The Markets June 7, 2007

ETFs Gain $20B in May

U.S.-listed ETF assets rose by approximately $20 Billion in May with International, Style, Size, Specialty and Broad Market ETFs experiencing considerable asset growth.
Reported by
State Street Global Advisors’ (SSgA) latest monthly statistical report indicated that International, Style, Size, Specialty and Broad Market ETFs enjoyed gains of $6 billion, $5 billion, $5 billion, $2 billion and $1 billion respectively.
As of May 31, 2007, 507 ETFs in the U.S. were managed by 16 ETF managers, with assets totaling approximately $480 billion. Overall, industry assets increased by about 4%.
Thirty-two new ETFs were launched during May. State Street launched five ETFs tracking domestic fixed income market segments. BGI, Van Eck, Claymore, and First Trust Advisors launched 5, 1, 1 and 20, respectively.
In terms of managers, Barclays Global Investors (BGI) had the largest AUM with $284 billion in 136 ETFs, followed by State Street with $104 billion in 58 ETFs.
International ETFs saw assets grow by over $6 billion in May. iShares MSCI (EFA) was the category leader, contributing over $1 billion in asset growth.
Also in May, according to the SSgA report:
  • style ETFs showed strong growth for the month, adding over $5 billion.
  • size ETFs continued their growth, collectively adding approximately $5 billion.
  • sector ETFs slid this month, losing approximately $401 million.
  • specialty ETFs gathered assets for the month, adding over $2 billion.
As a group, sector-based ETFs experienced a loss of $401 million in assets. Health Care added the greatest assets for the period, climbing by $436 million.
More information about the SSgA data is at http://www.ssgafunds.com/etf/index.jsp.
Compliance June 6, 2007

Plan Sponsors Want More Commission Disclosure

More than two-thirds of plan sponsors say they want the Securities and Exchange Commission (SEC) to draw clearer lines for disclosure requirements for commissions paid to brokers for research and trade execution.
Reported by

Currently, just more than half of plan sponsors surveyed by Greenwich Associates and Capital Institutional Services (CAPIS) say their investment managers disclose total commissions and another 38% say their managers will disclose that information only upon request. Meanwhile, 35% of investment managers say they disclose the commissions they pay to brokers.

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More than half (55%) of plan sponsors say mandatory disclosure of commissions for both research and trading would benefit them and 86% say disclosure by investment managers of broker commissions should be required.

However, half of participating investment managers support disclosure requirements for total commissions, 41% think managers should be required to split out commissions paid for research overall, half support mandatory disclosure for commissions used for third party research and 45% think managers should be required to report the amount paid to executing brokers for proprietary research.

Only 20% of plan sponsors say their investment managers give them a more specific breakdown of commissions paid for research in general or third party research in particular; between 40% and 50% say their managers do not disclose commission data at this level of detail. Nearly a quarter of investment managers say they take the next step and split out the total amount of commissions paid for research.

More than 60% believe managers should be required to split out the amount of commissions paid for research overall and for third party research as a separate line item, and more than half want managers to report total commissions paid to executing brokers for proprietary research.

Forty percent of investment managers think that the use of proprietary research will decline as a result of increases in disclosure and almost 30% believe that greater disclosure will lead to reductions in overall commissions and lower quality of research, which will in turn have a negative impact on investment performance.

The study is based on interviews with 43 investment managers and 37 plan sponsors.

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