURO STOXX 50 gained 1.6%. Japan's Nikkei 225 also gained 3.5%. ETFS Physical Platinum (ETPMPT) had another strong week returning 3.2%, whilst the Betashares WisdomTree Japan ETF was the best performing, with a return of 3.5% for the week. Asian stock markets have had a mixed year, with Chinese equities continuing to struggle compared to Japan and Taiwan (see Chart of the Week). The U.S. dollar weakened last week. Currency pressure continues in emerging markets including Argentina, Turkey, Brazil, Russia and South Africa. The Australian dollar gained 0.7% to reach US71.53c, after hitting a two year low a week earlier. U.S. 10-year Treasury yields increased by 6 basis points. Commodities were mixed. Gold ended the week marginally lower at US$1,195/ounce, while Silver fell 0.8%. WTI crude gained 1.8% to US$68.99/bbl. The Bloomberg Commodities Industrial Metals index fell 0.2%. The Australian ETF market saw inflows of $118m into and outflows of $22m from domestically domiciled funds last week. The largest inflows were into cash ETFs (BILL, AAA and ISEC) and domestic funds (MVW and IOZ). Outflows were spread across a range of different exposures.

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Weekly ETF Monitor for week ending 7 September 2018

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Sep 11, 2018

The S&P/ASX 200 fell 2.8% last week, the RBA kept rates on hold and market futures are pointing towards a flat period ahead. Offshore the sea of red continued, the S&P 500 fell by 1.0% led by technology stocks, while the EURO STOXX 50 dropped 2.9%. Asian stocks, also fell by 2.4%. ETFS Physical Palladium (ETPMPD) and BetaShares Australian Equities Strong Bear (BBOZ) both had a strong week, returning 5.5% and 7.0% respectively. The U.S. dollar strengthened last week on rising global uncertainty in emerging markets. Currency pressure continuing to grow in emerging markets. Argentina, Turkey, Brazil, Russia and South Africa all continuing to drop. The Australian dollar fell 1.1% to US71.07c, its new lowest level since late-2016. U.S. 10-year Treasury yields increased by 8 basis points. Commodities were mixed. Gold ended the week marginally lower at US$1,197/ounce, while Silver slumped 2.5%. WTI crude fell 2.9% to US$67.75/bbl. The Bloomberg Commodities Industrial Metals subindex fell 1.4%. The Australian ETF market saw inflows of $116m into and outflows of $18m from domestically domiciled funds last week. The largest inflows were into equity ETFs (STW and NDQ) and domestic funds (MVW, QPO and HBRD). Outflows were spread across a range of different exposures. ETF Securities has launched ETFS Battery Tech & Lithium ETF (ACDC), which provides exposure to developers of battery storage technology and lithium miners. Trading on the ASX commenced on 3rd September.

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Weekly ETF Monitor for week ending 31 August 2018

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Sep 04, 2018

The S&P/ASX 200 added 1.2% last week, led higher by financial and mining stocks as the market digested the change of leadership and cabinet reshuffle. Offshore, the S&P 500 gained 0.9%, while the EURO STOXX 50 dropped 1.0%. Emerging markets underperformed, with Argentina joining Turkey as a country of focus. Asian stocks, however, performed strongly with ITW, IKO and IJP all amongst the top performing ETFs for the week. ETFS ROBO Global Robotics and Automation ETF (ROBO) also had a strong week, returning 4.4%. The U.S. dollar strengthened last week on rising global uncertainty and higher rate expectations following the release of the latest FOMC minutes. The Australian dollar fell 1.9% to US71.89c, its lowest level since late-2016. U.S. 10-year Treasury yields increased by 5 basis points. Commodities were mixed. Gold ended the week marginally lower at US$1,204/ounce, while palladium jumped 4.9%. WTI crude gained 1.6% to US$69.80/bbl. The Bloomberg Commodities Industrial Metals subindex fell 1.7% and copper hit a 12-month low on emerging market concerns and the stronger U.S. dollar. The Australian ETF market saw inflows of $116m into and outflows of $18m from domestically domiciled funds last week. The largest inflows were into cash ETFs (AAA and BILL) and domestics equity funds (MVW, A200 and KSM). Outflows were spread across a range of different exposures. ETF Securities has launched ETFS Battery Tech & Lithium ETF (ACDC), which provides exposure to developers of battery storage technology and lithium miners. Trading on the ASX commenced on 3rd September.

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Platinum – The night is darkest before the dawn?

