July 2015

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Canada may introduce ETF requirements for advisers
The Mutual Funds Dealers Association of Canada (MFDA) is seeking to introduce standards for advisers wishing to transact in exchange-traded funds. Currently, mutual fund licensed representatives can trade in exchange-traded funds which meet the definition of a mutual fund under Canadian securities legislation. In 2014 the Canadian ETF Association and others involved in this area provided an industry solution to make ETFs more accessible to investors. The MFDA proposes mutual fund advisers “receive training on information about characteristics and features of ETFs, as well as, training on how ETFs will be offered”.

Icahn attacks BlackRock
US hedge fund activist Carl Icahn launched a broadside last month 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 CashAAA50.190.233.10.18771.63
SPDR S&P/ASX Aust BondBOND26.03-1.055.710.2415.62
SPDR S&P/ASX Aust Govt BondGOVT25.8-1.115.880.225.14
iShares Composite Bond ETFIAF106.05-0.935.450.24184.65
iShares Treasury ETFIGB103.24-1.155.510.2616.58
iShares Govt Inflation ETFILB114-1.726.220.2632.31
Russell Aust Select Corp Bond ETFRCB20.46-0.553.840.2879.18
Russell Aust Govt Bond ETFRGB21.28-1.266.860.24132.17
Russell Aust Semi-Govt Bond ETFRSM20.77-0.615.030.26125.23
Vanguard Aust Fxd Int Index ETFVAF50.05-0.935.470.2199.88
Vanguard Aust Govt Bond Index ETFVGB49.01-1.025.680.249.37
*1m/1y performance as at end of June 2015. Closing price as at week end. Return in AUD before Fees

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