10 rising stars - Index Strategy Advisors, Inc.
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the magazine for etf advisors ///////////////////////////////////////////////// NOVEMBER 2012<br />
PICK THE<br />
HIGH HANGING FRUIT.<br />
Find <strong>10</strong>0 companies at the top of innovation in one fund.
PowerShares QQQ invests in <strong>10</strong>0 of the most innovative companies listed on<br />
the NASDAQ Stock Market, including global leaders in information technology,<br />
consumer products, and healthcare. To learn more, visit powershares.com/qqq.<br />
// There are risks involved with investing in Exchange-<br />
Traded Funds (ETFs) including possible loss of money.<br />
The funds are not actively managed and are subject to<br />
risks similar to stocks, including those related to short<br />
selling and margin maintenance. Ordinary brokerage<br />
commissions apply. Shares are not FDIC insured, may<br />
lose value and have no bank guarantee.<br />
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Investors should consult their own tax advisors for<br />
information regarding their own tax situations.<br />
While it is not Invesco PowerShares’ intention, there<br />
is no guarantee that the PowerShares ETFs will not<br />
distribute capital gains to their shareholders.<br />
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of the shares may acquire those shares from the Funds<br />
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of 50,000 shares.<br />
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or visit www.invescopowershares.com. Please read<br />
the prospectus carefully before investing.<br />
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the magazine for etf advisors ///////////////////////////////////////////////// NOVEMBER 2012<br />
<strong>10</strong> RISING<br />
STARS<br />
www.<strong>Index</strong>Universe.com/ETFReport<br />
published by
proshares.com<br />
Global Fixed i ncome | HedG e StrateG ieS | Geared | i n F lation and Volatility<br />
Carefully consider the investment objectives, risks, charges and expenses before investing. This and other information can be found in<br />
the prospectus; read carefully before investing; obtain at ProShares.com. ProShares each entail certain risks including the possible loss of<br />
principal: non-diversification, imperfect benchmark correlation, leverage, market price variance and possible use of derivatives, all of which may<br />
increase volatility and decrease performance. For more risk information read the prospectus. ProSharesare distributed by SEI Investments<br />
Distribution Co., which is not affiliated with ProShares. © 2012 PSA 2012-2642
Volume 12 | No. 11<br />
Contents<br />
features<br />
6<br />
18<br />
<strong>10</strong> Rising Stars Of ETFs<br />
In this inaugural feature, <strong>Index</strong>Universe profiles <strong>10</strong> of the best and brightest in the ETF advisor<br />
services industry. Featuring Rick Ferri, King Lip, Michael McClary, James McDonald, Tyler Mordy,<br />
Neil Peplinski, Mitch Reiner, Kevin Simpson, Rich Steinberg and Jeff Wycoff.<br />
Keep Them Happy:<br />
Ric Edelman’s Advice To The Industry<br />
The biggest ETF advisor in the world shares his thoughts on where the industry<br />
is going—and the best way to grow your business.<br />
SUBSCRIBE TODAY<br />
Subscribe by contacting Nicholas Chang<br />
at nchang@indexuniverse.com<br />
or by calling 415-659-9029.<br />
The annual subscription rate is $99.<br />
Publisher, Director of Sales<br />
Foster Wright, 646.867.4481<br />
fwright@indexuniverse.com<br />
Global Head of Editorial<br />
Matt Hougan<br />
mhougan@indexuniverse.com<br />
Managing Editor<br />
Cory Banks<br />
cbanks@indexuniverse.com<br />
Copy Editor<br />
Lisa Barr<br />
Creative Director<br />
Jeannine Gaubert Pamoukdjian<br />
<strong>Index</strong>Universe LLC<br />
353 Sacramento Street, Ste. 1520<br />
San Francisco, CA 94111<br />
www.<strong>Index</strong>Universe.com<br />
Departments<br />
2 New ETF Launches<br />
iShares launches the first competitor to Guggenheim’s Frontier<br />
Markets ETF. Plus: Our monthly look at new ETF offerings.<br />
4 ETF Explainer: VWO<br />
What market movements push the return of the largest<br />
emerging markets ETF? Our explainer shows you the news<br />
behind the performance.<br />
22 Sectors In Review<br />
The end of the third quarter brings big gains for almost all<br />
of the broad sector ETFs. We highlight the best winners.<br />
24 Why I Own: UUP<br />
Jonathan Citrin of The Citrin Group explains why his firm<br />
thinks UUP is the smartest play on the currency asset class.<br />
26 ETF Data<br />
Our monthly databank breaks down ETF returns<br />
for every market segment.<br />
Founder, CEO<br />
Jim Wiandt<br />
COO, Executive VP<br />
Don Friedman<br />
© 2012 <strong>Index</strong>Universe LLC. All rights reserved. The text, images and other materials<br />
contained or displayed are proprietary to <strong>Index</strong>Universe LLC, except where otherwise<br />
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downloaded, transmitted, broadcast, transferred, assigned, reproduced or in any other<br />
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explicit written consent of <strong>Index</strong>Universe LLC. For permission to photocopy and use<br />
material electronically, please contact reprints@indexuniverse.com or call 415.659.9029.<br />
CORRECTION:<br />
The October feature, “Choosing The<br />
Best Broad-Based Commodities ETF,”<br />
incorrectly stated the expense ratio for<br />
the STREAM S&P Dynamic Roll Global<br />
Commodities Fund (BNPC) as 1.24%.<br />
Its correct expense ratio is 0.78%.
NEW Funds<br />
ETF<br />
Launches<br />
etf filing activity<br />
7%<br />
INVERSE<br />
8%<br />
US EquitY<br />
6%<br />
ALTERNATIVES<br />
5%<br />
asset allocation<br />
146<br />
ETFs<br />
Year-to-date<br />
3%<br />
commodities<br />
40%<br />
intl EquitY<br />
Launches<br />
U.S. Equity<br />
RBS US Large Cap Alternator ETN<br />
International Equity<br />
iShares MSCI Frontier <strong>10</strong>0<br />
FlexShares Mstar Emrg Mkts Factor Tilt<br />
FlexShares Mstar Dev Mkts ex-US Factor Tilt<br />
WisdomTree China Div Ex-Financials<br />
Alternatives<br />
STAR Global Buy-Write<br />
FM Quick View<br />
Issuer<br />
BlackRock<br />
Segment<br />
Equity: Frontier<br />
Markets - Total Market<br />
Expense Ratio 0.79%<br />
Structure<br />
Open-Ended Fund<br />
Date LAUNCHED September 12, 2012<br />
Competing Funds<br />
9%<br />
INTL FIXED INCOME<br />
Featured ETF<br />
FRN<br />
<strong>10</strong>%<br />
LEVERAGED<br />
On Sept. 12, iShares<br />
launched an ETF targeting<br />
frontier market<br />
equities. The iShares<br />
MSCI Frontier <strong>10</strong>0 <strong>Index</strong><br />
Fund (FM) tracks<br />
an MSCI benchmark<br />
that taps into stocks<br />
from 20 frontier markets,<br />
including Argentina,<br />
Bangladesh, Croatia, Estonia, Jordan,<br />
Kazakhstan, Kenya, Kuwait, Lebanon,<br />
Mauritius, Nigeria, Oman, Pakistan, Qatar,<br />
Romania, Serbia, Sri Lanka, Ukraine, the<br />
United Arab Emirates and Vietnam.<br />
The portfolio is heavily allocated to<br />
financial names, which comprise more<br />
than 56% of its total market capitalization.<br />
Telecommunications, industrials<br />
13%<br />
US FIXED INCOME<br />
iShares MSCI Frontier <strong>10</strong>0 <strong>Index</strong> Fund (FM)<br />
iShares Debuts First Competitor To FRN<br />
and energy also have a strong presence<br />
in the fund.<br />
iShares appears to be the first ETF sponsor<br />
to create a broad frontier markets fund<br />
since Guggenheim launched the market’s<br />
first frontier markets ETF (FRN) in 2008.<br />
But the new iShares also looks to be the first<br />
pure-play frontier fund, as the $142 million<br />
Guggenheim fund has heavy allocations to<br />
countries that some index providers consider<br />
emerging rather than frontier.<br />
The time for FM’s launch seems right, as<br />
investors increase allocation to international<br />
equities—and look for more prospective<br />
sources of returns at a time when some of<br />
the key emerging markets economies such<br />
as China and Brazil are slowing down.<br />
FM comes with an annual expense ratio<br />
of 0.79%.<br />
GO<br />
Filings<br />
ALPS/GS Momentum Builder Gr Mkts<br />
ALPS/GS Momentum Builder Multi-Asset<br />
ALPS/GS Risk-Adj Return US Large Cap<br />
Market Vectors EM Aggregate Bond<br />
PureFunds ISE Diamond/Gemstone<br />
PureFunds ISE Junior Silver<br />
QuantShares US High Momentum<br />
QuantShares US Low Beta<br />
QuantShares US Relative Value<br />
QuantShrs US High Div Abs Return<br />
VelocityShares EM Depositary Receipt<br />
VelocityShares Emrg Asia Dep Receipt<br />
VelocityShares Volatility Hdgd Large Cap<br />
VelocityShrs Tail Risk Hedged Lrg Cap<br />
Closures<br />
Global X, iPath and UBS all announced<br />
multiple exchange-traded product closures<br />
in September<br />
ONLINE<br />
For the latest ETF listings, visit<br />
<strong>Index</strong>Universe.com/ETFWatch<br />
2 <strong>Index</strong>Universe.com/ETFReport<br />
Source: <strong>Index</strong>Universe. Data and information as of 9/30/2012. ETF Filings sidebar covers launches and filings for the month of September.
©2012, THE NASDAQ OMX GROUP, INC. ALL RIGHTS RESERVED.<br />
WHERE THE WORLD’S<br />
MARKETS GET INDEXED.<br />
The NASDAQ Global <strong>Index</strong> Family SM covers 98% of the investable universe. Our rules-based<br />
indexes cover approximately 9,000 securities from 45 world markets, broken down by<br />
geography, sector, and size. That’s why, for investors, the world is growing.<br />
LEARN MORE ABOUT THE VALUE OF OUR NEW GLOBAL INDEX FAMILY AT WWW.NASDAQOMX.COM/GLOBALINDEXFAMILY<br />
WELCOME TO THE NASDAQ OMX CENTURY SM<br />
COVERING<br />
98%<br />
OF THE INVESTABLE<br />
UNIVERSE<br />
9,000<br />
SECURITIES<br />
45<br />
WORLD MARKETS
in detail<br />
ETF Explainer: VWO<br />
Vanguard MSCI Emerging Markets ETF<br />
Each month, we look at an ETF with a particularly interesting chart and explain the market forces<br />
behind its performance. This month we look at the Vanguard MSCI Emerging Markets ETF (VWO),<br />
in light of Vanguard’s announced benchmark change. What drives VWO’s performance?<br />
RETURN<br />
VWO Quick View<br />
30 %<br />
Issuer<br />
Vanguard<br />
FEB<br />
17 MAR<br />
05<br />
Segment<br />
Equity: Emerging<br />
Markets-Total Market<br />
25<br />
20<br />
JAN<br />
31<br />
APR<br />
23<br />
Expense Ratio 0.20%<br />
AUM<br />
$57 Billion<br />
Competing Funds EEM, SCHE, PXH<br />
SEP<br />
13<br />
20.88%<br />
15<br />
JUL<br />
07<br />
<strong>10</strong><br />
DEC<br />
20<br />
5<br />
0<br />
oct nov dec jan feb mar apr may jun jul aug sep<br />
2012<br />
vwo ETF<br />
DEC<br />
20<br />
Analysts worry that a cooling demand for raw materials will<br />
hurt emerging markets; especially Brazil.<br />
APR<br />
23<br />
China Mobile Ltd., the world’s largest phone carrier by<br />
users, falls 3% after it missed analyst estimations.<br />
JAN<br />
31<br />
Emerging markets stocks post best start to a year since<br />
2001, as European officials agreed to reign in sovereign debt.<br />
VWO rose <strong>10</strong>%+ in January alone.<br />
APR<br />
23<br />
Economic indicators show that Chinese manufacturing may<br />
contract for sixth-consecutive month after European officials<br />
claim that the sovereign debt crisis threatens global growth.<br />
FEB<br />
17<br />
Emerging markets stocks rise to a 6-month high on signs of a<br />
healthier U.S. economy and a solution to the Greek debt crisis.<br />
JUL<br />
07<br />
Brazil’s central bank slashes rates to a record low of 8% in<br />
an eighth-consecutive reduction since August 2011, while<br />
South Korea reduces rates by 25 bps to 3%.<br />
MAR<br />
05<br />
China cuts growth target to 7.5%, its lowest since 2004.<br />
VWO drops 4.94% in 2 days.<br />
SEP<br />
13<br />
Emerging markets stocks rally as the Fed announces plans<br />
for more quantitative easing (QE3).<br />
4 <strong>Index</strong>Universe.com/ETFReport<br />
Source: Bloomberg. Data for 9/26/2011 to 9/25/2012.
HYEM<br />
Emerging Markets<br />
High Yield Bond ETF<br />
INVEST BEYOND SOVEREIGNS<br />
➤ Focuses solely on non-sovereign segment of the HY EM bond 1 market<br />
➤ HY EM corporates currently have higher yields than HY EM sovereigns and HY U.S. corporates 2<br />
➤ HY EM corporates historically have had lower default rates than HY U.S. corporates 3<br />
Scan to view HYEM yield<br />
and performance.<br />
marketvectorsetfs.com/hyem<br />
888.MKT.VCTR<br />
1<br />
All references to high-yield emerging markets corporate or non-sovereign bonds are to U.S. dollar-denominated bonds within these categories.<br />
2<br />
As represented by The BofA Merrill Lynch High Yield U.S. Emerging Markets Liquid Corporate Plus <strong>Index</strong> for USD-denominated EM high-yield corporate bonds, The BofA Merrill<br />
Lynch USD Emerging Markets Sovereigns <strong>Index</strong> for USD-denominated EM high-yield sovereign bonds and The BofA Merrill Lynch U.S. High Yield Master <strong>Index</strong> II for U.S. high-yield<br />
corporate bonds.<br />
3<br />
Source: Standard & Poor’s Global Fixed <strong>Inc</strong>ome Research and Standard & Poor’s CreditPro ® ; 2011 Annual Global Corporate Default Study and Rating Transitions<br />
The Fund may be subject to credit risk, interest rate risk and a greater risk of loss of income and principal than higher rated securities. Emerging markets securities<br />
are subject to elevated risks, which include, among others, expropriation, confiscatory taxation, issues with repatriation of investment income, limitations of foreign<br />
ownership, political instability, armed conflict and social instability. Investors should be willing to accept a high degree of volatility and the potential of significant loss.<br />
The Fund may loan its securities, which may subject it to additional credit and counterparty risk.<br />
Fund shares are not individually redeemable and will be issued and redeemed at their NAV only through certain authorized broker-dealers in large, specified blocks of<br />
shares called “creation units” and otherwise can be bought and sold only through exchange trading. Creation units are issued and redeemed principally in kind. Shares<br />
may trade at a premium or discount to their NAV in the secondary market.<br />
Investing involves substantial risk and high volatility, including possible loss of principal. Bonds and bond funds will decrease in value as<br />
interest rates rise. An investor should consider the investment objective, risks, charges and expenses of the Fund carefully before investing. To<br />
obtain a prospectus and summary prospectus, which contain this and other information, call 888.MKT.VCTR or visit marketvectorsetfs.com/hyem.<br />
Please read the prospectus and summary prospectus carefully before investing.<br />
VAN ECK SECURITIES CORPORATION, DISTRIBUTOR ■ 335 MADISON AVENUE ■ NEW YORK, NY <strong>10</strong>017
<strong>10</strong> RISING<br />
STARS<br />
<strong>Index</strong>Universe highlights <strong>10</strong> of the<br />
brightest firms AND PERSONALITIES<br />
WORKING WITH ETFs TODAY.<br />
By Cory Banks
Rick Ferri «<br />
King Lip «<br />
Michael McClary «<br />
James McDonald «<br />
Tyler Mordy «<br />
Neil Peplinski «<br />
Mitch Reiner «<br />
Kevin Simpson «<br />
Rich Steinberg «<br />
Jeff Wycoff «<br />
What is a <strong>rising</strong> star in the ETF industry?<br />
It’s the most important thing to understand before reading<br />
the following pages. And it’s exceptionally hard to define.<br />
For us, the ETF industry is built on the shoulders of<br />
“<strong>rising</strong> <strong>stars</strong>.” Those shoulders belong to firms and<br />
advisors—often just a couple of people in a room—<br />
who wanted to find a new way of managing their<br />
clients’ money. Protecting it. Growing it. All in an<br />
environment that doesn’t require excessive fees or<br />
complex forms. The mutual fund industry is built<br />
upon those bad practices and more not listed here.<br />
The firms on the following pages thought they<br />
could do better—and they did.<br />
One firm, Capital Wealth Planning, has focused<br />
on providing its clients with additional income<br />
by buying and selling options. Another, Fort<br />
Point Capital, uses options as the ultimate hedging<br />
vehicle, protecting assets in times of market<br />
stress. Steinberg Asset Global is taking a risk on<br />
the smaller retail investment market, essentially<br />
hiring itself as an asset manager for those with<br />
$50,000 to put to work. Another firm, Portfolio<br />
Solutions, keeps costs as low as possible through<br />
index funds and ETFs, effectively rejecting the<br />
concept of an “active” manager.<br />
The firms in this list are not ranked in order of<br />
our preference; this isn’t a top <strong>10</strong> list. Some of the<br />
firms are new, with less than $50 million AUM in<br />
client assets, while others are already at $3 billion<br />
and climbing. Some work directly with clients,<br />
targeting high-wealth or mass-affluent investors;<br />
others work as intermediaries for other advisors<br />
or institutional clients.<br />
There are many differences between the firms<br />
on the following pages, but they all have one thing<br />
in common. Each firm is a <strong>rising</strong> star—a growing financial<br />
advisory firm that uses ETFs in innovative<br />
ways to address its clients’ needs. We think you<br />
should know these people, firms and their ideas.