Sep 03, 2018

ETFS Trade Idea: Platinum – The night is darkest before the dawn? High level summary: Platinum, one of the rarest precious metals, could correct upwards in H2 2018 to $900 an ounce This is because the platinum supply deficit is being exacerbated by today’s low prices South African politics – most platinum is mined in South Africa – has scared away mining investment, which also threatens supply Demand for platinum in auto catalysts, the mainstay of the metal’s demand, has been increasing. How to Invest: o ETFS Physical Platinum (ETPMPT) is the only pure listed exposure to platinum in Australia o MER: 0.49% p.a In this week’s ETFS Trade idea, we look at platinum, the rarest of the precious metals, whose price has been trending downwards in recent months. We take a look at whether platinum might be oversold and how fundamentals and macro trends support a near-term price rise. We finish by looking at ways investors can gain exposure to the rare metal. Platinum – Some background Platinum is a very rare metal. It is estimated that all the platinum ever produced would only go ankle-height in an Olympic sized swimming pool. (World Platinum Investment Council, 2018) South Africa produces 73% of the world’s platinum and has the overwhelming majority of proven reserves. Within South Africa itself, two companies – Anglo American (Amplats) and Impala – produces almost half of supply. (Thomson Reuters, 2018) Platinum’s unique chemical properties make it a choice element in industry. Industrial uses include electrics, medical equipment and, most importantly, catalytic converters in diesel cars, buses and trucks. Platinum is also a popular metal in jewellery due to its resistance to warping. A weak performance in 2018 Platinum has performed poorly in 2018, with its spot price sinking from a January peak of $1,016 per ounce to $790 as of mid-August. Year-to-date, platinum has fallen 23%, while gold has fallen roughly 10%. Taking a longer-term view, platinum’s spot price seems to have peaked – like gold, with which it correlates quite closely – in 2011 at around $1,855 per ounce. An upward correction seems possible While platinum’s recent performance has disappointed, some well reputed analysts believe it’s possible for prices to hit $900 in various points of H2 2018, for the following reasons: There could be some reversion to the mean in platinum’s parity in gold: at present platinum is only tracking gold on the downside and not the upside. Trends within South Africa itself are likely to support long-term a price hike. These include heightened political risks facing miners and higher utilities costs. Diesel engine production continues to rise in absolute terms, especially given strong demand in Asia. Diesel cars are not “dead” in Europe, as is sometimes implied in the press. Today’s platinum prices in the $790s are below production costs, data suggests. This means that miners will likely cut back on production, which will widen out the already existing supply deficit. We expect that the supply deficit will grow until prices bounce back. Parity with gold likely to be restored For most of its history platinum has traded at a premium to gold (one suspects this owes to platinum being the rarer metal). Yet at present platinum trades at a 33% discount to gold. In the current cycle, platinum has only tracked gold price falls and not its upside, widening the discount. (Gupta, 2018) In our view, some mean reversion in the near term is likely due to supply and demand dynamics (detailed below) but also due to renewed investor interest in response to these dynamics. As platinum correlates with gold, it offers similar portfolio diversification benefits and upside potential. (David Hillier, 2006) For this reason, we expect investor interest to rekindle as prices recover, helping stabilise demand. South African political risk and supply cuts South African politics is likely an additional supply side pressure. Mine nationalisations have been threatened by the Economic Freedom Fighters, (Economic Freedom Fighters, 2018) South Africa’s third-largest party, which is surging in the polls. (Umraw, 2018) South Africa is a one-party state, with the African National Congress ruling since apartheid ended, making an EFF government unlikely. But, as is often the case in politics, the danger lies not so much in the minority party seizing power but in its ability to force mainstream parties to adopt part of its platform. This year, we have already seen President Ramaphosa – under pressure from the EFF – outline proposals to give greater shareholdings to black owners, which would dilute current shareholders. These proposals, thus far, have been successfully challenged by miners in South Africa’s courts. But fears of dilution and government intervention have dried mining investment and slowed production, adding another supply side pressure. (Hodgson, 2018) Outside dilution fears, South African miners have hit a wall of difficulties: community unrest and union disputes over pay; skyrocketing electricity costs; and production disruptions from maintenance and safety stoppages. (Johnson Matthey, 2018) These ongoing difficulties – while not sufficient to drive up prices – are compounding the pressures caused by low platinum prices. In response to these difficulties, the past two years has witnessed industry rationalisation. Lonmin, the third largest platinum miner, sold off much of its platinum assets to another miner. (Sanjeeban Sarkar, 2017) Impala, the second largest platinum miner, shut several platinum mines in March 2018 and has indicated it will fire 13,000 staff over 2018 and 2019. (Miller, 2018) Platinum Group Metals closed a major platinum mine mid-2017 due to it being unprofitable. (Seccombe, 2018) These shaft closures and production cuts, in our view, add to the likelihood of a sharpening platinum supply deficit, which in turn will place upward pressure on pricing. Platinum trading below production costs There is also evidence that platinum prices below $790 an ounce, as they are at present, are unsustainable as they fall below production costs. By general consensus, the all-in sustainability cost (AISC) to pull an ounce of platinum out of a South African mine is above $900 an ounce. (Thomson Reuters, 2018) A recent report from Anglo American – the world’s largest and South Africa’s most efficient platinum miner – said that its AISC was $955 an ounce in 2017. (Anglo American Platinum, 2017) Production costs in North America and Zimbabwe where platinum is also mined – albeit in significantly smaller quantities – are estimated to be similar. (Statista, 2016) Only in Russia, which is currently under strict US and EU trade sanctions, is platinum trading at below AISC. Russia produces platinum in too small a quantity to alter the world average. Historically, commodities can and have traded below their AISC or marginal costs. But a situation where platinum is trading significantly below production costs – as it appears to be at present – will incentivise supply cuts and add upward pressure on prices. Demand Diesel cars and trucks are not dead The most crucial pocket of demand for platinum comes from car catalysts in diesel engines in developed economies, especially Europe. Yet diesel cars are losing market share, thanks largely to the Volkswagen scandal of 2015. According to data from the European Automobile Manufacturers Association (ACEA), the European car industry lobby, in H1 2017 sales of gasoline powered cars in Europe overtook diesel for the first time since 2009. (ACEA, 2018) This trend has been taken by some commentators as signalling the “death of diesel”. (Topham, 2018) In our view, diesel cars will likely continue to lose market share in developed economies, but warnings of “dead” diesel seem overblown. In its GFMS Platinum Group Metals Survey 2018, the most comprehensive survey of its kind, Thomson Reuters noted that platinum use in diesel catalysts rose 7.1% in 2017 thanks to strong demand from Asia offsetting declining demand in Europe. (Thomson Reuters, 2018) While in decline in Europe, European diesel cars still have a lot of “dying” left to do. According to the same numbers from the ACEA, diesel cars still make up 45% of Western European passenger cars. And although diesel’s market share may be declining, in absolute sales terms the number of diesel cars being sold globally is increasing, suggesting the mainstay of platinum demand is well supported. ETFS Physical Platinum (ETPMPT) – One of a kind For any investors dicing up the opportunity platinum affords, ETFS Physical Platinum ETF (ETPMPT) offers a one-of-a-kind solution. ETPMPT is 100% physically backed by platinum bullion, held in HSBC’s vaults in London. Every bar of platinum meets the London Platinum and Palladium Association's rules for Good Delivery, and every bar is segregated and allocated. As ETPMPT is physically backed there is zero credit risk. And because it can be redeemed for platinum bars, any deviations from platinum’s spot price will be quickly arbitraged out. ETPMPT is the only product of its kind available in Australia and offers a uniquely secure play on platinum. How to invest in physical platinum? ETFS Physical Platinum (ETPMPT) MER: 0.49% p.a. - ETPMPT is the only physically-backed platinum tracking ETF in Australia - As ETPMPT is redeemable for physical bullion, it is anticipated to track to the platinum spot price - ETPMPT trades on the ASX just like shares, meaning it is settled and held in brokerage accounts

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Weekly ETF Monitor for week ending 24 August 2018

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Aug 28, 2018

The S&P/ASX 200 declined by 1.5% last week, led lower by the big four banks, as the Liberal Party elected the country's sixth Prime Minister in the past 10 years. Financial sector ETFs (MVB, QFN and OZF) were the poorest performers for the week, all declining by more than 4%. Offshore, markets rallied on expected advances in trade negotiations. The S&P 500 added 0.9% as technology and energy stocks continued to push higher. The EURO STOXX 50 gained 1.6%, its first weekly gain in four weeks, while the Nikkei 225 added 1.5%. The U.S. dollar softened and Treasury yields fell as President Trump and Jerome Powell both spoke of a gradual pace to interest rate rises. The Australian dollar gained 0.2% to end the week at US73.29c. The euro gained 1.6% against the dollar. Commodities rebounded last week, with the broad Bloomberg Commodities Index up 0.4%. WTI Crude jumped by 4.3%. Precious metals also rose, with gold up 1.8% to US$1,205/ounce. ETFS Physical Palladium (ETPMPD) was amongst the top performing funds for the week, returning 3.4%. The Australian ETF market saw inflows of $114m into and outflows of $21m from domestically domiciled funds last week. The largest inflows were into BetaShares Australian Ex-20 Portfolio Diversifier ETF (EX20), with other notable inflows into AAA, WDMF, MVW and QUAL. The largest outflows were from BetaShares Dividend Harvester Fund (HVST) and BetaShares U.S. Dollar ETF (USD).

