PowerShares Applies to Offer Three Active ETFs
There are rumblings, once again, over the possibility of creating the first actively managed exchange-traded fund. PowerShares Capital Management has filed with the Securities and Exchange Commission to offer three such funds and has plans to offer an actively managed bond ETF, as well. The Wall Street Journal reports. "We're hopeful these funds will create a tremendous new market for ETF investors," said PowerShares CEO Bruce Bond. "We're expecting this will open a iot of interest among active managers in ETFs." Matt Hougan, editor of lndexUniverse.com, agreed: "It's certainly going to create a lot of excitement among investors who haven't up to this point been interested in ETFs."
he now regrets as being too hasty. "I don't trust this phenomenal rise in the A share market and now the H share market [on the Hong Kong exchange] at ali," van Agtmaei said. "Like ail bubbles, it will end in tears. I believe this is going to be sooner rather than later," he said, estimating that the market could fail as much as 70%. One data point that troubles van Agtmael in particular is China's GDP growth rate. Over the past 20 years, it has averaged between 8% and 10% but recently rose to 11%. Six of the top 10 best-performing funds so far this year through Nov. 20 have a China focus, the No. 1 fund, AIM China A, up 86.12%, according to Morningstar.
Bill Gross Likens Suhprime Crisis to Great Depression
Bill Gross, chief investment officer at PIMCO, said the effects of the subprime crisis have yet to be felt—and they will be devastating, the Financial Times reports. "We haven't faced a downturn like this since the Depression," he said. "[The] effect on consumption, its effect on future lending attitudes, could bring [America] ciose to the zero line in terms of economic growth. It does keep me up at night." And Gross is not alone. Other asset managers are echoing the sentiment that the subprime crisis could dampen the economy for years, and investor confidence is beginning to show its cracks. The subprime crisis has created three key problems, the first of which is escalating estimates of losses. Originally, Federal Reserve Chairman Ben Bernanke said losses wouid be $50 billion, but this month, he increased that to $150 billion— but some experts say it could be even double that, or more. As a result, investors couid default on as much as $300 billion in other types of debt. "Investors are now starting to worry that the subprime crisis will broaden out into other forms of con-
International Fund Skippers Begin to Cool on China Exposure
A number of managers of internationai and emerging markets mutuai funds who had invested heavily, and successfully, in China are now cutting back on their holdings, the Associated Press reports. Noting that China's domestic A shares have risen nearly 500% in the past two years, Justin Leverenz, manager of the Oppenheimer Developing Markets Fund, said he expects the bubble to burst soon—and fast "2008 will be an incredibly difficult year for Chinese equities," Leverenz said. The market is in the "later, waning stages of a bubble," he added. Although Antoine van Agtmael, chief investment officer of Emerging Markets Management, believes in economic growth in China, he says the stock market there has been ciouded by a buying frenzy. Van Agtmael, who is credited with coining the term emerging markets, has been so nervous about the Chinese market for a while now that he cut back on his holdings quite some time ago, which
December 10, 2007
sumer and real estate lending," Goldman Sachs, which estimates subprime losses will top $445 biliion, said in a recent report. The second problem is uncertainty about how this will affect the financiai services industry as a whole, due to the fact that many types of assets have been securitized. "Grenades keep going off in the system, and nobody quite knows what to think or expect," said a poiicymaker. Thirdly, banks are expected to cut back on lending, which will definiteiy siow economic growth. "Three months ago, it was reasonable to expect that the subprime credit crisis would be a financially significant event but not one that wouid threaten the overall pattern of economic growth," said Lawrence Summers, former U.S. Treasury secretary. But now it appears very likely there will be a "U.S. recession that slows growth significantly on a global basis."
41% of Ultra-Wealthy Say They re Assertive Investors
In spite of the belief that very wealthy investors are most interested in preserving their wealth, 41 % of those worth $25 million or more describe themselves as "aggressive" or "most aggressive" investors, according to a report from Spectrem Group, "The $25 Miliion Pius Investor." Two-thirds of their assets are in stocks, alternatives, mutuai funds, separately managed accounts, hedge funds, private equity, venture capital or other investable assets. Only 6% of those worth $25 miliion or more consider themselves conservative, and oniy 9% of those worth $5 million or more consider themselves conservative. "Even in the face of intense financial market turmoil, investors with the most to lose are willing to roll the dice with risky investments," said George H. Walper, Jr., president of Spectrem Group. "This raises eyebrows, given that they have two-thirds of their wealth tied up in investable assets." MS
Money Management Executive