Th e<br />
Low-Cost<br />
Leader<br />
Rick<br />
Ferri<br />
Founder, Portfolio Solutions<br />
<strong>rising</strong> star<br />
firm<br />
Portfolio Solutions<br />
location<br />
Troy, MI<br />
founded<br />
1999<br />
AUM<br />
$1.2 billion<br />
AUM GROWTH (YOY)<br />
28%<br />
% AUM IN ETFs<br />
42%<br />
MIN. ASSET SIZE<br />
$500,000<br />
It’s hard to call Rick Ferri<br />
a <strong>rising</strong> star. Rock star is more like it.<br />
He’s one of the leading torchbearers<br />
for John Bogle’s “cost matters”<br />
hypothesis; appears regularly on CNBC;<br />
and has more than $1.2 billion in assets<br />
under management. His books, including<br />
The Power of Passive Investing: More Wealth<br />
with Less Work and The ETF Book: All You<br />
Need to Know About Exchange-Traded Funds,<br />
are required reading for new employees<br />
at <strong>Index</strong>Universe.<br />
But here’s the thing about Ferri: We<br />
think he’s just getting started.<br />
Ferri takes Jack Bogle’s central investing<br />
idea—cost matters—and extends it<br />
into the advisory space. He builds simple,<br />
ultra-low-cost portfolios with high-quality<br />
ETFs and mutual funds and charges a pittance<br />
to manage them.<br />
How much? Twenty-five basis points,<br />
with costs moving lower from there based<br />
on asset size. In an industry built around<br />
the concept of charging 1%, 25 basis<br />
points is a disruptive number. It’s also<br />
good for clients.<br />
“We’re trying to keep the cost as low as<br />
possible,” said Ferri. “We’re increasing the<br />
client’s return by lowering their overall<br />
cost, not only in the funds but in trading<br />
and also in our fee.”<br />
Rather than offering model portfolios<br />
for its client base, Portfolio Solutions<br />
builds buckets of equity and fixed-income<br />
exposure, then allocates percentages to its<br />
clients on a customized basis. The firm’s<br />
fund selection process considers not just<br />
liquidity and expenses, but how well the<br />
fund really matches its benchmark. Ferri<br />
favors bond mutual funds over ETFs, for<br />
example, because bond ETFs tend to sample<br />
the available securities in an index instead<br />
of fully replicating that benchmark.<br />
While others in the financial services<br />
field put a tactical spin on their offerings,<br />
Ferri maintains that the best strategy is<br />
still buy-and-hold, with a caveat for rebalancing.<br />
“This simple strategy has absolutely<br />
done well,” Ferri said. “Much better<br />
than what pundits want people to believe.”<br />
Low costs. Sensible portfolios. No nonsense.<br />
A <strong>rising</strong> star indeed.<br />
8 <strong>Index</strong>Universe.com/ETFReport
Easing<br />
Client<br />
Worry<br />
King<br />
Lip<br />
C I O,<br />
Baker Avenue<br />
Asset Management<br />
Lip’s firm takes a tactical<br />
approach to investment management.<br />
His philosophy, and<br />
the philosophy behind all of Baker Avenue’s<br />
strategies, is to provide downside<br />
protection against down markets. “People<br />
are really starting to gravitate toward active<br />
management especially in down markets,”<br />
he said.<br />
Baker Avenue’s most popular strategy<br />
focuses on dividends. Using 12 ETFs<br />
on average, the portfolio aims to add to a<br />
portfolio’s yield through global stock ETFs<br />
carrying dividing-paying firms. Lip’s team<br />
evaluates the income ETFs it uses by first<br />
screening the available universe of funds<br />
for yields greater than the S&P 500. Then<br />
it applies a screen that measures the relative<br />
strength of the ETF’s segment. “We’re<br />
looking for asset classes and income production<br />
that is timely in terms of producing<br />
returns and yield,” Lip said. “We’re<br />
looking from a total return perspective.”<br />
The income portfolio currently holds<br />
ETFs that cover homebuilders, financials,<br />
REITs and preferred stock, among others.<br />
That’s vastly different from 12 months<br />
ago, based on how the relative strength of<br />
those segments have changed as the markets<br />
fluctuate.<br />
This focus on income-generating stocks<br />
contrasts with the traditional use of bonds,<br />
which are paying far lower yields in the<br />
current environment. Lip says the firm<br />
was defensively positioned earlier this year<br />
through bond ETF positions, but sees the<br />
current environment as better for stocks.<br />
“The market’s really changed since<br />
2008,” said Lip. “People are no longer saying,<br />
‘The markets are going to take care of<br />
me for the rest of my life. If I just invest<br />
in stocks, I’ll be okay.’” It may be a pessimistic<br />
view of the markets, but he attributes<br />
these client concerns as a primary<br />
reason why the firm’s income strategy is<br />
so popular–and why the firm’s assets are<br />
on the climb. “A lot of clients that come<br />
on board with us are saying, ‘I can’t afford<br />
another down 30-40% market,’” he<br />
said. “Our concept is that we’ll protect<br />
you against those down markets. You can<br />
sleep at night.”<br />
<strong>rising</strong> star<br />
firm<br />
Baker Avenue Asset<br />
Management<br />
location<br />
San Francisco, CA<br />
founded<br />
2005<br />
AUM<br />
$800 million<br />
AUM GROWTH (YOY)<br />
14%<br />
% AUM IN ETFs<br />
60%<br />
MIN. ASSET SIZE<br />
$500,000<br />
november 2012<br />
9
Young<br />
Gun<br />
Changing<br />
An O ld<br />
Market<br />
Michael<br />
McClary<br />
CIO & Vice President,<br />
ValMark ADVISERS<br />
<strong>rising</strong> star<br />
firm<br />
Valmark ADVISERS<br />
location<br />
Akron, OH<br />
founded<br />
1997<br />
AUM<br />
$2.2 billion<br />
AUM GROWTH (YOY)<br />
200%<br />
% AUM IN ETFs<br />
70%<br />
MIN. ASSET SIZE<br />
$<strong>10</strong>0 million<br />
When you think of<br />
ValMark, you don’t think<br />
of ETFs. You think insurance.<br />
The firm has $42 billion of in-force<br />
life insurance, has been in that market since<br />
1963, and sells insurance in all 50 states.<br />
Michael McClary is starting to change<br />
all that. The 30-year-old CIO has leveraged<br />
ValMark’s network and a smart portfolio<br />
model to turn the company into a leader—ValMark’s<br />
advisor group now holds<br />
$2.2 billion in ETFs through seven distinct<br />
model portfolios.<br />
When McClary joined ValMark in<br />
2003, the insurance broker-dealer had just<br />
jumped into ETFs, and it was considering<br />
getting out. The program was small, at just<br />
$5 million in assets, and the firm’s sales<br />
force wasn’t sure how to sell the new products<br />
to advisors. But McClary believed.<br />
ValMark’s seven portfolios each take a<br />
strategic stance for asset allocation, what<br />
McClary defines as a view for the next<br />
“12-36 months.” Holding 20-25 different<br />
ETFs, the portfolios target different levels<br />
of risk and hold a varying amount of equi-<br />
ties from 27% to 98%. Right now, McClary<br />
is wary of most bond investments. “I don’t<br />
think the hazard pay is high enough right<br />
now for the risk,” he said, noting, however,<br />
that they are “perpetual holders of TIPS.”<br />
McClary sees TIPS as insurance against<br />
portfolio inflation, relating them to another<br />
big part of ValMark’s business. “We<br />
feel that’s almost like life insurance,” he<br />
said. “You don’t add or subtract your life<br />
insurance coverage. We have shortened<br />
our duration on TIPS and moved a third of<br />
our position into the new FlexShares Target<br />
Duration funds.”<br />
What’s most striking about ValMark’s<br />
growth is how exclusive the firm is. McClary<br />
says that the firm works closely with its<br />
core distribution channels, and ValMark’s<br />
services are not generally available to the<br />
normal advisor community. “We stick to<br />
what we do best,” McClary said. “We’re not<br />
a firm that’s generally available to the advisor<br />
community through the more open<br />
platforms. That enables us to have a better<br />
idea of who our customer is, and adds another<br />
layer to our level of management.”<br />
<strong>10</strong> <strong>Index</strong>Universe.com/ETFReport
Th e<br />
Social<br />
Media<br />
Advisory<br />
Firm<br />
James<br />
McDonald<br />
CEO & CIO, <strong>Index</strong> <strong>Strategy</strong> <strong>Advisors</strong><br />
James McDonald is out to<br />
build the next major advisory platform;<br />
one that takes the model used<br />
by firms like Edward Jones and tweaks it<br />
for the 21st century.<br />
“The Edward Jones model is simple<br />
and effective,” said McDonald. “Hire<br />
smart, honest professionals; train them up<br />
through mentorships; and help them build<br />
their book of business by leveraging their<br />
personal circle of influence, whether that’s<br />
friends and family, alumni connections, or<br />
civic and professional organization colleagues.<br />
<strong>Index</strong> <strong>Strategy</strong> <strong>Advisors</strong> aims to<br />
do the same thing, but through technology<br />
and at lower costs.”<br />
Instead of traditional mentorships, <strong>Index</strong><br />
<strong>Strategy</strong> <strong>Advisors</strong> has built an online<br />
learning portal and training program to<br />
bring young advisors along. Instead of expensive<br />
portfolios, McDonald has built an<br />
online model system and second-opinion<br />
generator using advanced portfolio construction<br />
theory, ETFs and HTML5 to instantly<br />
offer lower-cost alternatives to investors<br />
stuck in old-school portfolios. And<br />
he’s helping advisors tap into their social<br />
network to expand their “circle of influence”<br />
nationwide, targeting not 50 or <strong>10</strong>0<br />
people, but 1,000, 5,000 or more.<br />
“The reach of social media means that<br />
your circle of influence is no longer small<br />
and it’s no longer local,” says McDonald.<br />
“If you’re smart about it, it’s national and<br />
it’s massive.”<br />
For all the practice management ideas,<br />
McDonald says that he’s most proud of<br />
the portfolio management side. The firm<br />
has built an algorithmic portfolio construction<br />
process that monitors 1,560 sectors<br />
across 46 countries in real time. It has<br />
a risk-hedging system that allocates 15%<br />
of the portfolio at all times to an incomeproducing<br />
risk hedge through JNK, the<br />
junk bond ETF. Technology even factors<br />
into the firm’s customer service—its investment<br />
platform dynamically allows<br />
for adjustments and rebalancing on the<br />
fly. So far, it’s working. The firm, which<br />
just launched last year, projects to bring<br />
in $75 million in assets a quarter for the<br />
foreseeable future.<br />
<strong>rising</strong> star<br />
firm<br />
<strong>Index</strong> <strong>Strategy</strong> <strong>Advisors</strong><br />
location<br />
Houston, TX<br />
founded<br />
2011<br />
AUM<br />
$12.4 million<br />
AUM GROWTH (YOY)<br />
30,000%<br />
% AUM IN ETFs<br />
<strong>10</strong>0%<br />
MIN. ASSET SIZE<br />
none<br />
november 2012<br />
11
Managing<br />
o n a<br />
macro<br />
level<br />
Tyler<br />
Mordy<br />
Director of Research & Co-CIO,<br />
Hahn Investment Stewards<br />
<strong>rising</strong> star<br />
firm<br />
Hahn Investment<br />
Stewards<br />
location<br />
Toronto, ON<br />
founded<br />
2001<br />
AUM<br />
$500 million<br />
AUM GROWTH (YOY)<br />
20%<br />
% AUM IN ETFs<br />
<strong>10</strong>0%<br />
MIN. ASSET SIZE<br />
$<strong>10</strong>0,000<br />
If Beta is the new Alpha, as<br />
BlackRock’s Larry Fink likes to say,<br />
Tyler Mordy plans to find it.<br />
Founded in 2001, Hahn’s investment<br />
philosophy focuses not on the small, but<br />
on the big. Mordy believes that a macro<br />
view of the global economy is the best way<br />
to manage money.<br />
“We started the firm with a view that<br />
it’s easier to create alpha through asset<br />
allocation than through individual stock<br />
picking,” he said.<br />
At the time, this investment philosophy<br />
was a radical departure from the traditional<br />
way of thinking about building<br />
portfolios—where advisors would divvy<br />
up assets between 60% in stocks and 40%<br />
in bonds, and search out alpha on the<br />
micro level. “The old ways might have<br />
worked in the ’80s and ’90s,” Mordy said,<br />
“but it wouldn’t work for the future.”<br />
Relying exclusively on ETFs, Mordy’s<br />
team manages $3 billion in accounts<br />
from Canada’s version of registered investment<br />
advisors. The firm’s screening<br />
process is rigorous, using a seven-point<br />
rating criteria for evaluating any exchange-traded<br />
fund to be included in the<br />
firm’s portfolios.<br />
Mordy says the company has screened<br />
every ETF launched so far, and considers<br />
each new option as fast as the industry<br />
can launch it. The ETFs that pass muster<br />
that pass muster are used in a set of core<br />
portfolios, as well as more focused portfolios,<br />
though Mordy stresses that every<br />
portfolio offered by Hahn has a certain<br />
level of asset class diversification.<br />
Mordy points to exchange-traded<br />