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Weekly ETF Monitor for week ending 17 August 2018

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Aug 21, 2018

Further volatility in the Turkish lira hit emerging markets last week. The MSCI Emerging Markets Index fell by 3.7%. China was hit particularly hard, with the Shanghai Composite down 4.5% for the week. European financials were sold on Turkey concerns, dragging the EURO STOXX 50 down 1.6%. The S&P 500 gained 0.6% as defensive sectors outperformed. The ETFS S&P 500 High Yield Low Volatility ETF (ZYUS) was the top performing ETF for the week. Domestically, the S&P/ASX 200 added 1.0% as gains in financials offset losses in the resources sector. The Turkish lira regained some ground last week, rising by 6.8% following its 21% decline in the previous week. The U.S. dollar fell against most majors. The Australian dollar gained 0.15% to end the week at US71.13c. Commodities declined last week, with the broad Bloomberg Commodities Index down 1.1%. WTI Crude dropped by 2.5%. Precious metals also fell, with gold down 2.2% to US$1,1,84/ounce and silver down 3.3%. The Australian ETF market saw inflows of $93m into and outflows of $36m from domestically domiciled funds last week. The largest inflows were into iShares S&P/ASX 200 ETF (IOZ), VanEck Vectors Australian Floating Rate ETF (FLOT) and a range of international equity funds (QUAL, IHVV and IAA). The largest outflows were from BetaShares FTSE RAFI Australia 200 ETF (QOZ) and BetaShares U.S. Dollar ETF (USD).

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Weekly ETF Monitor for week ending 10 August 2018

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Aug 14, 2018

Equity market volatility picked up last week as the Turkish lira plunged and global trade concerns continued. The S&P 500 fell by 0.3%, despite strong earnings from U.S. companies and positive economic data. Small-caps outperformed, with iShares Core S&P SmallCap ETF (IRJ) returning 2.3% for the week. The S&P/ASX 200 added 0.7% last week, with financials and real estate sectors being the main contributors. The EURO STOXX 50 declined by 1.6% on concerns around bank exposure to Turkish credit. Chinese equities bounced on growth expectations, with the Shanghai Composite adding 2.0%. China-focused ETFs (IZZ and CETF) were the top performing funds for the week. The Turkish lira declined by 21% last week, pushing the U.S. dollar higher against most currencies. The DXY U.S. Dollar Index added 1.3% as the Australian dollar fell by 1.4% to U.S.73c and the euro fell 1.3%. Bonds rallied, with U.S. 10-year Treasury yields falling by 8 basis points. Commodities mostly declined last week on U.S. dollar strength. Despite the rising volatility in equity markets gold continued to fall, dropping 0.4% for the week to US$1,211/bbl. ETFS Physical Gold (GOLD), which is priced in AUD, returned 0.9% for the week. The Australian ETF market saw inflows of $207m into and outflows of $129m from domestically domiciled funds last week. The largest inflows were into BetaShares Australia 200 ETF (A200) and a range of cash and fixed income funds (FLOT, BILL, QPON and PLUS). The largest outflows were from domestic equity funds; SPDR S&P/ASX 200 Fund (STW) and BetaShares FTSE RAFI Australia 200 ETF (QOZ).

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Weekly ETF Monitor for week ending 3 August 2018

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Aug 07, 2018

The S&P/ASX 200 dropped 1.0% last week, as declines in banks and resources led the market lower. Trade concerns dragged on markets globally, with the EURO STOXX 50 declining by 1.3% and the Nikkei 225 dropping 0.8%. China's Shanghai Composite fell 4.6% and China and Asia focused ETFs (CETF, IZZ, PAXX and UBP) were amongst the poorest performers for the week. The S&P 500 added 0.8% with the U.S. growth outlook strengthening. U.S. defensive sectors outperformed last week with real estate, telecoms and health care being the top performing sectors. ETFS S&P 500 High Yield Low Volatility ETF (ZYUS), which has a defensive sector bias, returned over 2%. The Fed kept rates on hold, but reaffirmed its confidence in the U.S. economy. U.S. 10-year Treasury yields rose above 3% for the first time since May. The Bank of England raised rates for the second time since the Brexit referendum. Gold dropped 0.8% to US$1,215/ounce and other precious metals also retreated. WTI crude fell to US$68.49/bbl. The Australian ETF market saw inflows of $118m into and outflows of $145m from domestically domiciled funds last week. The largest inflows were into BetaShares Australian Bank Senior Floating Rate Bond ETF (QPON) with notable inflows into a range of domestic and international equity funds including QUAL, MVW and QFN. SPDR S&P/ASX 200 Fund (STW) saw $140m of outflows.

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Weekly ETF Monitor for week ending 27 July 2018

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Jul 31, 2018

The S&P/ASX 200 added 0.2% last week, led higher by resources and energy sector stocks. Domestic resource sector ETFs, QRE and OZR, were amongst the top performers for the week, both returning 2.8%. The S&P 500 added 0.6% despite the IT sector declining as reporting season continued. The highlight was Facebook, which declined 16.7% for the week, leading the Nasdaq 100 Index 0.7% lower. U.S. financials fared much better - BetaShares Global Banks ETF (BNKS) returned 3.2% for the week. The EURO STOXX 50 Index rose 1.9% as Europe-U.S. trade talks progressed. In Asia the Shanghai Composite added 1.6%. The Australia dollar firmed to US74c, while the euro declined as the ECB confirmed its plans to end its asset purchasing programme this year. U.S. Treasury yields rose 6 basis points on an improved economic outlook as GDP grew by 4.1% in Q4. Commodities were mixed last week with WTI crude falling 2.5% to US$68.69/bbl. Gold dropped 0.4% to US$1,224/ounce. ETFS Physical Palladium (ETPMPD) was the top performing fund for the week, returning 4.3%, while gold mining ETFs (MNRS and GDX) were amongst the poorest performers. Bloomberg Industrial Metals Subindex rose 1.8% for the week. The Australian ETF market saw inflows of $102m into and outflows of $81m from domestically domiciled funds last week. The largest inflows were into iShares Core Cash ETF (BILL), while there were significant outflows from SPDR S&P/ASX 200 Fund (STW).

