Pacer ETFs has reached an agreement with Citi to license the bank's proprietary indices for use in Pacer's exchange-traded funds. Under the agreement, Citi will license their proprietary indices to Pacer ETFs, who act as the fund sponsor and will create ETFs to provide institutions with strategy-driven solutions for risk management and long-term growth.

Pacer ETFs has amassed over US$1bn in AUM in two years through their two suites of ETFs: Trendpilot Series which offers four trend following strategies that seek to participate in the market when it is trending up, maintain some exposure during short-term market declines, and exit the market when it is trending down; and Cash Cows Index Series which also comprises four ETFs using a passive rules-based security selection process to identify top companies in an index universe based on their free cash flow yield.

Goldman shies away from ETF market making

Goldman Sachs Group has told fund providers it is scaling back its role as a lead market maker (LMM) for ETFs and has already reduced the number of trackers it supports, according to a Reuters report based on disclosures, fund managers and other trading firms.

The report pointed at 'relatively high regulatory and other costs of operating' as an LMM have caused the withdrawal by the US investment bank, one of the few large banks remaining in that role. The move points at a shift in the market making landscape as many assets move away from traditional broker-dealers towards smaller, electronic-focused upstarts. While brokers-dealers can typically trade as they please, firms acting as LMMs must consistently offer competitive buy-and-sell quotes in their assigned ETFs, and they receive rebates on exchange fees. Some also provide start-up financing for the funds.

The LMMs risk some of their own capital to buy and sell ETFs to help maintain their liquidity. Unlike smaller rivals, big banks like Goldman Sachs are subject to strict capital requirements by regulators, putting them at a disadvantage when it comes to costs in an already low-margin business. Goldman continues to make issuing its own ETFs through its asset management unit a priority, however, even as it steps back from providing the infrastructure to keep such funds trading. Goldman is a leading player in ETF trading and holds a 9% market share for US ETF trading at the end of the second quarter, according to exchange traded volume from NYSE Arca and Nasdaq.

Goldman did not respond to requests for comment on the bank's market-making business.

BMO Asset Management shifts five ETFs to Solactive

BMO Asset Management has announced pending changes to the underlying indices and names of a number of its equal weight BMO ETFs. Effective on or about September 15, 2017, the Equal Weight BMO ETFs will start tracking new indices as set out in the table below:

As a result of the index changes, the names of the Equal Weight BMO ETFs will also be changed. The changes to the indices align with the current investment objectives and strategies of the Equal Weight BMO ETFs. The frequency of rebalancing for the Equal Weight BMO ETFs remains the same.

Solactive will be the new index provider for the Equal Weight BMO ETFs and is currently the index provider for eight other BMO ETFs. Since its creation in 2007, Solactive has become one of the key players in the indexing space. Solactive currently calculates indices for 350 clients in Europe, North America and Asia with approximately USD$100bn invested in products linked to its indices. Solactive indexes have also made an impact in the global structured products market with over 1,000 products featuring the German firm's gauges across jurisdictions.

Harvest eyes FTSE China for ETF listing in Shanghai

FTSE Russell has licensed the FTSE China A50 Index to Harvest Fund Management (HFM). The China fund manager has listed the Harvest FTSE China A50 Index ETF on Shanghai Stock Exchange (SSE) becoming the first domestically listed exchange-traded fund (ETF) to track a FTSE Russell index.

The new ETF will offer investors a channel to participate in the growing blue-chip market in China. The FTSE China A50 Index represents the 50 largest A-Share companies by market capitalisation, adjusted for liquidity and tradability. A-Shares are stocks of companies incorporated in mainland China that trade in Chinese yuan on domestic exchanges such as the Shanghai Stock Exchange and the Shenzhen Stock Exchange.

The index is dominated by the financial sector, which has a weight of approximately 62%, with banks accounting for about 39%. Major holdings include Ping An Insurance, China Merchants Bank, Industrial Bank, and China Minsheng Banking. The index has outperformed the FTSE China A All-Share Index, a broader representation of China A Share performance, over the previous one year (21.0% vs 7.0%). Globally, around $30bn AUM is benchmarked to or tracking FTSE China Indexes. China A-shares are typically only available for purchase by citizens of mainland China, which is why many ETFs covering this segment have been structured synthetically using swaps. In recent years, Chinese authorities have extended the Renminbi Qualified Foreign Institutional Investors (RQFII) scheme which allows foreign investors to hold A Shares physically. A number of ETFs have been launched under this scheme.

Deutsche AM deploys sterling-hedged MSCI World Index

Deutsche Asset Management (Deutsche AM) has listed a sterling-hedged share class for its db x-trackers MSCI World Index Ucits ETF on the London Stock Exchange (LSE). Launched on July 31, the '2D' sterling-hedged share class has an annual all-in-fee of 0.29% and tracks the MSCI World index. The index has a 59.4% weighting towards the US, and 8.7% and 8.6% weighting in the UK and Japan respectively, while the biggest holding is Apple (2.1%).