funds as a vehicle that forces advisors to<br />
rethink how they allocate assets, for the<br />
benefit of the end client. But most managers,<br />
he says, are not used to thinking<br />
about how the different asset classes can<br />
truly work together. “In the 1980s, it was<br />
about single-silo investors—guys who focused<br />
on large-cap growth or value,” he<br />
said. “And the paradigm shift has created<br />
the potential for a better portfolio, but<br />
there’s a mismatch of skill sets.”<br />
12 <strong>Index</strong>Universe.com/ETFReport
Th e<br />
Track<br />
Record<br />
Neil<br />
Peplinski<br />
Managing Partner,<br />
Good Harbor Financial<br />
<strong>rising</strong> star<br />
There are only a few things<br />
you need to know about Good<br />
Harbor, and they’re all numbers.<br />
The first is 7.23%. That’s the amount<br />
by which the firm’s Tactical Core U.S. ETF<br />
Model has beaten the S&P 500, on an annualized<br />
basis, over the past <strong>10</strong> years. Through<br />
Sept. 30, the firm’s strategy had an annualized<br />
return of 14.29% since inception in<br />
April 2003, compared with 7.06% for the<br />
S&P 500 <strong>Index</strong> it uses as a benchmark.<br />
The second number is $300 million.<br />
That’s the amount of money it’s raising in<br />
new inflows each month.<br />
“Redemptions are sparse,” says Neil<br />
Peplinski, managing partner in the firm.<br />
Good Harbor’s investment philosophy<br />
breaks away from traditional efficient<br />
markets theory. Yes, the markets are constant,<br />
but the firm believes that the risk<br />
in those markets is not. So when Peplinski<br />
engineered the firm’s flagship U.S. Tactical<br />
Core strategy, evaluating risk premiums<br />
was the issue at the center of it. “What really<br />
drives equity prices in the short term<br />
has less to do with company fundamentals,”<br />
he said, “and more to do with investors’<br />
appetites for risk.”<br />
Peplinksi’s team tracks three key categories<br />
to get a sense of where the environment<br />
is in the short term: economic data<br />
such as growth rate, credit spreads and<br />
movement on the VIX volatility index; activity<br />
on the U.S. Treasury curve; and overall<br />
momentum measures. Based on the<br />
data, the firm then makes large market<br />
moves into equities (if the risk premium is<br />
falling) or fixed income (if risks are <strong>rising</strong>).<br />
The strategy employs large, popular ETFs<br />
like the SPDR S&P 500 (SPY), iShares S&P<br />
500 (IVV) and SPDR S&P MidCap 400 (MDY)<br />
to capture exposure to stocks while using<br />
bond ETFs such as the iShares Barclays<br />
1-3 Year Treasury Bond (SHY), iShares<br />
Barclays 3-7 Year Treasury Bond (IEI) and<br />
iShares Barclays 7-<strong>10</strong> Year Treasury Bond<br />
(IEF) as defensive plays. The portfolio also<br />
employs leveraged ETFs from ProShares to<br />
add additional beta, with a target of 1.5 for<br />
the portfolio.<br />
firm<br />
Good Harbor Financial<br />
location<br />
CHICAGO, IL<br />
founded<br />
1999<br />
AUM<br />
$3.3 billion<br />
AUM GROWTH (YOY)<br />
700%<br />
% AUM IN ETFs<br />
99%<br />
MIN. ASSET SIZE<br />
$<strong>10</strong>0,000<br />
november 2012<br />
13
Serving<br />
A<br />
New<br />
Client<br />
Base<br />
Mitch<br />
Reiner<br />
Managing Partner, Wela Strategies<br />
<strong>rising</strong> star<br />
firm<br />
Wela Strategies<br />
location<br />
ATLANTA, ga<br />
founded<br />
2008<br />
AUM<br />
$40 million<br />
AUM GROWTH (YOY)<br />
63%<br />
% AUM IN ETFs<br />
95%<br />
MIN. ASSET SIZE<br />
$<strong>10</strong>,000<br />
“<br />
We were founded to managing<br />
solve a specific problem,”<br />
Reiner tells us on a phone<br />
call. It’s a great problem to have: Wela’s<br />
parent company, Capital Investment <strong>Advisors</strong>,<br />
would regularly receive inquiries<br />
for help from retail investors looking for<br />
advice—where to put their money and<br />
how to make it grow. Since the investors<br />
were well below Capital Investment’s $<strong>10</strong><br />
million minimum asset size, the firm<br />
used to point those clients to Vanguard or<br />
Fidelity—leaving all of that small money<br />
on the table.<br />
Instead, Capital Investment’s executive<br />
team built Wela to manage those clients,<br />
setting the minimum asset size to<br />
only $<strong>10</strong>,000 and charging accounts under<br />
$250,000 just 1% in fees. Reiner and<br />
his partners at the firm move the clients<br />
into one of 14 model portfolios that use<br />
ETFs to efficiently invest the new client’s<br />
assets. And while Wela’s assets and client<br />
base have grown considerably, Reiner<br />
runs the firm at the same time that he’s<br />
150 clients and more than<br />
$200 million in AUM. “[Wela’s] turned<br />
into something bigger than what we initially<br />
imagined,” he said. “We saw that<br />
our models were working, and it’s just<br />
taken off.”<br />
Wela’s models are impressive: One,<br />
dubbed the “Agg Yield” strategy, uses<br />
a combination of fixed income, REITs,<br />
MLPs, preferred securities and closed-end<br />
funds selected by momentum and valuation<br />
to deliver income to the client’s assets.<br />
Other models follow legendary investor<br />
John Bogle’s advice to own your<br />
age in bonds. The models tie right back<br />
to the reason why Wela exists in the first<br />
place. “We started this business [because]<br />
we were looking out for the teacher who<br />
had $200,000 saved,” Reiner says, “and<br />
nowhere to turn but the big asset management<br />
firms that would likely charge<br />
him high fees. We wanted to build a platform<br />
where we could offer objective investment<br />
advice, and that’s why we created<br />
the Own Your Age portfolios.”<br />
14 <strong>Index</strong>Universe.com/ETFReport
Th e<br />
<strong>Inc</strong>ome<br />
Generator<br />
Kevin<br />
Simpson<br />
Portfolio Manager,<br />
Capital Wealth Planning<br />
<strong>rising</strong> star<br />
Kevin Simpson’s message<br />
to clients is simple: High income,<br />
low risk.<br />
His Florida-based investment advisory<br />
firm, Capital Wealth Planning,<br />
achieves these goals by writing call options<br />
against fairly conservative, broadbased<br />
portfolios of ETFs.<br />
Simpson’s portfolios use equity ETFs<br />
across large-, mid- and small-caps, with<br />
some tactical rotation into the various sectors.<br />
The portfolio also always includes an<br />
inverse position to hedge against downside<br />
risk. The firm attempts to sell calls on<br />
<strong>10</strong>0% of the portfolio, placing those calls<br />
five to 8% out of the money.<br />
Simpson’s goal? Capture 60% of the<br />
market’s upside, while limiting downside<br />
to 35%.<br />
“It’s really not an equity strategy,”<br />
said Simpson. “It’s an income strategy.<br />
What’s nice is that when the markets are<br />
up as they have been this year, we get to<br />
participate in some of that upside. At the<br />
same time, we limit our downside risk.<br />
Our objective isn’t to outperform the <strong>rising</strong><br />
markets, but to participate in them.”<br />
The strategies tend to generate around<br />
2% in straight dividend income, and recently,<br />
option premiums have been adding<br />
another 4%. Put it all together and<br />
you have an overall portfolio yield of<br />
around 6%.<br />
ETFs chosen for the strategy tend to be<br />
big, standard stock ETFs—SPY, MDY, IWM,<br />
etc. Simpson looks carefully at the open<br />
interest on related options when choosing<br />
funds. “The selection process has to do<br />
with how tight the spreads are, how good<br />
the open interest is, and ultimately, how<br />
optionable an ETF is.”<br />
The focus on income is resonating<br />
with investors.<br />
“We’re looking at a market that over<br />
the next three or four years will have<br />
depressed interest rates,” said Simpson.<br />
“Retirees and others need income alternatives.<br />
A covered call strategy can help<br />
support client income needs in a low interest<br />
rate environment.”<br />
firm<br />
Capital Wealth Planning<br />
location<br />
Naples, FL<br />
founded<br />
2005<br />
AUM<br />
$307 million<br />
AUM GROWTH (YOY)<br />
20%<br />
% AUM IN ETFs<br />
90%<br />
MIN. ASSET SIZE<br />
$<strong>10</strong>0,000<br />
november 2012<br />
15
Th e<br />
Duke<br />
of<br />
Smooth<br />
Rich<br />
Steinberg<br />
President & CIO,<br />
Steinberg GLOBAL ASSET<br />
<strong>rising</strong> star<br />
firm<br />
Steinberg GLOBAL ASSET<br />
location<br />
Boca Raton, FL<br />
founded<br />
1993<br />
AUM<br />
$5<strong>10</strong> million<br />
AUM GROWTH (YOY)<br />
<strong>10</strong>%<br />
% AUM IN ETFs<br />
33%<br />
MIN. ASSET SIZE<br />
$1 million<br />
Steinberg’s NO. 1 goal for<br />
his clients is to give them a<br />
smooth ride, free of the topsyturvy<br />
roller-coaster rides that the markets<br />
often throw out. To do that, Steinberg<br />
Global Asset uses a variety of model<br />
portfolios and custom-built solutions that<br />
use ETFs with other instruments. Many<br />
clients receive a mix of the firm’s different<br />
equity and fixed-income investments,<br />
depending on their needs. “A smoother<br />
ride is more important than beating an<br />
index,” he said, “as long as we get our<br />
clients to their performance goals to live<br />
their lifestyle.”<br />
In the ETF-focused portfolios, Steinberg<br />
evaluates which ETFs to hold by many of<br />
the same performance metrics that drive<br />
more traditional vehicles—relative value,<br />
relative price-to-earnings and target prices.<br />
The equity ETF portfolio owns roughly 15<br />
funds offering large-, mid- and small-cap<br />
exposure at all times. ETFs are selected by<br />
generating a forward P/E for each fund,<br />
then converting those into an EPS per<br />
share and looking for the right upside. For<br />
the past year, Steinberg has also included<br />
a large dividend component, based on client<br />
needs, and will even use an inverse ETF<br />
when a hedge is needed. “There may be<br />
times when we have a 20% hedge on the<br />
portfolio,” he said.<br />
Outside of its model portfolios, the<br />
firm also manages rules-based portfolios<br />
for foundations that use single-country<br />
ETFs for international exposure. And Steinberg<br />
himself stresses uses for ETFs in many<br />
of the firm’s custom solutions for its highnet-worth<br />
clients. “We may add ETFs to<br />
complement existing positions or low-cost<br />
basis positions,” he said. “Not every client<br />
of ours is in a model portfolio.”<br />
Perhaps most interesting, however,<br />
is how the firm is moving from highwealth<br />
clients to address the mass-affluent<br />
crowd. Steinberg recently launched a<br />
separate business, SG Select LLC, to manage<br />
accounts with assets that fall in the<br />
$50,000 to $1 million range. The company<br />
will serve smaller clients in its own company<br />
as well as clients of other registered<br />
investment advisors.<br />
16 <strong>Index</strong>Universe.com/ETFReport
Th e<br />
ETF<br />
Psychologist<br />
Jeff<br />
Wycoff<br />
Managing Partner,<br />
Fort Point Capital<br />
Most advisors focus on<br />
the performance of their investments.<br />
Wycoff puts the<br />
focus on the investment experience. Fort<br />
Point shapes the experience a client has<br />
with their investments from top to bottom,<br />
both through advanced portfolio management<br />
techniques and good old fashioned<br />
client psychology. “The modern application<br />
of portfolio theory acts as if individuals<br />
will behave in the same way as institutions,”<br />
said Wycoff. “And they don’t.”<br />
The firm builds custom portfolios for<br />
its 50 clients, using what it calls an “active<br />
risk management overlay” to control the<br />
investment outcome as much as possible.<br />
Wycoff and his team use options to generate<br />
a “soft hedge” for the portfolio, and<br />
more importantly, show their clients that<br />
good things are happening during rough<br />
market periods. “Typically, the advisors<br />
don’t have a dynamic way of responding<br />
to negative environments,” said Wycoff.<br />
“In our case, that’s not what’s happening.<br />
The option overlays are dynamically<br />
creating more cash. Clients see that activ-<br />
ity and feel that something’s being done,<br />
that they’re not being asked to wait.”<br />
That same psychological approach applies<br />
to Fort Point’s robust tax-loss harvesting.<br />
The portfolio managers monitor each investment’s<br />
price movement in the portfolio,<br />
and based on the client’s cost basis,<br />
will replace positions to filter out undesired<br />
tax events.<br />
Fort Point’s strategy of anticipating client<br />
reactions and providing positive feedback<br />
through options and harvesting tax<br />
losses gives the firm a discipline Wycoff<br />
says others struggle to maintain. “Calibrating<br />
for the natural cognitive biases of the individual<br />
is important, not only for them but<br />
for the professional. Because the professional<br />
doesn’t want to lose their client, they’ll<br />