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Five reasons to consider an investment in TECH now

Jul 23, 2018

ETFS Trade idea:  Five reasons to consider an investment in TECH now In this week’s ETFS Trade idea we focus on the ETFS Morningstar Global Technology ETF (TECH) and look at five reasons why you might want to consider an investment in technology in the current market. High level observations: Technology stocks have continued their strong run in 2018Technology firms may be more resilient to a global trade war TECH includes valuation and quality features that may alleviate concerns of some investors Investors considering the technology sector should look at TECH The sector has proven to be robust in changing market conditions over recent years

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Weekly ETF Monitor for week ending 20 July 2018

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Jul 20, 2018

Global equity markets advanced slightly last week as upbeat commentary from the Federal Reserve and strong earnings reports from U.S. banks mostly offset tariff concerns. The S&P/ASX 200 added 0.3%, led higher by financials. Offshore the S&P 500 ended the week slightly higher, the EURO STOXX 50 gained 0.2% while the Nikkei 225 added 0.4%. Domestic and global bank ETFs (BNKS and MVB) were amongst the top performers along with Japanese equity funds (UBJ and IJP). The U.S. dollar weakened against the majors despite rising Treasury yields. The euro appreciated by 0.3%, while the yen gained 0.9%. The Australian dollar fell slightly to US74.15c. Commodities retreated, led lower by precious metals. Gold fell 1.2%, while silver was down 1.9% and palladium dropped 4.7%. WTI Crude declined by 0.8%. The five poorest performing ETFs for the week were all commodity-linked. Soft commodities were the exception. BetaShares Agriculture ETF (QAG) was the top performing ETF for the week. The Australian ETF market saw inflows of $158m into and outflows of $213m from domestically domiciled funds last week. The largest inflows were into SPDR S&P/ASX 200 Fund (STW), while there were significant outflows from both BetaShares S&P/ASX 200 Resources Sector ETF (QRE) and VanEck Vectors Australian Resources ETF (MVR) as well as BetaShares Australian High Interest Cash ETF (AAA).

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Weekly ETF Monitor for week ending 13 July 2018

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Jul 13, 2018

Global equity markets rose last week despite increasing global trade concerns. The S&P 500 added 1.5% as cyclical stocks returned to favour. BetaShares Nasdaq 100 ETF (NDQ) returned 2.5% for the week. Asia and emerging markets advanced; Japan's Nikkei 225 gained 3.7% and China's Shanghai Composite rose 3.1%, its first weekly gain in eight weeks. ITW, CETF and EMKT were all amongst the top performing ETFs for the week. Domestically the S&P/ASX 200 dropped 0.1% as utilities, energy and financial stocks traded lower. Commodity-related funds (QAG, MNRS and GDX) were amongst the poorest performers for the week. The U.S. dollar strengthened, gaining 1.7% against the yen and 0.5% against the euro. Pound sterling declined on heightened Brexit concerns. The Australian dollar ended the week marginally lower at US74.24c. The Chinese yuan declined for the fifth straight week. Commodities more impacted by the global trade uncertainty than equities with WTI Crude declining 3.8% and the broad Bloomberg Commodity Index dropping 2.8%. Gold retreated by 0.9% and other precious metals also declined. The Australian ETF market saw inflows of $95m into and outflows of $11m from domestically domiciled funds last week. The largest inflows were into Platinum's active equity ETFs (PIXX and PAXX). The bulk of outflows were from a range of domestic equity funds (HVST, QFN and GEAR).

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Weekly ETF Monitor for week ending 6 July 2018

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Jul 06, 2018

Global equity markets were mixed last week with global trade-war concerns being offset by up-beat economic data. The S&P 500 added 1.5% as technology and defensive sector stocks outperformed. U.S. employment grew more than expected in June. The EURO STOXX 50 added 1.6%, while stocks weakened across Asia with the Nikkei 225 down 2.3% and China's Shanghai Composite down 3.5%. Domestically the S&P/ASX 200 gained 1.5%. Telecoms and utilities were the top performing sectors, while a rebound in financials made the biggest contribution. Gold mining (GDX), U.S. small cap (IJR and IRU) and technology (TECH) ETFs were amongst the top performers for the week while Asian equities (CETF, IZZ and ISG) were amongst the biggest decliners. The U.S. dollar declined against most major currencies as Treasury yields fell. The Australian dollar ended the week higher at US74.30c and the euro advanced to US$1.17. The Chinese yuan declined for the fourth straight week.. Gold advanced 0.2% last week and gold miners rallied. WTI Crude declined 0.5%. . The broad Bloomberg Commodity Index dropped 1.4%. The Australian ETF market saw inflows of $83m into and outflows of $42m from domestically domiciled funds last week. The largest inflows were into equity ETFs including ETFS ROBO Global Robotics and Automation ETF (ROBO). The bulk of outflows were from BetaShares Australian High Interest Cash ETF (AAA).

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US Defensive Equities Starting to Look Well Valued

