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investors were charging, ProShares<br />
was explicit in disclosing particular<br />
risks associated with investing in its<br />
leveraged and inverse ETFs.<br />
He said that the registration<br />
statements at <strong>issue</strong> “stated in plain<br />
English” that the ETFs’ objectives<br />
were daily only, and their performance<br />
could “diverge significantly”<br />
from the underlying index when they<br />
were held for longer than one day.<br />
Russell Debuts ‘GeoExposure’<br />
Index Family<br />
Russell Investments rolled out a<br />
group of indexes in mid-September<br />
that serve up emerging markets exposure<br />
through portfolios <strong>com</strong>prising<br />
developed-market <strong>com</strong>panies.<br />
In what the <strong>com</strong>pany calls its<br />
GeoExposure Index series, Russell<br />
designed benchmarks made up of<br />
stocks of developed-country <strong>com</strong>panies<br />
that derive significant portions of<br />
their revenues from emerging economies.<br />
The <strong>com</strong>pany argued that where<br />
a <strong>com</strong>pany is based no longer is crucial<br />
in determining how it makes money.<br />
The methodology relies on financial<br />
statement analysis expertise from<br />
the financial information firm Revere<br />
Data to estimate just how much of a<br />
<strong>com</strong>pany’s revenue stream is <strong>com</strong>ing<br />
from emerging markets, Russell said.<br />
The indexes factor in not only<br />
what percentage of a <strong>com</strong>pany’s revenue<br />
originates in emerging markets<br />
but also the total dollar revenue<br />
<strong>com</strong>ing in from the region. Each<br />
<strong>com</strong>pany’s weighting in the mix is<br />
designed to reflect the significance of<br />
this exposure by taking into account<br />
the percentage of revenue, the dollar<br />
amount and the <strong>com</strong>pany’s market<br />
capitalization. The intention, according<br />
to a Russell representative, is to<br />
eliminate size bias and improve the<br />
tradability of the indexes.<br />
The benchmarks are created from<br />
existing Russell Global indexes and<br />
are rules-based. The series initially<br />
consists of four indexes:<br />
• Russell 1000 Emerging Markets<br />
GeoExposure Index<br />
• Russell Developed Large<br />
Cap Emerging Markets<br />
GeoExposure Index<br />
• Russell Developed Europe<br />
Large Cap Emerging Markets<br />
GeoExposure Index<br />
• Russell Developed ex-North<br />
America Large Cap Emerging<br />
Markets GeoExposure Index<br />
FTSE Signs Deal With<br />
Chinese Exchange<br />
FTSE is teaming up with a subsidiary<br />
of the Shenzhen Stock Exchange<br />
to develop new indexes based on<br />
Chinese A-Shares, with a particular<br />
focus on alternative-weighting<br />
methodologies and socially responsible<br />
investing, the index provider<br />
said in early September.<br />
Under a new agreement, FTSE and<br />
the Shenzhen Securities Information<br />
Co. Ltd will undertake new indexrelated<br />
research and create specialized<br />
A-Share indexes based on so-called<br />
intelligent beta indexing methodologies<br />
and/or on ESG standards that screen<br />
<strong>com</strong>ponents according to environmental,<br />
social and governance parameters.<br />
With an established data license<br />
agreement in place, the agreement<br />
signed in September builds<br />
on an existing relationship with the<br />
Shenzhen Stock Exchange, FTSE said.<br />
Shenzhen Securities Information<br />
Co. Ltd is the organization authorized<br />
by the Shenzhen Stock Exchange to<br />
manage its securities information.<br />
China A-Shares are securities from<br />
mainland China-based <strong>com</strong>panies,<br />
and have been mostly off limits to<br />
foreign investment and tightly regulated<br />
by the government. However,<br />
ongoing financial reforms that aim to<br />
improve foreign investment in mainland<br />
<strong>com</strong>panies are slowly making<br />
A-Shares more accessible.<br />
FocusShares Closes Up Shop<br />
FocusShares, the ETF unit of brokerage<br />
firm Scottrade, announced in<br />
early August it was liquidating its<br />
entire roster of 15 ETFs due to the<br />
funds’ failure to attract enough assets.<br />
The funds had <strong>com</strong>bined net<br />
assets of some $100 million at the<br />
time of the announcement. They last<br />
traded on Aug. 17, and closed to new<br />
investment as of Aug. 20.<br />
Any investor still holding any<br />
of the ETFs by Aug. 30 was promised<br />
a cash distribution equal to the<br />
amount of the net asset value of<br />
those shares as of that date, including<br />
any capital gains and dividends.<br />
There will be no fees tied to that.<br />
The move came just a few short<br />
months after FocusShares launched<br />
an aggressive marketing campaign<br />
designed to bring investor attention<br />
to its low-cost funds. At that time,<br />
the <strong>com</strong>pany hoped to bring to the<br />
limelight the fact that some of its<br />
ETFs were the cheapest on the market<br />
and that Scottrade clients could<br />
trade them <strong>com</strong>mission-free.<br />
Scottrade acquired FocusShares<br />
in 2010, some two years after<br />
FocusShares had shuttered a number<br />
of niche ETFs in the wake of the 2008<br />
market crash. The <strong>com</strong>pany rolled out<br />
its roster of funds back in March 2011.<br />
The list of liquidated ETFs includes<br />
the broad Focus Morningstar US<br />
Market Index ETF (NYSE Arca: FMU),<br />
and three ETFs targeting the large-,<br />
mid- and small-cap segments as well<br />
as 11 sector-focused ETFs.<br />
Russell Closing ETFs,<br />
Altering Plan<br />
Scottrade’s announcement of the<br />
liquidation of its FocusShares ETFs<br />
www.journalofindexes.<strong>com</strong> November / December 2012 53