do whatever they need to do to change their<br />
investment policy. They’re going to react.”<br />
“The cognitive biases that usually force<br />
clients to deviate at the worst possible moments,<br />
that’s where advisors and institutions<br />
lose their clients,” he said. “We tend<br />
to gain clients during negative market environments,<br />
as well as positive.”<br />
<strong>rising</strong> star<br />
firm<br />
Fort Point Capital<br />
location<br />
San Francisco, CA<br />
founded<br />
2008<br />
AUM<br />
$250 million<br />
AUM GROWTH (YOY)<br />
29%<br />
% AUM IN ETFs<br />
50%<br />
MIN. ASSET SIZE<br />
$1 million<br />
november 2012<br />
17
Keep Them Happy<br />
Ric Edelman’s Advice<br />
To The Industry<br />
The biggest ETF advisor in the world<br />
shares his thoughts on where the<br />
industry is going—and the best way<br />
to grow your business.<br />
By Cory Banks<br />
Ric Edelman is one of the largest independent financial<br />
advisors in the world—his firm manages $8 billion in assets for<br />
thousands of clients, while his radio shows and writings capture the broad<br />
attention of the markets. Ten years ago, he abandoned the mutual fund industry<br />
and built his firm almost exclusively around exchange-traded funds, making him<br />
one of the industry’s biggest success stories.<br />
But he doesn’t credit ETFs as much as he credits a commitment to customer<br />
service. It’s a recurring theme throughout my conversation with the<br />
man behind Edelman Financial Services—more than the evils of mutual fund<br />
fees, gunning for Merrill Lynch or his view on the 401(k) industry as the next<br />
frontier to tame. Edelman believes the financial services industry needs to put<br />
the emphasis back on its clients. “You need to stop worrying about you and<br />
your needs,” he tells ETF Report, “and focus instead on your client’s needs.”<br />
Advisor Quick View<br />
Firm<br />
Edelman Financial<br />
Services LLC<br />
Founded 1987<br />
Location<br />
aum<br />
All ETFs?<br />
Fairfax, Va.<br />
$8 billion<br />
No<br />
Why do you use ETFs?<br />
There are two reasons.<br />
The first is that ETFs<br />
are virtually free of<br />
the deceptive business<br />
practices that are pervasive throughout the retail<br />
mutual fund industry. ETFs, because of their<br />
design and management approach, are largely,<br />
if not entirely, immune to these problems. And<br />
part of the way they accomplish that is by investing<br />
in a more passive, highly diversified and<br />
consistent manner, which dramatically reduces<br />
turnover and fund expenses—which leads to the<br />
second reason we like ETFs: They are extraordinarily<br />
inexpensive. They’re as much as 90%<br />
cheaper than traditional retail mutual funds.<br />
Have you transitioned fully to ETFs, or are<br />
there still some mutual funds that you use?<br />
In addition to ETFs, we extensively use Dimensional<br />
Funds, which is a fund company that looks<br />
and acts like ETFs in terms of how they operate.<br />
And we use a smattering of Vanguard funds,<br />
which are also very similar. So it’s not that we are<br />
dogmatic in our approach, we’re not using ETFs<br />
simply because they’re ETFs: We’re seeking investment<br />
solutions that meet our clients’ needs.<br />
18 <strong>Index</strong>Universe.com/ETFReport
THE POWERSHARES DB<br />
COMMODITY INDEX<br />
TRACKING FuND<br />
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broad-based commodity ETF in the world.<br />
- Broad access to commodities<br />
- <strong>10</strong>0% daily transparency<br />
- Intraday liquidity<br />
// To download a copy of the prospectus, visit PowerShares.com/DBCpro // ETFs publish their holdings daily and trade on exchanges, like stocks, continuously throughout<br />
the trading day. // The fund is not a mutual fund or any other type of Investment Company within the meaning of the Investment Company Act of 1940 and is<br />
not subject to its regulation. // DB Commodity Services LLC, a wholly owned subsidiary of Deutsche Bank AG, is the managing owner of the fund. Certain marketing<br />
services may be provided to the fund by Invesco Distributors, <strong>Inc</strong>. or its affiliate, Invesco PowerShares Capital Management LLC (together, “Invesco”). Invesco will be<br />
compensated by Deutsche Bank or its affiliates. ALPS Distributors, <strong>Inc</strong>. is the distributor of the fund. Invesco, Deutsche Bank and ALPS Distributors, <strong>Inc</strong>. are not affiliated.<br />
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How does heavy usage of ETFs affect<br />
your fee structure for the clients that<br />
you manage?<br />
Well, what matters when dealing with<br />
pricing is the total cost to the client. Too<br />
often, advisors only look at pricing from<br />
their own personal perspective—what<br />
is their comp, or what is the fee they are<br />
charging the client? The client cares about<br />
total all-in costs: the cost of the advisor,<br />
plus the cost of the investments that the<br />
advisor recommends.<br />
Because ETFs cost so much less than<br />
other forms of investing, frankly, it provides<br />
room for the advisory fee to be a little<br />
bit higher. We can earn a little bit more,<br />
which helps to improve the quality of our<br />
services. And the client is still paying less<br />
than they would pay elsewhere.<br />
Your firm has quickly grown to managing<br />
$8 billion in assets. What’s the secret to<br />
your growth?<br />
First and foremost is outstanding client<br />
services in investment management. Obviously,<br />
if we aren’t good at what we do, nobody<br />
would be a client. But it’s not enough<br />
to be a great chef; people have to know that<br />
you’re a great chef. And we have established<br />
a very good reputation among consumers<br />
by virtue of the massive amounts<br />
of consumer education that we have been<br />
doing for 25 years.<br />
We have engaged in more financial<br />
education and literacy programs than<br />
any other advisor. I have radio and television<br />
shows. I’ve written seven best-selling<br />
books. We have a monthly 16-page newsletter.<br />
We do hundreds of seminars. We<br />
have a major website devoted to financial<br />
education. And this availability of information<br />
has helped to create both credibility<br />
and name recognition.<br />
It’s cumbersome. It takes a lot of time<br />
and effort and money to deliver. But it<br />
greatly serves the investing public.<br />
If you’re already doing all of that, what’s<br />
the next hill to climb?<br />
There are a variety of new business activities<br />
we are engaged in. We are still very<br />
small. I mean, we only have $8 billion in assets.<br />
Merrill has, what, $2 trillion? So we’re<br />
tiny. And there are still millions of Americans<br />
who need our services: people who are<br />
largely being ignored by the rest of the financial<br />
services sector, which tends to deal<br />
only with higher-net-worth consumers.<br />
Most firms have $500,000 or $1 million<br />
minimums. We don’t. So we are developing<br />
a variety of additional business initiatives<br />
that will expand our reach so that we<br />
can serve a lot more people.<br />
The ETF industry has grown tremendously.<br />
What can it do better?<br />
I don’t see any concerns or flaws in the ETF<br />
world. I think this is just the beginning. The<br />
tipping point is coming very soon. And it will<br />
be led by the retirement plan marketplace.<br />
When employees got their own ability<br />
to invest the money in their 401(k), most<br />
of those employers were beginning to offer<br />
mutual fund choices. Most consumers had<br />
never heard of a mutual fund. They didn’t<br />
know what it was.<br />
And they began to realize that these<br />
things are pretty cool: They’re inexpensive;<br />
you could invest $<strong>10</strong>0 or less. You can have<br />
automatic reinvestment. You get diversification.<br />
You have a professional money<br />
manager picking stocks for you. It was<br />
simple, clean, easy; it didn’t require a lot<br />
of knowledge or time. And people began to<br />
say, “Why don’t I buy these on my own? If<br />
Because ETFs cost so much less ...<br />
we can earn a little bit more.<br />
it’s such a cool deal inside my 401(k), let<br />
me go buy them on my own.” That began<br />
the explosion of the mutual fund industry<br />
through the late 1980s, to where we are<br />
today. What do they have, $13 trillion in<br />
assets now? ETFs at this point are generally<br />
not available in 401(k) plans.<br />
And what’s the hurdle to getting more ETFs<br />
in front of consumers through 401(k)s?<br />
Motivated self-interest of the financial services<br />
industry. ETFs do not provide compensation<br />
to the brokerage industry the<br />
way that mutual funds do. And there is no<br />
incentive for plan providers to offer ETFs to<br />
employers. Eventually it will take hold as<br />
employers continue to lose lawsuits where<br />
their employees are suing them for offering<br />
I think this is just the beginning.<br />
The tipping point is coming very soon.<br />
investments that are too expensive. And as<br />
workers continue to learn about the opportunity<br />
of ETFs, we will begin to see ETFs<br />
offered in the marketplace with increasing<br />
frequency, repeating what we experienced<br />
in the ’80s and ’90s.<br />
What indicators would you suggest other<br />
advisors watch for their outlook?<br />
We are looking at technology advances predominantly,<br />
which is going to be the leading<br />
cause of economic growth globally. Second<br />
are demographic trends, which are equally<br />
bullish. And those two factors frankly are<br />
overriding all the other concerns. The only<br />
thing that might derail it—which of course<br />
are significant threats—are natural disaster<br />
and terrorism. We’ve always got those<br />
risks. And they could be of course abhorrent,<br />
but they’re uncontrollable.<br />
What advice would you give the investment<br />
advisor who’s moving into the ETF industry?<br />
What do they need to think about in order<br />
to be successful?<br />
In a nutshell, commitment to excellence<br />
and your clients’ best interests. That’s kind<br />
of a vague, all-encompassing phrase—I<br />
might as well say “oxygen.”<br />
Is that something you don’t think a lot of<br />
investment advisors consider?<br />
No. If they were fundamentally devoted to<br />
excellence, then they would work very hard<br />
to make sure they are delivering not merely<br />
good advice and services, but excellent advice<br />
and services—better than what their clients<br />
would obtain elsewhere.<br />
And second, they would be focusing<br />
on the client’s best interests, they would<br />
ensure that the advice they were providing<br />
was in fact serving their client first and<br />
themselves second. We have seen too many<br />
practitioners in our field providing advice<br />
and recommendations that serve the advisor’s<br />
interests first, rather than the client’s.<br />
And when you behave that way, you<br />
limit your own growth because clients see<br />
it. They recognize it.<br />
20 <strong>Index</strong>Universe.com/ETFReport
ETF Analytics<br />
There are over 1,000 eTFs on The markeT. own The righT ones.<br />
Equity: U.S. Energy<br />
Equity Segment Report<br />
OVERVIEW<br />
<strong>Index</strong>Universe Insight<br />
Eight ETFs offer very different approaches to the energy space, providing<br />
investors with access to everything from the broad market—dominated<br />
by names like Exxon Mobil or<br />
Eight ETFs offer ConocoPhillips—to quant-based<br />
strategies that attempt to pick<br />
very different<br />
winners from the many companies<br />
approaches to the<br />
energy space. <br />
and sub industries in U.S. energy.<br />
Four funds—VDE, IYE, XLE and<br />
FEG—deliver broad, market-like<br />
sector exposure that ranges from very good to great, though they diverge<br />
sharply on costs and risks. IYE and XLE offer the most representative<br />
portfolio of stocks, but IYE's 0.47% expense ratio is far and away the<br />
highest of these four “plain vanilla” funds. In contrast, XLE delivers the<br />
best combination of broad exposure at the segment-lowest fee: 0.18%.<br />
The fund brings something else to the party--massive liquidity. As one of<br />
the most liquid ETFs in the world, XLE trades about $1 billion a day,<br />
15 June 2012<br />
making its all-in costs from trading and fees tough to beat. VDE also<br />
delivers a market-like basket at a low fee (0.19%). Then there’s FEG, the<br />
polar opposite from XLE on trading volume. Despite an excellent<br />
portfolio offered at the second lowest price in the segment (tied with VDE<br />
at 0.19%), FEG suffers from poor on-screen liquidity and carries high<br />
fund-closure risk from its low asset base.<br />
Four other funds offer clear alternatives to traditional sector exposure<br />
due to their strategy or selection universe. PSCE differs the most from the<br />
sector by focusing exclusively on small-cap energy companies. FXN and<br />
PXI use quant strategies to pick winners from the sector instead of merely<br />
