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of health care services, primarily in the area of insurance. S&P DJI said that the index committee believed the addition “reflects the growing importance of health care spending in the U.S. economy.” The last component changes to the industrial average occurred in June 2009, when Cisco Systems and The Travelers Companies replaced General Motors and Citigroup. Stoxx Makes Major Offering Expansions In separate launches in August and September, Stoxx Ltd. made some sizable additions to its lineup of indexes. The first—and smaller—batch of indexes debuted in August and included 19 benchmarks, carving out various subsets of Stoxx’s total market indexes for the emerging markets, the developed markets, East Asia and Africa. The second launch included more than 1,200 indexes added to Stoxx’s global index family, including total market benchmarks and narrower indexes targeting regions, supersectors and size segments. The launch also included four new total market indexes for China covering China’s A-Shares, B-Shares, H-Shares and Red Chips markets, the press release said. MSCI Adds 5 Stocks To ACWI MSCI said in mid-August it would add five stocks to its All-Country World Index (ACWI), while pulling eight from the broad global equities benchmark as part of its quarterly review of specific constituents. The three largest additions to the MSCI Global World Index measured by full company market capitalization were U.S.-based Camden Property Trust and Realty Income Corp., and Israel-based Mellanox Technologies, the company said in a press release. The two additions to the MSCI Emerging Markets Index measured by full company market capitalization were Korea-based AmoreG and Brazil-based Marcopolo, MSCI said. Other MSCI indexes underwent additions and deletions as well, including the MSCI Frontier Markets Index, which had one addition and no deletions; the MSCI ACWI Small Cap Index, which saw seven additions and 26 deletions; the MSCI ACWI Investable Market Index and MSCI All Cap Index, which each had no additions and 22 deletions; and the MSCI ACWI Islamic Index, which saw 51 additions and 22 deletions. All the changes were set to be implemented on Aug. 31, the company said. S&P DJI Debuts Low-Volatility Europe Index In late August, S&P Dow Jones Indices launched an index that covers a subset of the components of the S&P Europe 350 Index. The S&P Europe 350 Low Volatility Index includes the 100 stocks with the lowest volatility from the standard index, and rather than being weighted by free-float market capitalization, they are inversely weighted by volatility, with stocks with the lowest volatility assigned the highest weightings, the indexing company said in a press release. S&P Dow Jones also noted there were no restrictions on sector weights, with volatility the sole determining factor. So far, the index is only available denominated in euros. S&P DJI noted in the press release it also offers similarly designed versions of the S&P 500, the S&P/ TSX Composite Index and its broad emerging markets and developedmarkets indexes. Nasdaq Launches Commodity Equity Indexes First announced back in March, Nasdaq in September rolled out a trio of commodity equity indexes that it developed with Axioma, a provider of risk management products. The indexes comprise equities with share prices that track closely the spot prices of a targeted commodity or commodity group, according to the March press release. The new indexes are rebalanced on a monthly basis. The Nasdaq Axioma Equity- Commodity Oil Index, the Nasdaq Axioma Equity-Commodity Gold Index and the Nasdaq Axioma Equity-Commodity Agriculture Index are available as price indexes and total-return indexes. Nasdaq began disseminating their values over its data feeds as of Sept. 10. Stoxx Debuts Trading-Focused Index In early September, Stoxx Ltd. rolled out an index targeting the largest and most actively traded stocks in the world, according to a press release. The Stoxx+ Global Max Traded 200 Index comprises 200 components selected from three different sections of the globe. All components of the Stoxx Global Total Market Index meeting minimum market capitalization and trading volume requirements are eligible for inclusion. The methodology divides the world into three time zones, with 50 stocks selected from each based on threemonth average daily trading volume. The final 50 components are chosen from the remaining universe of stocks based solely on their threemonth average daily trading volume, the press release said. S&P Dow Jones Adds To GIVI Lineup S&P Dow Jones Indices in September expanded its index family focused on intrinsic value by rolling out the S&P GIVI Global Growth Markets Tilt Index, which is a composite of two other indexes, a press release said. The original GIVI methodology screens out high-beta stocks and weights its components by intrinsic value, as determined by each company’s assets and growth opportunities. S&P DJI also launched a GDPweighted version of the GIVI index, in which each country’s weight is determined by its gross domestic product. The new “Tilt” index splits each country’s weight evenly between its GIVI index and its GDP-weighted GIVI index, a factsheet said, essenwww.journalofindexes.com November / December 2012 55