Jul 02, 2018

ETFS Trade idea:  US Defensive Equities Starting to Look Well Valued ETFS S&P 500 High Yield Low Volatility ETF ASX Code: ZYUS U.S. market has been high growth since Trump’s election This cycle looks like it may be turning Investors wanting to retain U.S. exposure but remove the high growth/high volatility companies should look at ZYUS In this week’s ETFS Trade idea, we look at opportunities in defensive U.S. equities and show how it may be a good entry point for ZYUS, which under performed the broader market in 2017, but has picked-up in recent months and had standout performance in 2016. ZYUS tracks the S&P 500 Low Volatility High Dividend Index, which selects a portfolio of the lowest volatility stocks from amongst the highest yielding names in the S&P 500. The story in 2017 - defensives appeared to be out of favour For most of 2017 the U.S. economy was in expansionary territory with GDP growth rising above 4%, the S&P 500 returning 22%, volatility remaining persistently low and normalisation of monetary policy accelerating. Information technology stocks dominated, returning 39%, but other traditional growth sectors also outperformed. Materials, consumer discretionary and financials all beat the benchmark. Defensive sectors, which traditionally include utilities, consumer staples, health care and real estate, on the other hand, suffered on two fronts. Firstly, the economic conditions of a growing economy and rising interest rates were not conducive to above-market performance in sectors such as utilities, consumer staples and telecommunications. Secondly, many companies in these sectors had become over-bought and over-valued in the post-crisis scramble for stable returns and yield, where low volatility and equity-yield strategies gained significant popularity. With rates rising and bonds starting to look more attractive, asset allocations shifted causing under-performance in defensives in 2017 and into early 2018. What has happened so far in 2018? 2018-to-date has seen the U.S. move further into expansionary territory, with GDP growth now sitting at 4.7% and the Federal Reserve having raised rates twice so far. However, signs of the expansionary cycle moving into a later phase have started to appear in recent months. Long-term bond yields have stabilised, inflation has picked-up and the S&P 500 has returned only 2.6% year-to-date. In addition, through a combination of geo-political and economic events, volatility has returned, with the VIX peaking at 37.3 in February and averaging 16.3 in 2018 compared to a maximum of 16.0 and an average of 11.1 for the whole of 2017. Defensives are currently looking more attractive on a valuations basis than at any time in recent years. On a relative-PE basis, utilities, consumer staples, telecommunications and health care sectors are all currently trading at lower multiples than the S&P 500. Even if the bull market still has further to run, now could be a good opportunity to re-allocate back towards defensive sectors. While the economy is not yet showing any signs of slowing, if you believe the U.S. is currently in a late-cycle boom, then it may be prudent to prepare for a sell-off in risky-assets. How does ZYUS’s sector allocation look? As can be seen in Chart 1, ZYUS is currently most overweight real estate and utilities along with smaller over-allocations to consumer staples, energy and telecoms. Information technology, health care and financials are the biggest under-weights. Overall, relative to the S&P 500, ZYUS is 34% overweight to the traditional defensive sectors, despite being 10% underweight health care, which is no longer considered to be as defensive as it once was. How has ZYUS performed relative to the S&P 500? In 2017 ZYUS underperformed the S&P 500 by nearly 9.6% as technology stocks accelerated away. This continued into early 2018 with ZYUS under-performing heavily in both January and February as the sell-off in defensives picked-up pace. This contrasts with 2016, where ZYUS outperformed by 8.8% . Monthly performance differentials are shown in Chart 3, below. Since the end of February, however, ZYUS has outperformed in three of the four months and added 4.7% to the S&P 500 on an AUD total return basis. Volatility-wise, on a 90-day historic basis, the spread between the S&P 500 and the S&P 500 Low Volatility High Dividend Index is currently at its lowest since 2012, as shown in Chart 3. Recently the low volatility screening is providing a degree of risk-reduction even in a more concentrated, 50-stock portfolio. On a yield basis, the S&P 500 Low Volatility High Dividend Index is currently yielding 4.3%, which is more than double the yield on the S&P 500 at 1.9%. Lastly, it is worth recalling that, despite the recent under performance, the low volatility/high dividend strategy has outperformed the S&P 500 by over 6% pa since the beginning of 2000, which demonstrates its ability to outperform across cycles. How ZYUS invests ETFS S&P 500 High Yield Low Volatility ETF (ZYUS) follows a rules-based strategy, tracking its benchmark Index, and has the following features: ZYUS captures the performance of a selection of the high yielding companies from the S&P 500 Index and aims to provide stable returns with regular income. ZYUS selects the 50 lowest volatility names from a list of the 75 highest yielding stocks at each rebalance. ZYUS is rebalanced semi-annually in January and July. ZYUS is weighted in proportion to the dividend yield of each constituent, meaning that the stocks with the highest yields receive the highest weightings. ZYUS applies individual stock and sector caps to ensure diversification. ZYUS has an MER of 0.35% p.a. ZYUS has a Recommended rating by Lonsec. Summary While low volatility and defensive sector strategies have underperformed over the past 12 to 18 months, with the U.S. possibly moving towards the latter stages of the current economic cycle, it could be a good time to revisit these strategies. ZYUS provides a generally more defensive sector allocation than the broader market, uses a low-volatility screening and produces a consistently higher yield.

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Weekly ETF Monitor for week ending 29 June 2018

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Jun 29, 2018

Global equity markets declined last week on global growth expectations. The S&P 500 dropped 1.3%, led lower by technology stocks. The EURO STOXX 50 declined by 1.3% and the Nikkei 225 fell by 0.9%. China's Shanghai Composite continued its recent decline, having now dropped over 22% from its January peak. Domestically the S&P/ASX 200 dropped 0.5% as gains in materials and energy stocks mostly offset declines in the financial and health care sectors. Australian resources ETFs (QRE and OZR) were among the top performers for the week, while VanEck Vectors ChinaAMC A-Share ETF (CETF) and ETFS Morningstar Global Technology ETF (TECH) were amongst the biggest decliners. Bond yields declined and the U.S. dollar strengthened last week. The Australian dollar ended the week lower at US74.05c, having dropped as far as US73.24c mid-week. The Chinese renminbi declined by 1.8% against the U.S. dollar. Oil prices rallied strongly on expectation of reduced supply. WTI crude gained 8.1% to end the week at US$74.15/bbl. Precious metals declined across the board, with gold down 1.4% and silver down 2.1%. The Australian ETF market saw inflows of $100m into and outflows of $82m from domestically domiciled funds last week. The largest inflows were into BetaShares Australian Sustainability Leaders ETF (FAIR). The largest outflows were from SPDS S&P/ASX 200 Fund (STW) and SPDR MSCI Australia Select High Dividend Yield Fund (SYI).

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Weekly ETF Monitor for week ending 22 June 2018

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Jun 22, 2018

Global equity markets fell on trade concerns last week, with the S&P 500 down 0.9%, the EURO STOXX 50 dropping 1.8% and the Nikkei 225 down 1.5%. Chinese equities also took a hit, with the Shanghai Composite Index down 4.4%. Locally, the S&P/ASX 200 defied the trend, gaining 2.2% as the financial sector rebounded from its recent dip. Financial sector ETFs (MVB, OZF and QFN) were all amongst the top performing funds for the week, returning in excess of 5%. Chinese equity funds (CETF and IZZ) were amongst the week's poorest performers, declining by more than 4%. The Australian dollar ended the week slightly lower at US74.40c, having dropped to a mid-week low of US73.46c. The euro and yen also gained against the U.S. dollar. U.S. 10-year Treasury yields declined by 3 basis points. OPEC agreed to loosen output restrictions last week, though the added production fell short of expectations sending WTI Crude 5.4% higher to US$68.58/bbl. Precious metals declined across the board, with gold down 0.7%. ETFS Physical Silver (ETPMAG) and ETFS Physical Palladium (ETFMPD) were amongst the week's biggest decliners. The Australian ETF market saw inflows of $60m into and outflows of $14m from domestically domiciled funds last week. The largest inflows were into BetaShares Australian High Interest Cash ETF (AAA) and global sustainability ETFs (ETHI and ESGI). The largest outflows were from BetaShares Australian Dividend Harvester Fund (HVST).