owning the market like the vanilla funds. RYE offers an equal-weighted<br />
version of XLE. As they stray from vanilla exposure, all four funds<br />
come—in varying degrees—with greater risks, higher price tags and<br />
less-than-perfect tracking, but contribute to a well-rounded segment:<br />
There’s something for everyone here.<br />
Analyze, compare and select the<br />
right ETF for every investment strategy<br />
with <strong>Index</strong>Universe ETF Analytics.<br />
Related ETFs<br />
Snapshot<br />
Overall<br />
Ticker Fund Name<br />
Rating Efficiency Tradability Fit Notes<br />
IYE iShares Dow Jones U.S. Energy A 97 88 98 97<br />
VDE Vanguard Energy A 93 91 98 93<br />
TRADABILITY<br />
XLE Energy Select SPDR A 93 94 99 93<br />
FEG Focus Morningstar Energy B 94 85 78 94<br />
<strong>Index</strong>Universe Tradability Insight<br />
U.S. energy funds vary dramatically in Tradability, with XLE reigning over tier, averaging around 0.14% ($0.06). Still, like the top tier, PXI scores<br />
PXI PowerShares Dynamic Energy Portfolio B 65 81 86 65<br />
all. For on-screen liquidity, XLE is not only the most liquid ETF in the high with regard to block liquidity—indicating it’s still easy to trade in<br />
RYE Guggenheim S&P Equal Weight Energy B 52 82 79 52<br />
segment, it’s one of the most liquid size.<br />
FXN First Trust Energy AlphaDEX B 41 80 83 41<br />
U.S. energy funds ETFs in the world, trading an<br />
average of about $1 billion daily. Funds that trade around and below $1 million a day in volume land at<br />
PSCE PowerShares S&P SmallCap Energy B 26 89 74 26<br />
vary dramatically in<br />
Segment Average | Ranked by Overall Score<br />
Tradability. <br />
VDE and IYE are distant seconds by the bottom tier of Tradability—PSCE, RYE, FXN and FEG. Of these, FEG<br />
volume, with ADV averaging $13 may be the least lucky, considering its portfolio of securities is among the<br />
million and $9 million,<br />
most liquid. FEG was victim to a pricing error on its first day of trading<br />
1-Year Total Return<br />
respectively. Still, VDE and IYE deliver excellent liquidity for most<br />
that led to wacky trades and bad press—likely scaring away investors at a<br />
investors. All of the top three funds trade multiples of their creation unit critical early stage for the new fund. While all four funds experience<br />
1-Year<br />
sizes (50,000 shares), with average spreads between 0.01% and 0.04%. wider spreads—with averages as high as 0.24% in the case of PSCE—their<br />
PXI -7.97%<br />
holdings are incredibly liquid, as indicated by their high block-liquidity<br />
<strong>10</strong>%<br />
Bench -8.44% PXI occupies a second tier of Tradability within the U.S. Energy segment. scores. The irony of this is that large investors will find these funds easy FIT<br />
IYE -9.08% With its ADV of $2 million, it trades well above our minimum threshold to trade in size (with the help of a liquidity provider), but small investors<br />
0%<br />
FEG -9.41% of $1 million. Spreads range a good deal wider for PXI than for the top only have limit orders to use as an aid when placing trades.<br />
<strong>Index</strong>Universe Fit Insight<br />
Segment funds deliver clear choices regarding their portfolios, roughly exposure: It overweights service and equipment firms and completely<br />
XLE -<strong>10</strong>.11%<br />
Median<br />
split along the lines of those that try to match the sector and those that ignores the integrated oil & gas industry. (PSCE passes on names like<br />
-<strong>10</strong>%<br />
VDE -<strong>10</strong>.54%<br />
Average Daily<br />
Average<br />
Premium/<br />
Maximum<br />
Maximum<br />
Creation<br />
don’t. VDE, IYE, XLE and FEG all Chevron and Exxon Mobil in favor of SEACOR Holdings and Lufkin<br />
Ticker Tradability Rating<br />
Volume ($)<br />
Spread<br />
Discount<br />
Premium<br />
Discount<br />
Basket Size<br />
RYE -16.60%<br />
Segment funds land in the first camp. They aim to Industries.) Though PSCE has outperformed its competitors over the<br />
XLE 99 1.07 B 0.02% 0.00% 0.38% -0.17% 50,000<br />
deliver the broad market and past year, its beta of 1.42 indicates that it’s risky relative to the broad<br />
-20%<br />
PSCE -19.54%<br />
deliver clear<br />
generally do a great job at it, with market, though this shouldn’t surprise (or necessarily deter) investors<br />
IYE 98 9.55 M 0.04% 0.00% 0.16% -0.20% 50,000<br />
FXN -24.28%<br />
VDE 98 13.08 M 0.04% 0.00% 0.17% -0.15% <strong>10</strong>0,000choices regarding<br />
Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun<br />
2012<br />
PXI 86 2.32 M 0.14% -0.03% 0.60% -1.03% 50,000their portfolios. <br />
IYE and XLE edging out the rest. looking for small-cap energy companies.<br />
These four funds all follow a<br />
market-cap weighting scheme that Investors looking for an equal-weight strategy will want to examine RYE.<br />
As of 06/14/12<br />
FXN 83 963.16 K 0.13% -0.04% 0.38% -0.50% 50,000<br />
gives them top-heavy<br />
The fund strays from the broad market—instead it overweights midcap<br />
concentration of major players such as Exxon Mobil and Chevron, and companies with zero exposure to small-caps. As a result, RYE loads up on<br />
RYE 79 309.18 K 0.12% -0.02% 1.97% -1.80% 50,000<br />
generally heavy exposure to the integrated oil & gas industry. However, the exploration & production industry—a space that tends to be<br />
FEG 78 309.04 K 0.14% 0.00% 1.93% -1.35% 50,000there are differences to note. For one, XLE selects from a mid-to-large dominated by midcap firms. RYE’s beta of 1.18 indicates the fund is<br />
PSCE 74 621.02 K 0.24% -0.05% 0.68% -0.52% 50,000universe within the S&P 500, but due to the capping restrictions of the relatively risky compared to the broad market.<br />
S&P indexes, the fund ends up with a portfolio slightly skewed toward<br />
Segment Average | Ranked by Tradability Score<br />
midcaps. VDE, the second-broadest fund in the segment, slightly<br />
PXI and FXN follow similar strategies: They use quant strategies to select<br />
overweights exploration & production firms, making it a tad riskier than winners within the energy space. While their goals are similar, their<br />
Spread Dispersion<br />
Premium/Discount Dispersion<br />
the market with a beta of 1.03. That said, it’s FEG that tilts the most selection screens differ. As a result, PXI heavily overweights mid- and<br />
Premium<br />
toward smaller companies (among the four vanilla funds), with a<br />
small-cap stocks. FXN also dips into the small-cap space, but loads up<br />
| Equity: U.S. Energy | 15 June 2012 | Source data provided by<br />
Page 1 of 6<br />
weighted average market cap of $130 billion vs. the sector’s $150 billion. massively on midcaps. By industry, both funds skimp on the integrated<br />
0.8%<br />
oil & gas space, while loading up on exploration & production firms. In<br />
1%<br />
PSCE<br />
PSCE The other 4 funds diverge from the market, and from each other, by the case of PXI, its current portfolio is particularly exposed to refining<br />
0.6%<br />
FXN<br />
VDE nature of their unique strategies. PSCE scores lowest in Fit, but with good and marketing firms. Both funds are relatively risky in comparison to the<br />
PXI<br />
FXN<br />
reason—the fund doesn’t attempt to represent the broad market—it broad market. FXN and PXI have yet to show any statistically significant<br />
0%<br />
focuses solely on small-caps. PSCE’s firm size-universe affects industry alpha relative to the market.<br />
FEG<br />
XLE<br />
0.4%<br />
RYE<br />
IYE<br />
VDE -1%<br />
FEG<br />
<strong>Index</strong> Methodology<br />
Average # of Goodness<br />
0.2%<br />
IYE<br />
PXI Ticker Fit Rating Weighting Selection P/E P/B<br />
Market Cap Holdings of Fit (R) Note<br />
XLE Discount<br />
RYE IYE 97 Market Cap Market Cap 9.7 1.6 $144.96 B 91 99.94% Broad exposure, high<br />
cost<br />
JunJul Aug Sep Oct Nov Dec Jan Feb Mar Apr May<br />
JunJul Aug Sep Oct Nov Dec Jan Feb Mar Apr May<br />
2012<br />
2012<br />
FEG 94 Market Cap Market Cap <strong>10</strong>.0 1.6 $130.36 B <strong>10</strong>0 99.86% Youngest fund<br />
VDE 93 Market Cap Market Cap 9.8 1.6 $131.08 B 172 99.90% Broad exposure,<br />
<strong>Index</strong>Universe / Knight Block Liquidity<br />
second for lowest cost<br />
IYE VDE XLE FEG PXI RYE FXN PSCE This measure shows how easy it is to trade<br />
XLE 93 Market Cap Proprietary 9.8 1.6 $126.55 B 44 99.80% AUM giant, cheapest<br />
25,000 shares of any given ETF. It reflects<br />
5<br />
5<br />
5<br />
5<br />
5<br />
5<br />
5<br />
5<br />
fund<br />
the liquidity and hedgeability of a fund’s<br />
4<br />
4<br />
4<br />
4<br />
4<br />
4<br />
4<br />
4 underlying securities. A score of 5 means a<br />
PXI 65 Tiered Multi-Factor 9.9 1.5 $26.45 B 60 95.75% Quant-based strategy<br />
3<br />
3<br />
3<br />
3<br />
3<br />
3<br />
3<br />
3 fund is extremely liquid.<br />
RYE 52 Equal Proprietary <strong>10</strong>.7 1.3 $31.77 B 44 96.91% Equal-weighted<br />
2<br />
2<br />
2<br />
2<br />
2<br />
2<br />
2<br />
2<br />
exposure<br />
|<br />
1<br />
1<br />
1<br />
1<br />
1<br />
1<br />
1<br />
1<br />
FXN 41 Tiered Multi-Factor 9.2 1.2 $27.27 B 54 95.42% Quant-based strategy<br />
PSCE 26 Tiered Proprietary 15.0 1.1 $1.02 B 24 90.04% Small-cap play<br />
Segment Average | Ranked by Fit Score<br />
} Complete eTF due<br />
diligence process<br />
} robust scoring system:<br />
efficiency, Tradability, Fit<br />
} Unbiased institutional analysis<br />
| Equity: U.S. Energy | 15 June 2012 | Source data provided by<br />
Geographic Exposure<br />
United States Switzerland Bermuda Netherlands Brazil Canada<br />
Benchmark 96.84% 2.00% 0.65% 0.32% 0.<strong>10</strong>% 0.09%<br />
IYE 97.15% 2.19% 0.22% 0.44% 0.00% 0.00%<br />
VDE 97.74% 1.26% 0.43% 0.42% 0.00% 0.15%<br />
XLE 98.87% 0.60% 0.52% 0.00% 0.00% 0.00%<br />
Page 3 of 6PXI 96.15% 0.00% 1.30% 1.24% 0.00% 1.30%<br />
RYE 96.04% 2.20% 1.76% 0.00% 0.00% 0.00%<br />
FXN 96.51% 0.00% 2.16% 1.34% 0.00% 0.00%<br />
PSCE <strong>10</strong>0.00% 0.00% 0.00% 0.00% 0.00% 0.00%<br />
FEG 97.81% 1.88% 0.32% 0.00% 0.00% 0.00%<br />
Balanced 5%+ 1% to 3% 1% to to 5% Underweight 3% to 5% Overweight 3% 3% 5%+<br />
} Plain-english explanations<br />
} Best data in the eTF industry<br />
| Equity: U.S. Energy | 15 June 2012 | Source data provided by<br />
Page 4 of 6<br />
Learn more at www.<strong>Index</strong>Universe.com/ETF-Analytics or by contacting<br />
our ETF Analyst team at 415-501-0939 or analytics@indexuniverse.com<br />
©2012 <strong>Index</strong>Universe LLC, <strong>Index</strong>Universe ETF Analytics
in review<br />
September’s strong performance<br />
ended the third quarter on a high note. Telecom posted<br />
some of the strongest returns, as the iShares Dow Jones<br />
Telecommunications ETF (IYZ) gained 6.44% and the<br />
Vanguard Telecommunication Services ETF (VOX) was<br />
up 5.86%. Health care also continued to climb—the<br />
Health Care Select SPDR (XLV) rose almost 4%, while<br />
subsector ETFs like the iShares Dow Jones U.S. Medical<br />
Devices (IHI) and the SPDR S&P Health Care Equipment<br />
(XHE) were up 5.36% and 5.93%, respectively.<br />
In fact, the only down sector was real estate, where<br />
the massive bounce in the homebuilding industry has<br />
not translated to big gains in REITs, leading to a 1% loss<br />
in the iShares Dow Jones U.S. Real Estate ETF (IYR) and<br />
an almost 2% loss in the Vanguard REIT ETF (VNQ).<br />
Despite the losses, IYR led the field in top inflows,<br />
with $991 million in new assets. The Financial Select<br />
SPDR (XLF) came in second, with $963 million, followed<br />
by the Market Vectors Gold Miners (GDX) at $684 million.<br />
In outflows, the Industrial Select SPDR (XLI) lost<br />
$203 million in AUM, followed by the Direxion Daily<br />
Financial Bull 3x (FAS) at $132 million, and the Power-<br />
Shares KBW Bank (KBWB) at $81 million.<br />
Top Inflows ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||<br />
ticker net flows aum ($m)<br />
iShares Dow Jones U.S. Real Estate IYR 991.40 4,852.0 Real Estate<br />
Financial Select SPDR XLF 962.82 7,970.5 Financials<br />
Market Vectors Gold Miners GDX 684.02 <strong>10</strong>,238.3 Basic Materials<br />
Vanguard REIT VNQ 665.99 14,426.5 Real Estate<br />
Technology Select SPDR XLK 463.51 <strong>10</strong>,696.9 Technology<br />
Top Outflows |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||<br />
ticker net flows aum ($m)<br />
Industrial Select SPDR XLI -203.45 3,230.9 Industrials<br />
Direxion Daily Financial Bull 3x FAS -131.89 1,114.9 Financials<br />
PowerShares KBW Bank KBWB -80.82 129.5 Financials<br />
iShares Cohen & Steers Realty Majors ICF -59.88 2,843.7 Real Estate<br />
SPDR Dow Jones REIT RWR -51.56 1,928.2 Real Estate<br />
Sector<br />
Performance SEPTEMBER 2012<br />
BASIC MATERIALS CONS. CYCL. CONS. NON-CYCL. ENERGY FINANCIAL HEALTH CARE INDUSTRIAL REAL ESTATE TECH TELECOM UTILITIES<br />
BROAD<br />
XLB<br />
3.69%<br />
MINING<br />
XME<br />
6.50%<br />
BROAD<br />
XLY<br />
3.16%<br />
HOMEBLD<br />
XHB<br />
5.49%<br />
MEDIA<br />
PBs<br />
4.54%<br />
RETAIL<br />
xrt<br />
2.78%<br />
LEISURE<br />
PeJ<br />
5.11%<br />
BROAD<br />
XLP<br />
1.60%<br />
FOOD<br />
PBJ<br />
-0.01%<br />
BROAD<br />
XLe<br />
3.22%<br />
EQUIP<br />
iez<br />
0.85%<br />
EXPLOR<br />
xop<br />