The unhedged version is part of the firm's Core ETF suite, which was rebranded to Xtrackers last month as the German bank moved to consolidate its ETF and exchange-traded commodities (ETC) in the next step in pushing forward its growing passive business. The unhedged version has an all-in-fee of 0.19% while the ETF range tracking the MSCI World index has $2.4bn in assets under management (AUM).

Deutsche AM has also listed a smart beta bond index ETF on Germany's Xetra. The db x-trackers iBoxx USD Emerging Sovereigns Quality Weighted UCITS ETF offers access to high quality emerging market government bonds with a currency hedge. The bond index ETF enables investors to participate in the performance of emerging market government bonds denominated in US dollars that meet particular quality criteria.

The benchmark index components are weighted according to fundamental data such as per capita GDP or the rate of inflation.

IA pushes ETF committee

The Investment Association (IA) has created an ETF committee, comprising a number of the industry's major passive fund providers to discuss key issues related to the sector such as regulation and educating investors about the products.
The committee, which has been in existence for a few months, includes representatives from Vanguard, Invesco PowerShares, Amundi, Deutsche AM, HSBC GAM and BlackRock's iShares, as well as Lyxor AM.

The committee will meet regularly to discuss regulatory issues, to provide one voice through the IA to promote exchange-traded products (ETPs) and educate investors on how they work and their benefits. As at January 2017, there were 567 ETF products domiciled in Europe available for distribution in the UK, according to ETF analysis platform TrackInsight.

Last year, ETF providers BMO GAM, ETF Securities, Source (in association with LGIM), and WisdomTree Europe partnered to launch the ETF Forum, which aims to promote awareness of the sector among the adviser and wealth management firms.

Transamerica debuts smart beta suite

Transamerica Asset Management has launched DeltaShares, a new suite of strategic beta ETFs designed to provide core equity strategies with an embedded risk-management feature. Transamerica Asset Management says DeltaSahres is the first ETF suite to track the S&P Managed Risk 2.0 Index Series. It was built to provide investors with the ability to track the performance of a given segment of the equity market, while seeking to control volatility.

The suite includes the DeltaShares S&P 500 Managed Risk ETF, which tracks the S&P 500 Managed Risk 2.0 Index and is designed to measure US large-cap equities using a managed risk strategy seeking to limit losses and capture the upside in rising markets.

The DeltaShares S&P 400 Managed Risk ETF which is designed to measure US mid-cap equities, and the DeltaShares S&P 600 Managed Risk ETF is built to measure US small-cap equities. Meanwhile, the DeltaShares S&P International Managed Risk ETF tracks the S&P EPAC Ex. Korea LargeMidCap Managed Risk 2.0 Index which focuses on broad international developed markets.

Milliman Financial Risk Management, a Chicago-based SEC-registered investment adviser, will act as sub-adviser to the suite.

India's government launches Bharat-22

India's Finance Minister Arun Jaitley announced last Friday (July 4) the launch of a new ETF called Bharat-22, which comprises 22 scrips including ONGC, IOC, ITC, SBI and Axis Bank. This is the second ETF from the government after it raised over Rs8,509 crore ($78m) from three tranches of the CPSE ETF.

Bharat-22 will have a diversified portfolio of six sectors, including energy, fast-moving consumer goods (FMCG), finance, basic material and industrial and utilities. ICICI Prudential AMC will be the ETF manager and Asia Index Private Limited will be the Index provider

Apart from banks and CPSEs, the ETF will include shares of government's strategic holding in Axis Bank, ITC and L&T held through SUUTI (Specified Undertaking of Unit Trust of India) as well as energy and mining companies ONGC, IOC, BPCL, Coal India and Nalco. In the Budget Speech of 2017-18, the government said it will use ETF as a vehicle for further disinvestment of shares.

The government plans to raise a total of Rs72,500 crore through divestment in the current fiscal year.

Fubon launches Hang Seng China Enterprises Index ETF

Hang Seng Indexes has licensed the Hang Seng China Enterprises Index (HSCEI) to Fubon Asset Management Company Limited to serve as the underlying index for the creation of an ETF listed on the Taiwan Stock Exchange.

The HSCEI is the leading barometer for tracking the performance of mainland China enterprises listed in Hong Kong. Earlier in 2016, Fubon launched two ETFs that track the HSCEI Short Index and the HSCEI Leveraged Index respectively in Taiwan. The launch of the new ETF provides Taiwanese investors with a wider range of HSCEI products with different risk exposures.

The new ETF will bring the number of exchange-traded products linked to indexes in the Hang Seng Family of Indexes to 66 - with listings on 17 different stock exchanges across the world. As at 30 June 2017, assets under management in ETPs linked to indexes in the Hang Seng Family of Indexes had reached a total of more than $27bn.