13 July – 17 July 2015

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Trading
Last week saw very little change in fund flows but with some modest increases to Russell’s Semi Government ETF, Vanguard’s Fixed Interest Index ETF and Betashare’s High Interest Cash ETF. Russell’s Government Bond ETF suffered a small out flow.

Icahn attacks BlackRock
US hedge fund activist Carl Icahn launched a broadside last week at Black Rock, saying the world’s dominant bond participant was complicit in pushing the yields of bonds to record lows. Icahn believes the US corporate bond market is in bubble territory and players such as Black Rock are adding fuel to the fire by marketing bond ETFs to yield-hungry investors. Icahn fears that US yields are too low and when interest rates do rise, a ‘rush for the exits’ will create a liquidity crisis as there are fewer bond market makers as a result of regulatory changes. He is not alone in this view as several Australian Reserve Banks officials and ‘Bond King’ Bill Gross have commented on this lack of liquidity over the last 12 months.

Icahn’s main concern and the reason for his attack on Black Rock, is his belief the “high yield” ETF markets will prove illiquid and there will be “nobody to buy this stuff”.

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ASX CASH & BOND ETFs*

NAMESYMBOLCLOSE
PRICE
1m (%)1y (%)MER (%)FUND
SIZE ($m)
BetaShares Aust High Int CashAAA50.150.233.100.18706.08
SPDR S&P/ASX Aust BondBOND25.83-1.055.710.2415.63
SPDR S&P/ASX Aust Govt BondGOVT25.58-1.115.880.225.15
iShares Composite Bond ETFIAF104.60-0.935.450.24191.67
iShares Treasury ETFIGB101.90-1.155.510.2616.01
iShares Govt Inflation ETFILB113.04-1.726.220.2633.23
Russell Aust Select Corp Bond ETFRCB20.33-0.553.840.2879.50
Russell Aust Govt Bond ETFRGB21.02-1.266.860.24132.29
Russell Aust Semi-Govt Bond ETFRSM20.66-0.615.030.26125.90
Vanguard Aust Fxd Int Index ETFVAF49.45-0.935.470.20209.97
Vanguard Aust Govt Bond Index ETFVGB48.65-1.025.680.2049.26

*1m/1y performance as at end of June 2015. Closing price as at week end. Return in AUD before Fees

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