5.91%<br />
BROAD<br />
XLF<br />
3.41%<br />
BANKS<br />
kbwb<br />
5.17%<br />
BANK & IN<br />
iai<br />
2.80%<br />
insurance<br />
kbwi<br />
2.90%<br />
SERVICES<br />
iyg<br />
4.63%<br />
BROAD<br />
XLV<br />
3.92%<br />
BIOTECH<br />
ibb<br />
4.83%<br />
MED DEV<br />
ihi<br />
5.36%<br />
pharma<br />
ihe<br />
3.70%<br />
equipment<br />
xhe<br />
5.93%<br />
services<br />
ihf<br />
2.83%<br />
BROAD<br />
XLI<br />
1.19%<br />
DEFENSE<br />
ppa<br />
1.80%<br />
TRANSPO<br />
iyt<br />
-2.24%<br />
engineer<br />
pkb<br />
6.67%<br />
BROAD<br />
IYR<br />
-0.99%<br />
BROAD<br />
vnq<br />
-1.85%<br />
BROAD<br />
xlk<br />
1.64%<br />
INTERNET<br />
fdn<br />
3.56%<br />
SEMIS<br />
xsd<br />
-4.04%<br />
software<br />
igv<br />
1.14%<br />
BROAD<br />
IYZ<br />
6.44%<br />
BROAD<br />
vox<br />
5.86%<br />
BROAD<br />
XLU<br />
1.16%<br />
BROAD<br />
vpu<br />
1.37%<br />
///////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////<br />
Source: Bloomberg. Data for 08/31/2012 to 09/30/2012. ETFs chosen to represent each sector<br />
based on the most liquid ETF in each segment of the <strong>Index</strong>Universe ETF Classification System.<br />
KEY:<br />
-<br />
≤-5.0<br />
-3.0 ≤-4.9<br />
-1.0 ≤-2.9<br />
-0.1 ≤-0.9<br />
0<br />
0.1 ≤ 0.9<br />
1.0 ≤ 2.9<br />
3.0 ≤ 4.9<br />
≥ 5.0<br />
+<br />
22 <strong>Index</strong>Universe.com/ETFReport
8 Goldman Sachs GS 2.66%<br />
9 Simon Property SPG 2.66%<br />
<strong>10</strong> Metlife MET 1.85%<br />
TIRED OF TOEING THE LINE WITH YOUR<br />
EQUITY<br />
DISCOVER A STOCK ALTERNATIVE<br />
THE FINANCIAL SECTOR SPDR ETF<br />
Potential benefits of adding XLF to your portfolio include:<br />
• Undiluted exposure to the Financial Sector of the S&P 500<br />
• The all-day tradability of stocks<br />
• The diversification of mutual funds<br />
• Total transparency<br />
• Liquidity<br />
XLF Top <strong>10</strong> Holdings Symbol Portfolio %<br />
1 Wells Fargo WFC <strong>10</strong>.02%<br />
2 Berkshire Hathaway B BRK.b 8.27%<br />
3 JP Morgan Chase JPM 7.67%<br />
4 Bank of America BAC 4.97%<br />
Visit www.sectorspdrs.com<br />
or call 1-866-SECTOR-ETF<br />
5 Citigroup C 4.53%<br />
6 US Bancorp USB 3.44%<br />
7 American Express AXP 3.29%<br />
* Components and weightings as of 6/30/12. Please see website<br />
for daily updates. Holdings subject to change.<br />
Consumer Discretionary - XLY Consumer Staples - XLP Utilities - XLU Financial - XLF Technology - XLK Health Care - XLV Energy - XLE Industrial - XLI Materials - XLB<br />
An investor should consider investment objectives, risks, charges and expenses carefully before investing. To obtain a prospectus, which contains this and other information,<br />
call 1-866-SECTOR-ETF or visit www.sectorspdrs.com. Read the prospectus carefully before investing.<br />
The S&P 500, SPDRs, and Select Sector SPDRs are trademarks of The McGraw-Hill Companies, <strong>Inc</strong>. and have been licensed for use. The stocks included in each Select Sector <strong>Index</strong><br />
were selected by the compilation agent. Their composition and weighting can be expected to differ to that in any similar indexes that are published by S&P. The S&P 500 <strong>Index</strong> is an<br />
unmanaged index of 500 common stocks that is generally considered representative of the U.S. stock market. The index is heavily weighted toward stocks with large market capitalizations<br />
and represents approximately two-thirds of the total market value of all domestic common stocks. Investors cannot invest directly in an index. The S&P 500 <strong>Index</strong> fi gures do not refl ect<br />
any fees, expenses or taxes. Ordinary brokerage commissions apply. ETFs are considered transparent because their portfolio holdings are disclosed daily. Liquidity is characterized by a<br />
high level of trading activity.<br />
Select Sector SPDRs are subject to risks similar to those of stocks, including those regarding short-selling and margin account maintenance. All ETFs are subject to risk, including possible<br />
loss of principal. Funds focusing on a single sector generally experience greater volatility. Diversifi cation does not eliminate the risk of experiencing investment losses.<br />
ALPS Distributors, <strong>Inc</strong>. a registered broker-dealer, is distributor for the Select Sector SPDR Trust. SEL000930 exp. 09/30/2012
<strong>Strategy</strong><br />
WHY<br />
I own<br />
UUP<br />
PowerShares DB US<br />
Dollar <strong>Index</strong> Bullish ETF<br />
Jonathan Citrin<br />
Founder & CEO<br />
Firm: The Citrin Group LLC<br />
Location: Birmingham, MI<br />
Founded: 2003<br />
AUM: $55 Million<br />
All ETFs? Yes<br />
Why do you use the PowerShares DB US Dollar <strong>Index</strong><br />
Bullish ETF (UUP)?<br />
The primary reason is its low correlation with global<br />
equity markets. UUP has a correlation to the MSCI<br />
EAFE <strong>Index</strong> of -0.7, and to the S&P of -0.55 over the<br />
last eight years. It’s really a risk-mitigation instrument<br />
in our portfolio.<br />
Tell me a little bit about how UUP works. It expresses a<br />
long position on the dollar by shorting other currencies?<br />
Right. We feel that not only will people run to currencies,<br />
but they’ll run to the dollar above all those other<br />
currencies. So it’s OK to have an inverse basket of<br />
other currencies, because of the dollar’s prominence<br />
in the world as the reserve currency.<br />
The yen has done so well lately, and in my mind, is<br />
probably the strongest currency. But I think you’d see<br />
that change a lot if we had another global downturn—<br />
people would opt for the dollar over the yen. And that’s<br />
been the way historically since 1971 or even before 1971.<br />
UUP has been pretty volatile over the last 12 months.<br />
Is that volatility something that you considered?<br />
Certainly there’s been significant volatility in the dollar,<br />
and it’s been down a lot. But we’ve researched the<br />
actual statistical-standard deviation of it, which is half<br />
that of the S&P 500, and less than half of the EFA. And<br />
we’re buying it not for when the market<br />
is doing mediocre or well, we’re buying it<br />
for when the market has a second or third<br />
standard-deviation movement to the south.<br />
We’re looking very closely at it when global<br />
conditions are really, really bad. If it reverts<br />
to its mean in times of poor economic performance,<br />
I’m happy.<br />
Does your position on the dollar indicate a<br />
bullish position for the U.S. economy?<br />
I like it. It’s my belief that if things improve<br />
economically, we’d actually see a tighter<br />
stance from the Fed. And therefore you<br />
might see conditions where the dollar rises with markets.<br />
But what more typically happens from a historical<br />
perspective is that there’s a lag between when the<br />
Fed acts and when the market recovers.<br />
When the economy starts to improve, the next big<br />
issue will be inflation. Therefore, I’m more worried<br />
about a devaluing of the dollar relative to an improving<br />
economy than an increasing value of the dollar. So<br />
when I look at the portfolio, I don’t look at the dollar<br />
and SPY or the U.S. market as one and the same. I look<br />
at them as very different assets. Even though, in theory,<br />
if our economy does well, our dollar is worth more.<br />
But historically, that’s not how it always plays out.<br />
What does holding this position express about your<br />
opinion on the world?<br />
Owning the dollar is a commentary that no one in<br />
this market truly knows where markets are going to<br />
go. I see a trend in markets a certain way, but I don’t<br />
think I know everything. So I’m humble enough to<br />
own the dollar just in case. We’re going to make sure<br />
that we have something in there as a true hedge. It’s a<br />
bit of a depressing reason, but it’s true. At the end of<br />
the day, obviously, these people are on TV and talking<br />
and screaming—myself included; we don’t know what<br />
we’re talking about. I’m just, I think, humble enough<br />
to admit it.<br />
Is there a time to sell this position?<br />
The difficulty there is if I see a sharp movement<br />
downward in global markets, I expect the dollar to go<br />
up and that would be a good time to use some of that<br />
appreciation of the dollar to buy low. But we get more<br />
specific—if we have a 20% rise in the dollar relative to<br />
the other positions, we cut our position in the dollar<br />
down and use that money to buy into the others. So<br />
we have a tolerance band on our dollar position over<br />
20% upside. If it moves more than 20% up relative to<br />
global equities, we’re out. And then we’ll get back in<br />
when it’s back down and we’ll buy low again.<br />
PowerShares DB US Dollar <strong>Index</strong> Bullish ETF (UUP)<br />
Segment: Inverse Currency:<br />
Basket - Global Ex-US<br />
Issuer: Invesco PowerShares<br />
Legal Structure: Commodities<br />
Pool (Limited Partnership)<br />
Expense Ratio: 0.80%<br />
AUM: $1.06 Million<br />
AD$V (30-Day): $32.6 Billion<br />
Avg. Spread: 0.05%<br />
Competing Fund: UUPT<br />
RETURN<br />
5%<br />
4<br />
3<br />
2<br />
0<br />
-1<br />
-2<br />
-3<br />
-4<br />
-5<br />
-6<br />
S O N D J F M A M J J A S<br />
2012<br />
Source: Bloomberg. Data as of 9/25/2012.<br />
-1.71%<br />
24 <strong>Index</strong>Universe.com/ETFReport
InsideETFsTrading<br />
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conference<br />
ExECUTION, LIqUIDITy & ETF TRADING TEChNIqUES<br />
2012<br />
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december 11, 2012<br />
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Save the date!<br />
Designed for FINANCIAL ADVISORS and INSTITUTIONAL INVESTORS<br />
Featured SpeakerS:<br />
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Presented by:<br />
november 2012<br />
25
Fund Name Ticker ExP Ratio % AUM ($M) YTD % 3Yr % 5Yr %<br />
ETF<br />
DATA<br />
U.S. Equity: Total Market<br />
PowerShares Dynamic Market PWC 0.60 130.5 18.90 11.76 -0.13<br />
Vanguard Total Stock Market VTI 0.06 23,288.1 16.18 13.40 1.55<br />
SPDR Dow Jones Total Market TMW 0.20 433.6 16.04 13.24 1.42<br />
Schwab US Broad Market SCHB 0.04 1,117.2 15.92 - -<br />
iShares Dow Jones US IYY 0.20 626.7 15.91 13.17 1.30<br />
iShares Russell 3000 IWV 0.20 3,840.1 15.87 13.04 1.16<br />
iShares S&P 1500 ISI 0.20 362.3 15.71 13.15 1.21<br />
iShares MSCI USA EUSA 0.15 143.8 15.49 - -<br />
FlexShares Morningstar U.S. Market Factor Tilt <strong>Index</strong> TILT 0.27 125.4 15.03 - -<br />
WisdomTree Total Dividend DTD 0.28 300.1 13.54 14.73 1.14<br />
iShares MSCI USA Minimum Volatility USMV 0.15 365.5 12.65 - -<br />
WisdomTree Dividend Ex-Financials DTN 0.38 1,268.4 11.53 18.47 2.60<br />
U.S. Equity: Total Market Growth<br />
Fidelity NASDAQ Composite ONEQ 0.31 184.1 19.83 14.53 3.75<br />
iShares Russell 3000 Growth IWZ 0.25 356.3 16.32 14.46 3.01<br />
U.S. Equity: Total Market Value<br />
iShares Russell 3000 Value IWW 0.25 335.5 15.38 11.53 -0.87<br />
U.S. Equity: Extended Cap<br />
Vanguard Extended Market VXF 0.14 1,394.1 14.92 14.05 2.74<br />
PowerShares FTSE RAFI US 1500 SmMid PRFZ 0.39 450.9 13.83 12.09 4.74<br />
U.S. Equity: Large Cap<br />
U.S.-Listed ETFs<br />
by Asset Class and<br />
Year-to-Date Return<br />
› Data as of 09/30/2012<br />
› Exp Ratio is annual expense ratio<br />
› AUM is net assets in $US millions<br />
› YTD is year-to-date<br />
› 3YR and 5YR returns are annualized<br />
› <strong>Inc</strong>ludes all U.S.-listed ETFs and ETNs<br />
with assets of $<strong>10</strong>0 million and above<br />
› Source: Morningstar<br />
Fund Name Ticker ExP Ratio % AUM ($M) YTD % 3Yr % 5Yr %<br />
Guggenheim Russell Top 50 XLG 0.20 621.7 19.20 12.90 0.91<br />
iShares S&P <strong>10</strong>0 OEF 0.20 4,991.8 18.26 13.14 0.81<br />
Vanguard Mega Cap 300 MGC 0.12 455.5 16.97 13.05 -<br />
Vanguard S&P 500 VOO 0.05 5,530.4 16.46 - -<br />
SPDR S&P 500 SPY 0.09 118,000.0 16.43 13.14 0.98<br />
iShares S&P 500 IVV 0.09 31,521.2 16.33 13.08 0.96<br />
Vanguard Large-Cap VV 0.<strong>10</strong> 3,566.4 16.30 13.22 1.33<br />
Vanguard Russell <strong>10</strong>00 VONE 0.12 170.7 16.22 - -<br />
iShares Russell <strong>10</strong>00 IWB 0.15 6,533.0 16.20 13.14 1.12<br />
iShares Morningstar Large Core JKD 0.20 290.6 16.19 12.66 2.19<br />
Schwab US Large-Cap SCHX 0.04 931.0 16.18 - -<br />
RevenueShares Large Cap RWL 0.49 159.1 15.74 12.90 -<br />
PowerShares FTSE RAFI US <strong>10</strong>00 PRF 0.39 1,450.0 14.26 11.37 1.95<br />
Guggenheim S&P Equal Weight RSP 0.40 2,836.5 14.06 13.50 2.47<br />
WisdomTree LargeCap Dividend DLN 0.28 1,275.6 13.76 14.75 0.78<br />
iShares MSCI KLD 400 Social DSI 0.50 171.8 12.39 <strong>10</strong>.87 0.82<br />
SPDR DJ Industrial Average Trust DIA 0.17 11,729.8 12.06 14.27 1.99<br />
First Trust Large Core AlphaDEX FEX 0.70 340.5 11.55 12.91 1.63<br />
PowerShares S&P 500 Low Volatility SPLV 0.25 2,475.1 11.06 - -<br />
iShares MSCI USA ESG Select Social KLD 0.50 176.8 <strong>10</strong>.12 <strong>10</strong>.94 0.40<br />
Barclays ETN+ S&P Veqtor ETN VQT 0.95 364.1 3.61 - -<br />
U.S. Equity: Large Cap Growth<br />
PowerShares QQQ QQQ 0.20 34,766.4 23.65 18.47 6.62<br />