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Weekly ETF Monitor for week ending 15 June 2018

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Jun 15, 2018

Global equity markets were mixed last week with North Korea talks dominating the news flow, though with limited market reaction. The U.S. announced tariffs on $50bn of Chinese imports late in the week, sending index futures lower after market close on Friday. The S&P/ASX 200 added 0.8%, with Utilities and Telcos being the top performing sectors. The S&P 500 ended marginally higher, while the EURO STOXX 50 added 1.7% as the euro weakened. ETFS Morningstar Global Technology ETF (TECH) and iShares Global Consumer Staples ETF (IXI) were the top sector plays for the week. The Federal Reserve raised its target rate by 25 basis points, in line with market expectation. The Australian dollar fell by 2.1% to US74.42c. The euro declined by 1.4% against the U.S. dollar as the ECB said it would end QE by year-end. Commodities mostly declined last week. WTI Crude was down by 1.0% to US$65.06/bbl as speculation mounted that this week's Opec meeting will see an agreement on increased supply. Precious metals declined across the board following the tariff announcement, with gold down 1.5%. ETFS Physical Silver (ETPMAG), which fixed its NAV before the announcement, was the top performing ETF for the week. The Australian ETF market saw inflows of $64m into and outflows of $25m from domestically domiciled funds last week. The largest inflows were into iShares S&P/ASX 200 ETF (IOZ) and domestic and global sustainability funds (FAIR and ETHI). The largest outflows were from USD and YMAX.

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Weekly ETF Monitor for week ending 8 June 2018

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Jun 12, 2018

Global equity markets returned to risk-on last week. The S&P/ASX 200 gained 0.9%, led higher by energy and mining sectors. Three resources ETFs (QRE, OZR and MVR) were amongst the top performers for the week. The S&P 500 gained 1.6% and the Nasdaq 100 hit a new high. In Asia the Nikkei 225 added 2.4% and FTSE China A50 Index gained 0.8% as China A-shares debuted in the MSCI Emerging Markets Index. In Europe, the EURO STOXX 50 declined by 0.2% as the fall-out from the Italian election continued to impact market confidence. The Australian dollar gained 0.4% against the US dollar last week to end the week just above US76c. The euro regained some lost ground adding 0.9% against the U.S. dollar. U.S. 10-year Treasury yields rose 4 basis points. WTI Crude declined slightly to US$65.74/bbl. Gold added 0.4%, while silver gained 2.3%. ETFS Physical Palladium (ETPMPD) returned 1.9% for the week. The Australian ETF market saw inflows of $126m into and outflows of $17m from domestically domiciled funds last week. The largest inflows were into SPDR S&P/ASX 200 Fund (STW) and other domestic equity funds (QOZ and MVW). The largest outflows were from domestic dividend and strategy ETFs; RDV, HVST and MVOL.

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ETF Volatility - Truths and Misconceptions

May 31, 2018

ETFSTrade idea:  ETF Volatility - Truths and Misconceptions In this week’s ETFS Trade idea, we look at the misconceptions around ETFs causing volatility and explain why these are myths. High level observations: ETFs have been unfairly targeted as the cause of market volatility ETFs tracking the ASX 200 have successfully stayed in line with the volatility of the benchmark ETFs can cause movements in the underlying market but so do active funds and investors buying securities directly In nearly all cases ETFs match the volatility of the market they track and this is what should be expected from an index tracking fund

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Weekly ETF Monitor for week ending 18 May 2018

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May 18, 2018

Global equities were mixed last week. The S&P/ASX 200 declined by 0.5% with financials, energy and resources performing strongly in the face of rising interest rates and energy prices, while utilities and telecommunications suffered. The S&P 500 declined 0.5% with energy, industrial and materials sectors also gaining ground at the expense of real estate, utilities and IT. Small caps outperformed in the U.S. with IJR and IRM amongst the top performing ETFs for the week. The EURO STOXX 50 gained 0.2% as Italy moved closer to a populist coalition, while the Nikkei 225 gained 0.8%. BetaShares Global Energy Companies ETF (FUEL) was the top performing ETF for the week. VanEck Vectors Australian Banks ETF (MVB) was the top performing domestic equity fund. The U.S. 10-year Treasury yield jumped 9 basis points to reach a new 7-year high above 3%, while the Australian 10-year Government Bond yield rose 12 basis points. The U.S. dollar gained against the Aussie, euro and yen last week. The Australian dollar ended the week at US75.1c. Crude oil continued to climb, with Brent Crude briefly topping US$80/bbl for the first time since 2014. Precious metals fell on rate-rise concerns, with gold suffering its worst week of 2018, down 2.0%. Platinum continued its downwards trajectory in 2018, falling 3.9% for the week to end 12.7% below its January peak. The Australian ETF market saw inflows of $103m into and outflows of $87m from domestically domiciled funds last week. The largest inflows were into BetaShares Australian High Interest Cash ETF (AAA), while the bulk of outflows were from SPDR S&P/ASX 200 Fund (STW).

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Weekly ETF Monitor for week ending 11 May 2018

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May 11, 2018

Global equities rallied last week across most major markets. The S&P 500 added 2.4% on strong corporate earnings and economic data. Energy stocks were the top performing sector for the week, responding to higher oil prices in the wake of the U.S. withdrawal from the Iran nuclear agreement. Technology stocks also performed strongly, with HACK and NDQ both amongst the top performing funds on a price return basis. The EURO STOXX 50 gained 0.4% as Italy neared an agreement for a coalition government. Elsewhere the Nikkei 225 gained 1.3% while the MSCI Emerging Markets Index added 2.5%. Domestically the S&P/ASX 200 gained 0.9% on strong performance across the resources and energy sectors. The U.S. dollar gained against the euro and yen last week. The Australian dollar ended the week slightly higher at US75.4c. Crude oil continued to rally, reaching it highest levels since late 2014. BetaShares Crude Oil Index ETF (OOO) was amongst the top performing funds for the week. Precious metals also advanced, with gold adding 0.4% to US$1,319/oz and silver adding 0.8%. The Australian ETF market saw inflows of $103m into and outflows of $72m from domestically domiciled funds last week. The largest inflows were into BetaShares Australia 200 ETF (A200) as well as cash and fixed income ETFs (IAF, PLUS and AAA), while the bulk of outflows were from BetaShares S&P/ASX 200 Resources Sector ETF (QRE).

