ETF Observer - 2014 September

Our ETF analyst team has recently published the ETF Observer.

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Back to School Rally
As kids packed their pencil cases (styluses?) and protractors (is there an app for that now?) into their new backpacks in preparation for a new school year, markets rallied. The S&P 500 Index gained 4% and crossed the 2,000 mark for the first time ever. Long bonds also marched higher as the 10 year treasury yield declined over the course of the month. Investors took notice, and took on more risk. ETFs in Morningstar’s long government bond and diversified emerging markets equity categories topped the asset flows ranks, gathering $2.3 and $1.9 billion in new assets, respectively. Elsewhere, we saw evidence that investors' recent love affair with European stocks might have come to an end. After a twelve month streak of steady inflows that began in July 2013, European equity ETFs experienced a second consecutive month of outflows in August, amounting to some $2.2 billion. ETFs offering exposure to the utilities sector had record outflows, bleeding nearly $1.8 billion.

This month’s installment of ETF Observer features four articles and two fund spotlights from our Passive Strategies research team. In the first article, Bob Goldsborough goes on the hunt for investment opportunities in U.S. Health Care. Tom Boccellari follows with an analysis of the Barclays Aggregate Bond Index. Alex Bryan bats clean up this month, providing a pair of articles on the topic of risk management. In the first, he provides a useful refresher course on investment risk and offers up some ways in which investors might seek to mitigate risk in their portfolios. In the second article, Alex explores a more unconventional approach to managing risk—trend following. As it so happens, it appears there may be some merit to the old adage “the trend is your friend”. Lastly, this month we spotlight the Vanguard Telecommunications ETF (VOX) and PowerShares’ Build America Bond ETF (BAB).

Finally, for the third and final time I’d like to plug our fifth annual Morningstar ETF Conference. This year’s conference will be held from September 17-19 (next week!) at the Chicago Sheraton. You can find additional details and the full conference agenda here. This year’s conference is shaping up to be our best yet—owing to a fantastic lineup of speakers and panelists. This year’s keynote and general session speakers include Nobel Laureate Eugene Fama, BlackRock’s Russ Koesterich, JP Morgan’s Dr.David Kelly, PIMCO’s Jerome Schneider, AQR’s Ronen Israel, and Wesley Gray of Drexel University. We hope to see you in Chicago next week for three days packed with valuable insights and investment ideas.

To access the full US ETF Observer report, please click here.

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Morningstar ETF Analysts  research hundreds of ETFs available to European investors. The Morningstar Rating for ETFs is based on a risk-adjusted performance measure

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