iShares Morningstar Large Growth JKE 0.25 470.9 20.81 14.87 2.65<br />
Vanguard Mega Cap 300 Growth MGK 0.12 926.5 19.37 15.03 -<br />
Vanguard Growth VUG 0.<strong>10</strong> 8,334.8 18.32 15.12 3.50<br />
PowerShares Dyn Large Cap Growth PWB 0.61 174.7 18.21 13.42 0.84<br />
Schwab US Large-Cap Growth SCHG 0.07 501.0 17.97 - -<br />
iShares Russell Top 200 Growth IWY 0.20 367.2 17.54 14.99 -<br />
iShares S&P 500 Growth IVW 0.18 7,336.8 16.86 14.77 3.40<br />
SPDR 500 Growth SPYG 0.20 235.8 16.68 15.29 3.90<br />
iShares Russell <strong>10</strong>00 Growth IWF 0.20 16,586.2 16.62 14.54 2.99<br />
Guggenheim S&P 500 Pure Growth RPG 0.35 341.0 14.00 16.70 5.52<br />
First Trust Large Growth AlphaDEX FTC 0.70 127.7 8.46 11.74 -0.15<br />
U.S. Equity: Large Cap Value<br />
iShares S&P 500 Value IVE 0.18 4,487.1 15.65 11.22 -1.65<br />
iShares Russell <strong>10</strong>00 Value IWD 0.20 12,991.1 15.61 11.63 -1.01<br />
SPDR S&P 500 Value <strong>Index</strong> SPYV 0.20 <strong>10</strong>3.6 15.59 11.45 -1.36<br />
PowerShares Dyn Large Cap Value PWV 0.59 452.5 15.26 14.14 3.34<br />
Vanguard Mega Cap 300 Value MGV 0.12 424.3 14.82 11.05 -<br />
Schwab US Large-Cap Value SCHV 0.07 413.8 14.50 - -<br />
Vanguard Value VTV 0.<strong>10</strong> 6,599.1 14.08 11.35 -1.01<br />
iShares Morningstar Large Value JKF 0.25 248.4 13.43 <strong>10</strong>.92 -2.64<br />
First Trust Large Cap Value AlphaDEX FTA 0.70 262.1 13.25 13.73 2.68<br />
U.S. Equity: Mid Cap<br />
iShares Russell Midcap IWR 0.21 6,178.1 13.82 14.<strong>10</strong> 2.13<br />
SPDR S&P MidCap 400 MDY 0.25 <strong>10</strong>,111.3 13.65 14.03 3.47<br />
iShares S&P 400 MidCap IJH 0.21 12,318.4 13.64 14.12 3.68<br />
iShares Morningstar Mid Core JKG 0.25 157.6 13.19 15.62 3.09<br />
Schwab US Mid-Cap SCHM 0.07 222.5 13.02 - -<br />
Vanguard Mid-Cap VO 0.<strong>10</strong> 3,773.9 12.83 13.95 1.89<br />
WisdomTree MidCap Dividend DON 0.38 383.5 11.82 15.41 3.62<br />
WisdomTree MidCap Earnings EZM 0.38 154.8 11.39 15.13 5.29<br />
First Trust Mid Cap Core AlphaDEX FNX 0.70 304.4 <strong>10</strong>.18 14.21 4.84<br />
RevenueShares Mid Cap RWK 0.54 1<strong>10</strong>.0 8.79 11.55 -<br />
U.S. Equity: Mid Cap Growth<br />
Guggenheim S&P MidCap 400 Pure Growth RFG 0.35 529.1 14.67 17.91 9.65<br />
iShares Morningstar Mid Growth JKH 0.30 170.2 14.38 14.99 1.48<br />
iShares S&P Mid Cap 400 Growth IJK 0.25 3,091.0 14.05 15.75 5.03<br />
Vanguard Mid-Cap Growth VOT 0.<strong>10</strong> 1,183.3 13.80 14.89 1.38<br />
iShares Russell Mid Cap Growth IWP 0.25 3,296.2 13.68 14.55 2.34<br />
U.S. Equity: Mid Cap Value<br />
iShares Russell Midcap Value IWS 0.28 3,427.1 13.85 13.58 1.60<br />
iShares S&P MidCap 400 Value IJJ 0.27 2,173.1 13.28 12.51 2.29<br />
Vanguard Mid-Cap Value VOE 0.<strong>10</strong> 1,058.9 12.13 12.96 2.03<br />
U.S. Equity: Small Cap<br />
WisdomTree SmallCap Dividend DES 0.38 385.8 15.68 14.30 2.82<br />
Schwab US Small-Cap SCHA 0.<strong>10</strong> 674.8 15.11 - -<br />
Vanguard Small-Cap VB 0.16 4,423.1 15.06 14.36 3.51<br />
iShares Russell 2000 IWM 0.23 18,200.1 14.49 13.06 2.27<br />
RevenueShares Small Cap RWJ 0.54 120.4 14.38 13.47 -<br />
Vanguard Russell 2000 VTWO 0.22 160.5 14.23 - -<br />
iShares S&P SmallCap 600 IJR 0.22 7,960.2 13.89 15.08 3.21<br />
SPDR S&P SmallCap 600 <strong>Index</strong> SLY 0.20 211.2 13.43 15.18 4.16<br />
iShares Morningstar Small Core JKJ 0.25 135.5 12.86 12.60 2.54<br />
First Trust Small Cap Core AlphaDEX FYX 0.70 159.5 12.71 14.41 3.46<br />
WisdomTree SmallCap Earnings EES 0.38 154.1 12.70 13.11 5.42<br />
U.S. Equity: Small Cap Growth<br />
Vanguard Small-Cap Growth VBK 0.<strong>10</strong> 2,118.7 15.57 15.91 4.22<br />
iShares Russell 2000 Growth IWO 0.25 3,866.3 14.25 14.35 3.11<br />
SPDR S&P SmallCap 600 Growth SLYG 0.25 176.0 13.13 16.84 5.01<br />
iShares S&P SmallCap 600 Growth IJT 0.25 1,651.6 13.<strong>10</strong> 16.60 3.90<br />
U.S. Equity: Small Cap Value<br />
SPDR S&P SmallCap 600 Value <strong>Index</strong> SLYV 0.25 136.5 14.85 13.58 3.57<br />
Vanguard Small-Cap Value VBR 0.21 2,128.3 14.78 12.66 2.65<br />
iShares S&P SmallCap 600 Value IJS 0.29 1,876.1 14.58 13.65 2.51<br />
iShares Russell 2000 Value IWN 0.37 4,227.5 14.42 11.64 1.32<br />
26 <strong>Index</strong>Universe.com/ETFReport
Fund Name Ticker ExP Ratio % AUM ($M) YTD % 3Yr % 5Yr % Fund Name Ticker ExP Ratio % AUM ($M) YTD % 3Yr % 5Yr %<br />
iShares Morningstar Small Value JKL 0.30 176.3 13.65 13.92 4.86<br />
U.S. Equity: Micro Cap<br />
iShares Russell Microcap IWC 0.69 470.2 19.60 11.49 -0.66<br />
U.S. Equity: Basic Materials<br />
First Trust Materials AlphaDEX FXZ 0.70 175.3 16.17 12.83 3.78<br />
Vanguard Materials VAW 0.19 667.3 13.36 11.30 0.97<br />
Materials Select SPDR XLB 0.18 2,346.8 11.44 8.66 -0.18<br />
iShares DJ US Basic Materials IYM 0.47 505.0 6.62 9.21 0.00<br />
SPDR S&P Metals and Mining XME 0.35 995.5 -<strong>10</strong>.36 -0.69 -6.40<br />
U.S. Equity: Consumer Cyclicals<br />
iShares DJ US Home Construction ITB 0.47 1,374.4 63.40 17.04 0.51<br />
SPDR S&P Homebuilders XHB 0.35 1,914.3 46.42 19.78 4.58<br />
PowerShares Dynamic Media PBS 0.63 153.2 25.57 16.32 1.62<br />
iShares DJ US Consumer Services IYC 0.47 316.0 22.<strong>10</strong> 19.68 6.24<br />
Vanguard Consumer Discr VCR 0.19 554.6 21.31 21.03 6.01<br />
Consumer Discr Select SPDR XLY 0.18 3,343.2 21.12 21.26 6.69<br />
SPDR S&P Retail XRT 0.35 809.4 20.30 24.02 11.42<br />
First Trust Consumer Discr AlphaDEX FXD 0.70 461.1 11.52 15.96 4.22<br />
U.S. Equity: Consumer Non-Cyclicals<br />
Vanguard Consumer Staples VDC 0.19 1,137.4 12.41 15.37 7.89<br />
Consumer Staples Select SPDR XLP 0.18 6,117.9 12.40 15.26 7.98<br />
iShares DJ US Consumer Goods IYK 0.47 376.2 <strong>10</strong>.47 14.70 5.52<br />
PowerShares Dyn Food & Beverage PBJ 0.63 114.2 5.90 14.55 4.65<br />
First Trust Consumer Staples AlphaDEX FXG 0.70 357.2 3.31 13.09 5.37<br />
U.S. Equity: Energy<br />
PowerShares Dynamic Energy PXI 0.65 118.7 11.45 19.91 4.94<br />
JPMorgan Alerian MLP ETN AMJ 0.85 5,219.3 7.82 23.95 -<br />
Energy Select SPDR XLE 0.18 7,784.1 7.62 12.73 1.24<br />
iShares Dow Jones US Energy IYE 0.47 1,092.1 7.20 11.50 0.82<br />
ETRACS MLP Infrastructure ETN MLPI 0.85 394.7 6.81 - -<br />
SPDR S&P Oil/Gas Expl & Production XOP 0.35 936.0 6.34 13.80 4.19<br />
Vanguard Energy VDE 0.19 1,974.2 6.12 11.85 1.<strong>10</strong><br />
iShares DJ US Oil/Gas Expl & Production IEO 0.47 339.5 4.88 8.63 2.<strong>10</strong><br />
Alerian MLP AMLP 0.85 4,195.9 4.25 - -<br />
Credit Suisse Cushing 30 MLP ETN MLPN 0.85 291.2 4.24 - -<br />
First Trust Energy AlphaDEX FXN 0.70 136.8 1.66 8.11 -1.66<br />
iShares DJ US Oil Equipment & Services IEZ 0.47 364.0 0.59 8.64 -3.56<br />
PowerShares Dyn Oil & Gas Services PXJ 0.63 131.1 0.20 6.31 -5.82<br />
SPDR S&P Oil/Gas Equipment & Services XES 0.35 304.0 -1.54 7.71 -2.49<br />
First Trust ISE-Revere Natural Gas FCG 0.60 441.9 -4.01 1.85 -2.60<br />
PowerShares WilderHill Clean Energy PBW 0.70 131.2 -14.94 -26.03 -27.95<br />
U.S. Equity: Financials<br />
PowerShares KBW Bank Portfolio KBWB 0.35 129.5 27.52 - -<br />
iShares DJ US Financial Services IYG 0.47 273.4 24.19 1.02 -13.09<br />
iShares Dow Jones US Regional Banks IAT 0.47 149.3 22.17 8.53 -8.83<br />
Financial Select SPDR XLF 0.18 7,970.5 21.38 2.87 -12.64<br />
iShares DJ US Financial IYF 0.47 469.6 20.26 4.96 -<strong>10</strong>.06<br />
Vanguard Financials VFH 0.23 792.0 20.23 5.01 -9.65<br />
PowerShares KBW High Div Yld Financial KBWD 1.32 157.1 19.97 - -<br />
SPDR KBW Bank KBE 0.35 1,685.4 19.89 1.45 -12.86<br />
SPDR KBW Regional Banking KRE 0.35 1,318.8 18.74 12.09 -5.84<br />
First Trust Financials AlphaDEX FXO 0.70 184.4 16.13 9.15 -1.56<br />
SPDR KBW Insurance KIE 0.35 <strong>10</strong>7.9 14.98 7.12 -4.16<br />
U.S. Equity: Health Care<br />
Market Vectors Biotech BBH 0.35 132.3 48.50 - -<br />
First Trust NYSE Arca Biotechnology FBT 0.60 257.7 42.07 18.34 12.97<br />
SPDR S&P Biotech XBI 0.35 682.8 40.68 20.30 <strong>10</strong>.35<br />
iShares NASDAQ Biotechnology IBB 0.48 2,415.7 37.20 20.97 11.68<br />
PowerShares Dyn Pharmaceuticals PJP 0.63 322.8 23.12 26.72 14.15<br />
First Trust Health Care AlphaDEX FXH 0.70 626.4 21.09 19.14 9.98<br />
PowerShares Dyn Biotech/Genome PBE 0.63 139.1 20.44 12.41 4.90<br />
iShares DJ US Healthcare IYH 0.47 655.4 19.70 14.65 5.30<br />
Vanguard Health Care VHT 0.19 975.0 19.60 14.87 5.48<br />
iShares DJ US Pharmaceuticals IHE 0.47 438.9 18.97 21.11 12.26<br />
SPDR S&P Pharmaceuticals XPH 0.35 418.2 18.05 20.87 13.54<br />
Health Care Select SPDR XLV 0.18 5,022.5 17.44 14.11 4.59<br />
iShares DJ US Medical Devices IHI 0.47 299.1 17.34 11.27 2.90<br />
iShares DJ US Healthcare Providers IHF 0.47 226.1 16.90 17.92 3.11<br />
PowerShares S&P SmallCap Health Care PSCH 0.29 132.1 16.54 - -<br />
Market Vectors Pharmaceutical PPH 0.35 173.9 12.78 - -<br />
U.S. Equity: Industrials<br />
iShares DJ US Industrial IYJ 0.47 557.5 12.27 13.78 0.37<br />
Vanguard Industrials VIS 0.19 498.4 11.24 13.44 -0.42<br />
Industrial Select SPDR XLI 0.18 3,230.9 9.96 13.85 -0.03<br />
First Trust Industrials/Producer Durables AlphaDEX FXR 0.70 117.7 7.82 11.27 0.30<br />
iShares DJ Transportation Average IYT 0.47 526.6 -1.84 9.71 1.53<br />
U.S. Equity: Technology<br />
Technology Select SPDR XLK 0.18 <strong>10</strong>,696.9 22.48 15.57 4.21<br />
Vanguard Information Technology VGT 0.19 2,586.3 19.60 14.43 4.56<br />
iShares DJ US Technology IYW 0.47 1,866.5 19.35 14.<strong>10</strong> 4.43<br />
iShares S&P North Amer Software IGV 0.48 633.5 17.89 13.59 5.09<br />
First Trust DJ Internet FDN 0.60 482.0 17.43 18.27 7.95<br />
iShares S&P North American Technology IGM 0.48 547.5 17.18 12.77 3.42<br />
SPDR Morgan Stanley Technology MTK 0.50 170.3 16.88 9.32 1.11<br />
Guggenheim S&P Equal Weight Technology RYT 0.50 123.4 <strong>10</strong>.43 <strong>10</strong>.13 1.00<br />
First Trust Technology AlphaDEX FXL 0.70 237.3 7.59 <strong>10</strong>.14 -0.30<br />
First Trust NASDAQ-<strong>10</strong>0 Technology QTEC 0.60 123.9 7.50 <strong>10</strong>.96 2.54<br />
iShares PHLX SOX Semiconductor SOXX 0.48 225.6 5.92 6.12 -4.26<br />
Market Vectors Semiconductor SMH 0.35 282.4 3.98 - -<br />
iShares S&P North Am Multimedia Netwrk IGN 0.48 233.8 -0.14 0.63 -5.47<br />
U.S. Equity: Telecommunications<br />
iShares DJ Telecommunications IYZ 0.47 640.4 23.78 14.01 -2.36<br />
Vanguard Telecommunication Svcs VOX 0.19 555.0 20.72 14.50 0.89<br />
U.S. Equity: Utilities<br />
First Trust Utilities AlphaDEX FXU 0.70 149.4 8.05 12.34 3.05<br />
Vanguard Utilities VPU 0.19 1,150.7 4.36 12.38 2.48<br />
Utilities Select SPDR XLU 0.18 6,158.9 4.11 11.96 2.19<br />
iShares DJ US Utilities IDU 0.47 666.6 4.05 12.24 2.00<br />
U.S. Equity: Real Estate<br />
iShares DJ US Real Estate IYR 0.47 4,877.9 16.24 19.09 1.12<br />
Vanguard REIT VNQ 0.<strong>10</strong> 14,420.9 14.75 20.48 2.70<br />
First Trust S&P REIT FRI 0.50 394.7 14.58 19.84 1.43<br />
SPDR Dow Jones REIT RWR 0.25 1,928.2 14.24 20.25 1.56<br />
Schwab U. S. REIT SCHH 0.07 379.4 14.12 - -<br />
iShares Cohen & Steers Realty Majors ICF 0.35 2,855.4 13.36 20.67 0.54<br />
iShares FTSE NAREIT Residential Plus REZ 0.48 226.0 9.05 22.48 4.47<br />
U.S Equity: Theme<br />
iShares FTSE NAREIT Mortgage Plus REM 0.48 900.3 29.59 11.27 -3.<strong>10</strong><br />
PowerShares Water Resources PHO 0.62 805.6 16.57 6.<strong>10</strong> -1.30<br />
U.S. Equity: Alpha-Seeking<br />
PowerShares DWA Technical Leaders PDP 0.67 647.2 15.88 16.11 0.98<br />
PowerShares Buyback Achievers PKW 0.71 185.4 13.57 16.57 4.42<br />
U.S. Equity: High Dividend Yield<br />
Vanguard High Dividend Yield VYM 0.13 4,088.4 13.90 14.49 1.59<br />
Guggenheim Multi-Asset <strong>Inc</strong>ome CVY 0.78 760.2 13.67 15.72 3.18<br />
WisdomTree Equity <strong>Inc</strong>ome DHS 0.38 570.5 13.33 16.48 -0.12<br />
iShares High Dividend Equity HDV 0.40 2,223.7 12.75 - -<br />
First Trust Mstar Dividend Leaders FDL 0.45 645.2 12.29 17.75 0.65<br />
PowerShares Dividend Achievers PFM 0.60 282.0 12.20 13.96 0.83<br />
Schwab US Dividend Equity SCHD 0.07 514.6 11.99 - -<br />
Vanguard Dividend Appreciation VIG 0.13 11,890.5 <strong>10</strong>.94 12.76 2.91<br />
First Trust Value Line Dividend FVD 0.70 501.7 <strong>10</strong>.69 14.59 3.83<br />
SPDR S&P Dividend SDY 0.35 9,428.4 <strong>10</strong>.39 13.39 3.33<br />
iShares DJ Select Dividend DVY 0.40 11,176.5 <strong>10</strong>.28 15.99 0.44<br />
PowerShares HiYld Equity Div Achievers PEY 0.60 311.7 7.63 13.01 -3.74<br />
Global Equity<br />
Vanguard Total World Stock VT 0.22 1,383.2 12.57 7.07 -<br />
iShares MSCI ACWI ACWI 0.34 3,052.1 12.29 6.83 -<br />
iShares MSCI All Country World Minimum Volatility ACWV 0.35 623.4 11.20 - -<br />
iShares S&P Global <strong>10</strong>0 IOO 0.40 1,036.1 9.68 5.11 -2.64<br />
Global Equity Ex-U.S.<br />
Vanguard FTSE All-World ex-US SmCap VSS 0.28 1,012.0 13.70 5.93 -<br />
SPDR S&P World ex-US GWL 0.34 411.3 11.21 2.84 -4.37<br />
Vanguard FTSE All-World ex-US VEU 0.18 7,349.7 <strong>10</strong>.33 2.97 -3.95<br />
november 2012<br />
27
Fund Name Ticker ExP Ratio % AUM ($M) YTD % 3Yr % 5Yr % Fund Name Ticker ExP Ratio % AUM ($M) YTD % 3Yr % 5Yr %<br />
Vanguard Total International Stock VXUS 0.18 959.1 9.91 - -<br />
iShares MSCI ACWI ex US ACWX 0.34 1,091.0 9.08 2.25 -<br />
SPDR MSCI ACWI ex-US CWI 0.34 384.2 8.85 2.56 -3.96<br />