News tially providing both a “value and growth tilt through intrinsic value and economic weighting.” Facebook Joins Nasdaq’s Q-50 Index Facebook officially became one of the 50 securities included in the Nasdaq Q-50 Index on Sept. 24. Many had hoped that after the Nasdaq OMX Group changed its “seasoning rules” in April for three of its most popular indexes—including the Nasdaq 100 Index—Facebook would be entering Nasdaq’s flagship index by September. Instead, after bleeding more than half of its value in its first four months as a public company, Facebook has been added to the Nasdaq Q-50 Index—the feeder index for the Nasdaq 100, according to a press release from Nasdaq. The benchmark, which is designed to track the performance of the 50 stocks that would be next in line for inclusion in the Nasdaq 100 Index, appears to have no ETFs attached to it. Aside from Facebook, other names being added to the Nasdaq Q-50 on Sept. 24 include Groupon, Concur Technologies, Mellanox Technologies, NXP Semiconductors, ONYX Pharmaceuticals, Royal Gold, TW telecom and Western Digital Corp. Nasdaq noted that Facebook can also be found in the Nasdaq Composite Index, which underlies the Fidelity Nasdaq Composite Index Tracking ETF (Nasdaq GM: ONEQ), as well as in the Nasdaq Computer Index, the Nasdaq Global Select Market Composite and the Nasdaq Global Select Computer Index. AROUND THE WORLD OF ETFs Schwab Cuts Costs On All 15 ETFs Charles Schwab took the battle in fees to its arch rival Vanguard by cutting prices on all 15 of its ETFs by 25 to 60 percent, resulting in each of the ETFs becoming cheapest in their respective Lipper categories. As an example, the Schwab U.S. Broad Market (NYSE Arca: SCHB) will now cost 0.04 percent, compared with its previous expense ratio of 0.06 percent. Company officials said the moves, which became effective Sept. 20, brought the weighted average overall expense ratio of its ETFs down to 0.077 percent. Some analysts speculate that Schwab’s bigger plan is to attract more clients and financial advisors to its overall platform, and once they have arrived, hope they make use of Schwab products and services that are more expensive than its low-cost ETFs, which can also be traded commission-free by Schwab clients. The move definitely raises the bar on Vanguard, whose reputation rests largely on its low-cost funds. What Vanguard chooses to do remains to be seen, but it’s clear that Schwab’s low-cost strategy is working every bit as well as it is for Vanguard. Schwab, which launched its first ETFs in November 2009, had $6.33 billion in 15 separate ETFs as of Sept. 20, 2012, according to data compiled by IndexUniverse. iShares Debuts Frontier Markets ETF In mid-September, iShares rolled out the iShares MSCI Frontier 100 Index Fund (NYSE Arca: FM), a fund that serves up focused exposure to the least mature and least liquid economies globally. FM tracks an MSCI benchmark that taps into equities from 20 frontier markets, including Argentina, Bangladesh, Croatia, Estonia, Jordan, Kazakhstan, Kenya, Kuwait, Lebanon, Mauritius, Nigeria, Oman, Pakistan, Qatar, Romania, Serbia, Sri Lanka, Ukraine, the United Arab Emirates and Vietnam. The portfolio is heavily allocated to energy, financial and telecommunication names, and comes with an annual expense ratio of 0.79 percent. iShares is the first ETF sponsor to create a broad frontier markets fund since Guggenheim predecessor Claymore launched the first-to-market Frontier Markets ETF (NYSE Arca: FRN) in 2008. But the new iShares also looks to be the first pure-play frontier fund, as the $142 million Guggenheim fund has heavy allocations to countries that some index providers consider emerging rather than frontier. Vanguard Plots Rival To STPZ, STIP Vanguard filed regulatory paperwork in late July to market a short-term inflation-protected securities index fund that would include an ETF share class that would compete with similar products from Pimco and iShares. The prospectus detailed plans for the Vanguard Short-Term Inflation- Protected Securities Index Fund that would track the Barclays U.S. Treasury Inflation-Protected Securities (TIPS) 0-5 Year Index, and invest in inflation-protected U.S. Treasury securities that have a remaining maturity of less than five years. The fund would serve up four share classes, including an ETF share class that would cost 0.10 percent in fees, or half the price tag of competing funds. The iShares Barclays 0-5 Year TIPS Bond Fund (NYSE Arca: STIP) and Pimco 1-5 Year U.S. TIPS Index Fund (NYSE Arca: STPZ) both cost 0.20 percent a year, and have assets of $358 million and nearly $1 billion, respectively. UBS Closes All VIX ETNs Except XVIX UBS redeemed all but one of its VIX-related ETNs, as the securities were not getting the traction the firm had hoped—in part because of the presence of a number of VIX-related ETFs that are now on the market. The largest of the funds at the time of the announcement was just under $20 million in assets, with most of the rest coming in under $15 million. The 12 closed ETNs included six long and short pairs that offered exposure to different portions of the VIX futures curve. The call settlement date was Sept. 12, with the call settlement amount set at the current principal of amount of the securities as of Sept. 7. Significantly, UBS decided to leave 56 November / December 2012
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