Portfolio activity, October-November 2009

October is the time to do my semi-annual purchase of funds. My asset allocation plan shows that I need to top up two asset classes:

  1. Europe equity
  2. Japan equity

No top up for REITs as the current holdings in my portfolio is over the target allocation already, because I have accepted a number of rights issues offered by some of the REITs.

For Europe equity and Japan equity, the funds that I will use remain the same: iShares MSCI Europe ETF and Lyxor Japan (TOPIX) ETF respectively. There is an alternative to Europe equity: Lyxor MSCI Europe ETF that was listed in SGX a week ago.  The broker fee to buy this ETF is cheaper than iShares MSCI Europe ETF, which is listed in London Stock Exchange. But for now,  I will give Lyxor MSCI Europe ETF a miss because it is quite new and the asset under management is only slightly more than USD 6 million.

I have made the transaction for Lyxor Japan (TOPIX) ETF and will buy iShares MSCI Europe ETF next week, after its ex-date on 28-Oct-2009.

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7 responses to “Portfolio activity, October-November 2009

  1. Hi zm
    Given the recent additions to the Lyxor ETF portfolio in Singapore, what do you think about buiding a global portfolio with the following
    Lyxor ETF Dow Jones Industrial Average
    Lyxor ETF MSCI Europe
    Lyxor ETF MSCI Emerging Markets

    Some specific questions
    1. Are the DJIA (only 30 stocks) and the Emerging mkts (not clear how many stocks) good representations of US/EM region?
    2. What is a good measure of adequate liquidity for new ETFs – Buy/Sell volume (what should it be?), Spread?
    3. Concerned that all of the above ETFs are managed by Lyxor – is there a high risk that I may be “putting all my eggs in one basket”?
    Thks in advance

  2. Hi Ash,

    Both Lyxor ETF DJIA and MSCI Europe have very small asset under management (fund size) now, less than $10mil. So I am not sure if the ETFs will stay.

    Another global portfolio can be constructed using Lyxor World and Lyxor MSCI EM ETF.

    1. IMO, DJIA is not a good representation of US market, as the factsheet wrote, it “represents approximately 20% of the capitalisation of American equities.” As for MSCI Emerging Markets, I think it is a good representations of EM equities.

    2. For new ETF, I would consider the spread, premium/discount and buy/sell queue size put up by the market maker. Buy/sell volume is not a good liquidity indicator of ETF, instead, its liquidity should be the liquidity of the underlying investment. For more information on liquidity, you can search the keywords “trading characteristics” in my blog, or read “Misconceptions about Liquidity” published at
    http://www.lyxoretf.com.sg/en/news/press.php

    3. If Lyxor goes down, the custodian of the ETF will sell the ETF at the price after valuation and return the money to you. Or the custodian may find another manager to take over. There will likely be a temporary trading freeze and will impact you when you try to sell. So this is one of the concern.

    Cheers.

  3. Thanks zm. Interesting to hear about the portfolio based on just Lyxor World and Lyxor EM. Do these two adequately cover the respective markets? I cant seem to find good fact sheets for the above two.
    Thks

  4. Hi Ash,

    Lyxor World covers all of developed markets (90% of global stock market capitalization) while Lyxor EM covers all of developing markets (10%) . So together they covers the whole global stock markets.

    You can find Lyxor ETF factsheets here:
    http://www.lyxoretf.com.sg/en/news/monthly.php

  5. Hi zm
    I really don’t know how to thank you for sharing your journey on passive investment. I think I’ve covered most of the posts on your website and found them most helpful and informative. Thank you for giving me the confidence!

    I’ve done a fair bit of homework and starting to take the dip. My portfolio also takes a global spread via ETFs. But I’m trying to keep to those ETFs listed on SGX. I have a few questions and hope that you could share your views.

    1. Europe ETFs listed on SGX are rather inactive. I’ve put in orders but hardly filled. (maybe should increase the price) Are there any other reasons? Is that why you opted for IMEU?

    2. dbx DJE50 (IH0) fund data stated a 0% total expense ratio! It this too good to be true? or there are some hidden costs some where?

    3. I had initially considered VTI for US. But, after it^ was pointed out that VTI has .99 correlation with 500Index, I’m considering iShares S&P500 (I17) as an alternative since it’s on SGX. Both expense ratio are .09%. Since I17 is SGX listed, would you know if US securities, such as I17, listed on SGX would be subjected US estate duty? would be great if it’s not, then we don’t have to consider the insurance route later on.

    Much thanks
    Slong

    ^Bogleheads’ Guide

    • Hi SL Ong,

      Thank you for reading my blog. I was away for a week, so I could not reply to your comment early.

      Here are my thoughts:

      1. For those Europe ETFs in SGX, I see that they have buy volume and sell volume, so if you buy at seller’s price, your order should be filled. I use IMEU before there is any Europe ETF in SGX. I would like to use Europe ETF in SGX, but I have some reservations: the Lyxor has a very small asset under management (fund size) of USD 6.2 mil; while the DB one may invest up to 100% of its net asset value in financial derivatives (see its prospectus section 17.3). So for now, I still use IMEU.

      2. DBX DJE50 (IH0) tracks DJ Euro Stoxx 50, which exclude UK. So it is not a good proxy for European equities. As for the 0% expense ratio, I think it is better that you clarify with DB.

      3. iShares S&P500 (I17) in SGX has a problem. It does not have market maker to put up buy/sell price and volume, so you have no seller to buy from. And in the prospectus, if I remember correctly, it says that it is subjected to US estate law, but please verify the prospectus yourself. Anyway, the problem of “no seller and buyer” alone should make you stay away from this ETF.

      Hope this helps.
      Cheers.

  6. Many thanks, zm! Good point on the possible total exposure to financial derivatives for DB. It’s kind of sad case about the S&P500 ETFs in SGX that there has not been any trade since mid ’09.

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