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Weekly ETF Monitor for week ending 4 May 2018

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May 08, 2018

The S&P/ASX 200 gained 1.8% last week, its best weekly performance in over a year. Every sector registered a positive return for the week, with Financials, Materials and Real Estate sectors being the largest contributors. Small cap stocks also performed strongly, with three domestic small cap ETFs (MVS, ISO and SSO) all returning close to 3% for the week. Offshore, the S&P 500 declined modestly, despite a technology-driven recovery towards the end of the week. ETFS Morningstar Global Technology ETF (TECH) was the top performing international fund for the week. The recent U.S. dollar rally continued last week as the Fed expressed confidence in the U.S. inflation outlook. The DXY Dollar Index gained 1.1% and reached new 2018 highs. The Australian dollar dropped below US75c before recovering in late trading on Friday. The euro declined by 1.4% against the U.S. dollar following disappointing eurozone inflation numbers. WTI crude oil continued to rally, adding 2.4% for the week. Precious metals mostly retreated, with gold declining 0.7% to US$1,315/oz. The broad Bloomberg Commodity Index gained 0.7%. The Australian ETF market saw inflows of $283m into and outflows of $60m from domestically domiciled funds last week. Broad-based domestic equity funds saw $82m of inflows across VAS, STW, MVW and EX20, while investors switched from Vanguard MSCI Index International Shares Hedged ETF (VGAD) to its unhedged counterpart (VGS).

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Weekly ETF Monitor for week ending 27 April 2018

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Apr 27, 2018

Global equity markets mostly advanced last week as North Korea risks receded. The S&P/ASX 200 added 1.5%, the EURO STOXX 50 gained 0.7% and the Nikkei 225 added 1.4%. The S&P 500 ended the week flat after recovering from some disappointing earnings results, mainly across the industrials sector. Defensive sectors returned to favour, with global and domestic property funds (DJRE and RENT) amongst the top performers. ETFS S&P 500 High Yield Low Volatility ETF (ZYUS) benefited from strong performances across the utilities and real estate sectors, returning 3.3% for the week. The U.S. dollar strengthened last week, with the DXY Dollar Index gaining 1.4%, and U.S. 10-year Treasury yields reached 3%. ETFS Physical U.S. Dollar ETF (ZUSD) returned 1.4% for the week as the Australian dollar dropped below US76c for the first time in 2018. WTI crude oil held firm last week, close to its recent 3-year highs above US$68/bbl. Precious metals retreated, with gold declining 0.9% and silver falling 3.6%. The broad Bloomberg Commodity Index fell 0.5%. The Australian ETF market saw inflows of $66m into and outflows of $23m from domestically domiciled funds last week. The largest inflows were into iShares CORE Composite Bond ETF (IAF) and iShares Edge MSCI Multifactor ETF (WDMF). The largest outflows were from iShares S&P/ASX 20 ETF (ILC).

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Conflicting signals in the U.S. - Time for caution?

Apr 22, 2018

ETFSTrade idea – Conflicting signals in the U.S. - Time for caution? ETFS S&P 500 High Yield Low Volatility ETF (ZYUS) ETFS Physical U.S. Dollar ETF (ZUSD) The U.S. economy continues to surprise to the upside with markets rebounding strongly. Yet rising inflation, subdued long-term rates and geo-political risks remain a concern. For a defensive U.S. equity exposure, investors should consider ZYUS. Avoiding equity-risk and looking for currency? Consider ZUSD. In this week’s ETFS Trade idea, we look at the outlook in the U.S. for monetary policy, the economy and the dollar. We highlight two funds that can be used in different ways to play the U.S. story; ZYUS and ZUSD. Rate rises on the horizon… Market expectations for multiple rate rises from the U.S. Federal Reserve in the remainder of 2018 have firmed in recent weeks. The economy is still in expansionary territory, though inflationary concerns are becoming more pertinent. US Core CPI rose to 2.1% in March, its highest level in over a year, while March PPI numbers also exceeded expectations. The Fed Beige Book reported strong economic activity, but showed significant business concerns around Trump’s planned steel and aluminium tariffs. Figure 1 below shows the current probabilities the futures market is implying for Fed activity for the remainder of 2018, with two further hikes narrowly the most likely outcome. ...but longer-term growth concerns are becoming more pronounced. While short-term yields have been rising, the yield curve has seen a substantial flattening, with the difference between 2-year and 10-year Treasury yields at their lowest since late-2007 (see Figure 2). Speculation of a curve inversion is starting to emerge. Historically this would indicate that the peak of the current rate cycle is approaching and present a subdued outlook for growth. U.S. dollar weakness continues… Despite rising short-term rates, the U.S. dollar has been in a steady down-trend since early 2017, as shown in Figure 2. This can be partly attributed to President Trump’s rhetoric regarding trade and towards China, but also to a gradual unwinding of GFC-era flight-to-safety trades. …but political risks could be a catalyst With the impositions of tariffs and a potential trade with China, military action in Syria, sanctions against Russia and talks with North Korea on the horizon and February’s equity market volatility still fresh in the memory, there is no shortage of event risk candidates looming. With external events and any evidence of longer-term U.S. economic strength both likely to have a positive impact on the dollar, it appears that near-term risks may lie to the upside. Why ZYUS? ZYUS invests in U.S. stocks from the S&P 500 screened for both high yield and low volatility. As such, the fund tends to be overweight defensive sectors like utilities and real estate and underweight more volatile sectors like technology and financials. The S&P 500 Low Volatility High Dividend Index, which ZYUS tracks, has outperformed the S&P 500 by over 3.6% per annum over the past 10 years and has outperformed on a monthly-basis in over 70% of months during which the S&P 500 has posted a negative return. After underperforming the S&P 500 by over 9.5% in 2017, mainly due to its underweight to technology, ZYUS has recently picked up. Outperformance in March 2018 was over 3% as volatility hit the tech sector and risk-aversion appeared. ZYUS should be considered by investors wanting to maintain U.S. equity exposure, but take a more cautious view on growth and the landscape ahead. Why ZUSD? Investors looking for pure exposure to the U.S. dollar strengthening against the Australian dollar without taking on any equity risk may consider ZUSD, which tracks the exchange rate by investing in short-term USD deposits. How ZYUS invests ETFS S&P 500 High Yield Low Volatility ETF (ZYUS) is well positioned for investors for the following reasons: ZYUS captures the performance of a selection of 50 high yielding U.S shares selected from the S&P 500 Index and rebalanced twice annually. ZYUS initially screens stocks based on dividend yield, reducing the 500 stocks down to 75. ZYUS then selects the 50 stocks with the lowest volatility for inclusion and weights them according to their dividend yield. ZYUS has an MER of 0.35% p.a. ZYUS has a Recommended rating by Lonsec. How ZUSD invests ETFS Physical U.S. Dollar ETF (ZUSD) is well positioned for investors for the following reasons: ZUSD captures the performance of the U.S. dollar against the Australian dollar, by investing all of its assets in U.S. dollar bank deposits. ZUSD currently holds overnight USD deposits with Australia and New Zealand Banking Group Limited (ANZ), earning interest at 1.30% p.a. ZUSD has an MER of 0.30% p.a., making it the lowest cost U.S. dollar exposure available on the ASX. ZUSD has a Recommended rating by Lonsec.

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Weekly ETF Monitor for week ending 20 April 2018

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Apr 20, 2018

Global equity markets advanced last week. The S&P 500 added 0.5% on strong earnings reports, moving into positive territory YTD before pulling-back on Friday. The EURO STOXX 50 added 1.3%, while the Nikkei 225 gained 1.8%. Domestically, the S&P/ASX 200 Index was led higher by the resources sector, adding 0.7%. Domestic resource sector ETFs (QRE and OZR) were the top performing equity funds, returning in excess of 3.7% for the week. iShares MSCI Singapore ETF (ISG) was the top performing international equity fund for the week. The U.S. dollar strengthened last week, with the DXY Dollar Index gaining 0.6%. U.S. 10-year Treasury yields neared 3%, while the 2yr-10yr yield spread dropped to levels not seen since 2007. The Australian dollar dropped 1.2%, ending the week at US76.72c. WTI crude oil added 1.4% to end the week at US$68.38/bbl, reaching new 3-year highs. Gold dropped 0.7% to US$1336/troy ounce, but continues to trade well above its longterm moving average. ETFS Physical Palladium (ETPMPD) and ETFS Physical Silver (ETPMAG) were the top performing funds for the week, returning 5.9% and 5.0% respectively. The Australian ETF market saw inflows of $82m into and outflows of $13m from domestically domiciled funds last week. The largest inflows were into BetaShares U.S. Dollar ETF (USD) and ETFS Physical Gold (GOLD). Outflows were spread across a range of equity and cash funds.

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Weekly ETF Monitor for week ending 13 April 2018

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Apr 13, 2018

Global equities rose last week despite U.S. military action in Syria and further global trade concerns. The S&P 500 gained 2.0% as company tax cuts started to flow into Q1 earnings reports. Energy and technology were the top performing sectors. Elsewhere the EURO STOXX 50 rose 1.2%, while the Nikkei 225 gained 1.0%. Domestically, the S&P/ASX 200 added 0.7%. Energy and resource sector ETFs (FUEL and QRE) were amongst the top performers last week, while defensive sector funds like infrastructure (CORE) and real estate (MVA) were amongst the poorest performers. U.S. CPI inflation rose to 2.4% pushing the 2yr-10yr Treasury spread to its narrowest since 2007 and firming rate-rise expectations. The Australian dollar gained 1.0%, ending the week at US 77.64c. The euro gained 0.4% against the U.S. dollar, while the U.S. dollar gained 0.4% against the yen. Crude oil rallied on U.S. involvement in Syria. WTI crude added 8.6% for the week. OOO was the week's top performing ETF, returning 8.5%. Gold gained 1.0% on safe-haven flows, while palladium jumped 9.2% on Russian supply concerns. ETPMPD returned 7.2% for the week. The Australian ETF market saw inflows of $149m into and outflows of $26m from domestically domiciled funds last week. The largest inflows were into BetaShares S&P/ASX 200 Resources Sector ETF (QRE) and a range of equity and cash funds. The largest outflow for the week was from UBS IQ Morningstar Australia Dividend Yield ETF (DIV).

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Weekly ETF Monitor for week ending 6 April 2018

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Apr 10, 2018

US-China trade tensions dominated financial markets last week. The S&P 500 fell by 1.4%, with technology and industrial stocks leading the decline. The VIX peaked above 24.0 on Tuesday. In Europe, PMI data failed to meet expectations, but the EURO STOXX 50 still added 1.4%. Domestically, the S&P/ASX 200 gained 0.5%. Australian resource sector ETFs were amongst the best performers last week, with MVR, QRE and OZR all returning in excess of 1.6%. The Australian dollar range traded last week, ending slightly higher at US 76.84c. The U.S. dollar gained against both the euro and yen. U.S. and Australian treasury yields both rose. WTI crude oil dropped 4.4% for the week. Gold gained 0.6% as investors looked to diversify out of volatile equity markets. Platinum declined 1.6% and palladium dropped 5.0% as auto-industry concerns around U.S. - China trade tariffs heightened. Palladium was further impacted by potential sanctions on Russia, the world's largest producer. ETPMPD, OOO and ETPMPT were all amongst the poorest performing funds for the week. The Australian ETF market saw inflows of $27m into and outflows of $246m from domestically domiciled funds last week. Inflows were spread across a range of equity and fixed income funds. iShares S&P/ASX 200 ETF (IOZ), saw redemptions of $185m and BetaShares Australian High Interest Cash ETF (AAA) lost $56m in assets.

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The Aussie yield ETF that challenges active managers

Apr 09, 2018

ETFS Trade idea – The Aussie yield ETF that challenges active managers ETFS S&P/ASX 300 High Yield Plus ETF (ZYAU) In the wake of S&P Dow Jones Indices recently published SPIVA® report, this week we have taken a look at how our ETFs have fared against active managers over time. This note highlights ZYAU, which has produced strong excess returns since inception and outperformed many well-known active managers. Investors looking for cost-effective excess returns from domestic equities should consider evaluating ZYAU. In this week’s ETFS Trade idea, we look at the results of the SPIVA® Australia Scorecard released by S&P Dow Jones Indices last month and compare the performance of ZYAU to a collection of well-known active funds focused on Australian equity-income. SPVIA® Australia Scorecard 2017 S&P Dow Jones Indices have been publishing SPIVA® Scorecards for major markets since 2002 and have become leading contributors to the active versus passive debate worldwide. The SPIVA® Scorecards track the performance of active fund managers in each market against benchmark indices across a variety of categories and across multiple time horizons. Looking specifically at Australian large-cap equity funds, as at the end of 2017 59% of funds underperformed the S&P/ASX 200 Index. Over 3, 5 and 15 year periods, respectively, 67%, 63% and 77% of funds underperformed the national benchmark. An equally-weighted portfolio of active funds would have underperformed the benchmark over 1, 3, 5, 10 and 15 years. Similarly, in the mid and