International Equity: Blended Development<br />
iShares S&P Asia 50 AIA 0.50 201.8 14.65 7.09 -<br />
iShares MSCI All Country Asia ex-Japan AAXJ 0.67 1,919.9 13.87 3.86 -<br />
International Equity: Developed<br />
iShares MSCI Singapore EWS 0.52 1,588.4 25.89 11.72 2.30<br />
iShares MSCI New Zealand ENZL 0.51 <strong>10</strong>9.6 24.61 - -<br />
iShares MSCI Germany EWG 0.51 3,271.3 20.99 2.95 -5.26<br />
iShares MSCI Hong Kong EWH 0.52 2,<strong>10</strong>4.2 20.40 8.59 0.55<br />
iShares MSCI Pacific ex-Japan EPP 0.50 3,309.3 17.11 7.40 -0.12<br />
iShares MSCI Sweden EWD 0.51 385.1 16.57 <strong>10</strong>.28 -1.31<br />
iShares MSCI Australia EWA 0.52 2,361.4 13.37 6.27 -0.85<br />
iShares MSCI EAFE Small Cap SCZ 0.40 1,539.2 13.17 5.26 -<br />
iShares MSCI South Korea EWY 0.59 2,988.6 13.15 8.51 -1.73<br />
Schwab International Small-Cap Eq SCHC 0.20 167.1 12.53 - -<br />
iShares MSCI Kokusai TOK 0.25 654.4 12.41 8.15 -<br />
iShares MSCI Switzerland EWL 0.52 571.1 11.80 6.56 0.49<br />
Vanguard European VGK 0.14 3,630.3 11.77 2.09 -5.50<br />
WisdomTree Intl SmallCap Dividend DLS 0.58 408.9 11.75 5.61 -3.41<br />
iShares S&P Europe 350 IEV 0.60 1,050.2 11.33 1.38 -5.93<br />
iShares MSCI EMU EZU 0.52 1,211.5 <strong>10</strong>.96 -4.40 -9.43<br />
iShares MSCI EAFE Growth EFG 0.40 1,313.1 <strong>10</strong>.48 4.21 -4.39<br />
iShares MSCI United Kingdom EWU 0.52 1,387.9 <strong>10</strong>.28 7.23 -3.83<br />
Schwab International Equity SCHF 0.09 832.0 <strong>10</strong>.20 - -<br />
iShares MSCI France EWQ 0.52 406.7 <strong>10</strong>.11 -4.05 -8.13<br />
SPDR S&P International Small Cap GWX 0.59 679.1 9.76 4.82 -3.36<br />
iShares MSCI EAFE Value EFV 0.40 1,341.6 9.63 -0.07 -6.26<br />
Vanguard MSCI EAFE VEA 0.12 9,322.5 9.57 2.03 -5.11<br />
iShares MSCI EAFE EFA 0.34 36,392.8 9.57 1.98 -5.37<br />
WisdomTree DEFA DWM 0.48 423.5 9.52 2.02 -5.34<br />
WisdomTree Intl LargeCap Dividend DOL 0.48 186.4 9.22 1.73 -5.29<br />
SPDR Euro STOXX 50 FEZ 0.29 993.8 9.22 -5.34 -9.27<br />
iShares MSCI Canada EWC 0.52 4,393.4 8.03 5.73 -0.87<br />
Vanguard Pacific VPL 0.14 1,560.5 7.39 2.60 -4.13<br />
PowerShares F/R Dev Mkts ex-US SmMid PXF 0.75 280.9 7.07 -2.17 -5.77<br />
WisdomTree Intl Dividend ex-Financials DOO 0.58 336.8 5.57 2.74 -5.63<br />
Maxis Nikkei 225 NKY 0.50 191.5 5.28 - -<br />
WisdomTree Japan SmallCap Dividend DFJ 0.58 157.7 3.<strong>10</strong> 2.71 -1.23<br />
iShares MSCI Italy EWI 0.51 206.4 2.76 -13.52 -15.56<br />
WisdomTree Japan Hedged Equity DXJ 0.48 547.8 1.92 -6.49 -8.77<br />
iShares MSCI Japan EWJ 0.51 4,248.4 1.64 -0.92 -6.99<br />
iShares MSCI Spain EWP 0.52 189.3 -5.83 -12.22 -9.24<br />
International Equity: Emerging<br />
iShares MSCI Turkey TUR 0.59 583.0 38.59 5.96 -<br />
iShares MSCI Philippines EPHE 0.59 <strong>10</strong>2.9 31.03 - -<br />
iShares MSCI Thailand THD 0.59 656.3 28.27 25.36 -<br />
iPath MSCI India ETN INP 0.89 466.0 25.91 -0.13 -4.19<br />
iShares S&P India Nifty 50 INDY 0.92 298.5 24.80 - -<br />
iShares MSCI Poland EPOL 0.59 138.8 23.34 - -<br />
iShares MSCI Mexico EWW 0.52 1,296.7 22.86 16.07 4.00<br />
WisdomTree India Earnings EPI 0.83 1,064.1 22.36 -2.72 -<br />
Global X/InterBolsa FTSE Colombia 20 GXG 0.78 206.9 19.08 14.15 -<br />
SPDR S&P Emrg Mkts Small Cap EWX 0.65 897.4 18.87 3.98 -<br />
iShares MSCI All Peru EPU 0.59 335.7 17.72 13.84 -<br />
PowerShares India PIN 0.79 392.0 15.96 -3.29 -<br />
iShares MSCI Emerging Markets Minimum Volatility EEMV 0.25 499.4 15.40 - -<br />
iShares MSCI Taiwan EWT 0.59 2,481.2 14.26 5.46 -0.78<br />
WisdomTree Emrg Mkts SmallCap Div DGS 0.64 1,035.8 14.12 7.87 -<br />
Market Vectors Brazil Small-Cap BRF 0.59 534.4 12.<strong>10</strong> 7.65 -<br />
SPDR S&P Emerging Asia Pacific GMF 0.59 389.8 11.15 4.88 -1.21<br />
iShares MSCI South Africa EZA 0.59 518.5 11.08 <strong>10</strong>.16 3.81<br />
iShares MSCI Russia ERUS 0.58 192.2 <strong>10</strong>.64 - -<br />
Vanguard MSCI Emerging Markets VWO 0.20 57,357.2 <strong>10</strong>.55 4.98 -1.66<br />
iShares MSCI Emerging Markets EEM 0.67 37,249.7 <strong>10</strong>.28 3.90 -1.70<br />
SPDR S&P Emerging Markets GMM 0.59 166.0 <strong>10</strong>.05 4.83 -0.74<br />
iShares MSCI Malaysia EWM 0.52 972.6 9.50 16.29 7.92<br />
Schwab Emerging Markets Equity SCHE 0.15 545.2 9.49 - -<br />
First Trust Emerging Markets AlphaDex FEM 0.80 118.3 9.33 - -<br />
iShares MSCI Chile ECH 0.59 554.4 9.21 <strong>10</strong>.58 -<br />
Market Vectors Russia RSX 0.62 1,830.8 8.03 2.21 -7.65<br />
PowerShares FTSE RAFI Emrg Mkts PXH 0.85 366.0 7.43 1.74 -2.04<br />
iShares MSCI China MCHI 0.58 384.4 6.58 - -<br />
SPDR S&P China GXC 0.59 759.2 6.43 0.95 -5.46<br />
SPDR S&P BRIC 40 BIK 0.50 296.3 6.13 1.70 -3.43<br />
iShares MSCI BRIC BKF 0.67 728.4 6.03 -1.44 -<br />
BLDRS Emerging Markets 50 ADR ADRE 0.30 341.6 4.65 0.77 -3.55<br />
SPDR S&P Emerging Latin America GML 0.59 114.1 4.18 2.82 0.46<br />
iShares MSCI Indonesia EIDO 0.59 279.8 2.95 - -<br />
Guggenheim China Small Cap HAO 0.75 152.9 2.38 -4.15 -<br />
iShares FTSE China 25 FXI 0.72 4,706.3 1.71 -3.41 -8.59<br />
iShares S&P Latin America 40 ILF 0.50 1,640.2 1.56 2.45 0.28<br />
Guggenheim BRIC EEB 0.64 344.0 1.28 -0.77 -3.74<br />
Market Vectors Indonesia IDX 0.57 390.8 0.39 14.19 -<br />
PowerShares Halter USX China PGJ 0.69 196.2 -1.74 -4.75 -9.58<br />
iShares MSCI Brazil EWZ 0.59 8,448.5 -3.86 -3.66 -2.52<br />
International Equity: Frontier<br />
Guggenheim Frontier Markets FRN 0.70 152.5 <strong>10</strong>.86 6.06 -<br />
Market Vectors Vietnam VNM 0.76 257.8 <strong>10</strong>.31 -16.96 -<br />
Global Equity: Sector<br />
PowerShares Listed Private Equity PSP 2.32 284.2 19.32 5.04 -13.69<br />
iShares S&P Global Financials IXG 0.48 159.2 19.08 -1.76 -11.24<br />
SPDR DJ Global Real Estate RWO 0.50 543.5 19.01 13.82 -<br />
iShares S&P Global Technology IXN 0.48 581.9 18.18 <strong>10</strong>.70 1.40<br />
Global X Silver Miners SIL 0.65 376.1 17.93 - -<br />
iShares S&P Global Consumer Discr RXI 0.48 139.5 17.<strong>10</strong> 13.16 1.42<br />
iShares S&P Global Healthcare IXJ 0.48 617.1 16.18 12.36 3.91<br />
Guggenheim S&P Global Water CGW 0.70 206.2 15.74 8.58 -0.70<br />
PowerShares Global Water PIO 0.75 213.7 12.74 1.32 -6.45<br />
iShares S&P Global Consumer Staples KXI 0.48 546.6 12.62 14.06 6.54<br />
PowerShares Global Agriculture PAGG 0.75 111.8 12.56 9.46 -<br />
iShares S&P Global Telecommunications IXP 0.48 587.7 12.04 9.22 -0.28<br />
Guggenheim Timber CUT 0.70 141.8 11.19 4.18 -<br />
iShares S&P Global Timber/Forestry WOOD 0.48 171.5 <strong>10</strong>.69 6.39 -<br />
Market Vectors Agribusiness MOO 0.53 5,662.3 9.84 11.08 3.<strong>10</strong><br />
iShares S&P Global Industrials EXI 0.48 151.3 9.25 8.44 -2.84<br />
iShares S&P Global Infrastructure IGF 0.48 353.4 8.35 5.81 -<br />
FlexShares Morningstar Glbl Upstream Nat Res GUNR 0.48 517.3 7.91 - -<br />
Market Vectors Hard Assets Producers HAP 0.49 143.4 7.06 6.61 -<br />
Market Vectors Oil Services OIH 0.35 1,097.5 5.07 - -<br />
iShares S&P North Amer Natural Res IGE 0.48 1,833.0 5.00 8.36 -0.43<br />
iShares S&P Global Materials MXI 0.48 503.4 4.97 3.96 -4.02<br />
SPDR Global Natural Resources GNR 0.40 414.9 4.69 - -<br />
iShares S&P Global Energy IXC 0.48 1,140.8 4.42 7.33 -0.70<br />
Market Vectors Gold Miners GDX 0.52 <strong>10</strong>,238.3 4.39 6.25 4.14<br />
iShares S&P Global Utilities JXI 0.48 236.0 3.08 0.38 -4.49<br />
Market Vectors Junior Gold Miners GDXJ 0.54 3,177.8 0.08 - -<br />
Global X Uranium URA 0.69 148.1 -6.13 - -<br />
Market Vectors Steel SLX 0.55 131.7 -7.74 -4.26 -9.38<br />
Market Vectors Rare Earth Metals REMX 0.57 163.8 -12.80 - -<br />
Market Vectors Coal KOL 0.59 196.4 -27.57 -7.65 -<br />
iShares MSCI Glbl Select Metals & Mining Producers PICK 0.39 212.9 - - -<br />
Global Ex-U.S. Equity: Sector<br />
Vanguard Global ex-US Real Estate VNQI 0.35 355.7 28.17 - -<br />
WisdomTree Global Ex-US Real Estate DRW 0.58 <strong>10</strong>8.9 27.26 8.66 -5.06<br />
SPDR DJ Intl Real Estate RWX 0.59 3,136.7 27.09 9.75 -4.47<br />
International Equity: Developed Sector<br />
iShares S&P Dev Ex-US Property WPS 0.48 160.3 26.97 8.01 -4.68<br />
iShares FTSE E/N Dev Real Est ex-US IFGL 0.48 1,295.2 26.76 7.92 -<br />
International Equity: Emerging Sector<br />
iShares S&P Emrg Mkts Infrastructure EMIF 0.75 124.4 14.86 7.90 -<br />
EGShares DJ Emrg Mkts Consumer Titans ECON 0.85 450.4 <strong>10</strong>.65 - -<br />
Global X China Consumer CHIQ 0.65 1<strong>10</strong>.8 -2.92 - -<br />
28 <strong>Index</strong>Universe.com/ETFReport
Fund Name Ticker ExP Ratio % AUM ($M) YTD % 3Yr % 5Yr % Fund Name Ticker ExP Ratio % AUM ($M) YTD % 3Yr % 5Yr %<br />
Global Equity: High Dividend Yield<br />
Global X SuperDividend SDIV 0.58 134.3 12.93 - -<br />
First Trust Dow Jones Global Select Dividend FGD 0.60 206.2 11.84 8.36 -<br />
Guggenheim Intl Multi-Asset <strong>Inc</strong>ome HGI 0.84 113.8 4.37 3.37 -2.87<br />
Global Ex-U.S. Equity: High Dividend Yield<br />
SPDR S&P International Dividend DWX 0.45 1,000.5 2.90 0.55 -<br />
International Equity: High Dividend Yield<br />
iShares DJ Intl Select Dividend IDV 0.50 1,154.2 11.49 5.26 -3.72<br />
WisdomTree DEFA Equity <strong>Inc</strong>ome DTH 0.58 174.5 8.76 0.89 -5.80<br />
WisdomTree Emrg Mkts Equity <strong>Inc</strong>ome DEM 0.63 4,423.6 8.05 8.26 4.88<br />
PowerShares Intl Dividend Achievers PID 0.56 717.5 6.88 7.40 -3.22<br />
SPDR S&P Emrg Mkts Dividend EDIV 0.59 301.5 -2.43 - -<br />
International Equity: Alpha Seeking<br />
PowerShares DWA EM Tech Leaders PIE 0.90 174.1 8.91 8.95 -<br />
U.S. Fixed <strong>Inc</strong>ome: Broad Market - Broad Maturities<br />
Vanguard Total Bond Market BND 0.<strong>10</strong> 17,473.0 3.90 6.03 6.47<br />
iShares Barclays Government/Credit Bond GBF 0.20 173.7 3.82 6.16 6.56<br />
iShares Barclays Aggregate Bond AGG 0.20 15,658.5 3.78 5.79 6.31<br />
SPDR Barclays Aggregate Bond LAG 0.17 621.8 3.55 5.93 6.55<br />
Schwab US Aggregate Bond SCHZ 0.05 326.8 3.54 - -<br />
U.S. Fixed <strong>Inc</strong>ome: Broad Market - Short-Term<br />
Vanguard Short-Term Bond BSV 0.11 9,013.6 1.86 2.97 4.26<br />
U.S. Fixed <strong>Inc</strong>ome: Broad Market - Intermediate<br />
Vanguard Intermediate-Term Bond BIV 0.11 4,092.9 6.35 8.70 8.48<br />
iShares Barclays Intermdt Gov/Cred Bond GVI 0.20 919.0 3.13 4.81 5.61<br />
U.S. Fixed <strong>Inc</strong>ome: Broad Market - Long-Term<br />
iShares <strong>10</strong>+ Year Government/Credit Bond GLJ 0.20 192.4 9.07 - -<br />
Vanguard Long-Term Bond BLV 0.11 789.3 8.<strong>10</strong> 12.31 11.01<br />
U.S. Fixed <strong>Inc</strong>ome: Government<br />
Vanguard Intermediate-Term Government Bond VGIT 0.14 129.6 2.47 - -<br />
Vanguard Short-Term Govt Bond VGSH 0.14 204.2 0.32 0.66 0.39<br />
iShares Barclays U.S. Treasury Bond GOVT 0.15 498.9 - - -<br />
U.S. Fixed <strong>Inc</strong>ome: Treasury - Broad Maturities<br />
PowerShares 1-30 Laddered Treasury PLW 0.25 167.0 3.81 9.14 -<br />
U.S. Fixed <strong>Inc</strong>ome: Treasury - Short-Term<br />
iShares Barclays 1-3 Yr Treasury Bond SHY 0.15 8,590.7 0.27 1.29 2.69<br />
Schwab Short-Term US Treasury SCHO 0.08 227.5 0.18 - -<br />
PIMCO 1-3 Year US Treasury TUZ 0.09 122.6 0.16 1.33 -<br />
iShares Barclays Short Treasury Bond SHV 0.15 2,677.9 -0.01 0.08 0.87<br />
SPDR Barclays 1-3 Month T-Bill BIL 0.13 1,058.3 -0.04 -0.05 0.55<br />
U.S. Fixed <strong>Inc</strong>ome: Treasury - Intermediate<br />
iShares Barclays 7-<strong>10</strong> Yr Treasury Bond IEF 0.15 4,576.2 4.05 8.62 8.81<br />
Schwab Intermediate-Term US Treasury SCHR 0.<strong>10</strong> 184.9 2.36 - -<br />
iShares Barclays 3-7 Yr Treasury Bond IEI 0.15 2,089.7 2.06 5.31 6.34<br />
SPDR Barclays Intermediate Treasury ITE 0.13 178.2 1.72 4.12 5.27<br />
U.S. Fixed <strong>Inc</strong>ome: Treasury - Long-Term<br />
Vanguard Ext Duration Treasury EDV 0.13 181.1 4.75 15.51 -<br />
iShares Barclays <strong>10</strong>-20 Yr Treasury TLH 0.15 628.3 4.46 <strong>10</strong>.20 9.92<br />
iShares Barclays 20+ Yr Treasury TLT 0.15 3,338.7 4.32 12.05 11.21<br />
U.S. Fixed <strong>Inc</strong>ome: Agencies<br />
Vanguard Mortgage-Backed Securities VMBS 0.15 269.1 2.96 - -<br />
iShares Barclays MBS Bond MBB 0.26 5,974.3 2.53 4.84 5.89<br />
iShares Barclays Agency Bond AGZ 0.20 375.5 1.85 3.33 -<br />
U.S. Fixed <strong>Inc</strong>ome: TIPS<br />
PIMCO 15+ Year US TIPS LTPZ 0.20 393.0 <strong>10</strong>.48 14.81 -<br />
PIMCO Broad US TIPS TIPZ 0.20 118.1 6.22 9.29 -<br />
SPDR Barclays TIPS IPE 0.18 770.9 6.08 9.26 7.88<br />
iShares Barclays TIPS Bond TIP 0.20 23,1<strong>10</strong>.1 6.02 9.07 7.78<br />
Schwab US TIPS SCHP 0.07 524.7 5.95 - -<br />
FlexShares iBoxx 5-Year Target Duration TIPS TDTF 0.20 341.3 4.74 - -<br />
FlexShares iBoxx 3-Year Target Duration TIPS TDTT 0.20 622.9 2.56 - -<br />
PIMCO 1-5 Year US TIPS STPZ 0.20 993.8 1.88 4.09 -<br />
iShares Barclays 0-5 Year TIPS Bond STIP 0.20 365.6 1.80 - -<br />
U.S. Fixed <strong>Inc</strong>ome: Municipal - Broad Market<br />
PowerShares Insured Natl Muni Bond PZA 0.28 884.8 8.73 6.75 -<br />
SPDR Barclays California Municipal Bond CXA 0.20 <strong>10</strong>1.9 8.49 6.53 -<br />
iShares S&P California Muni Bond CMF 0.25 260.2 7.40 6.35 -<br />
iShares S&P New York AMT-Free Municipal Bond NYF 0.25 117.6 6.35 5.44 -<br />
SPDR Barclays Municipal Bond TFI 0.23 1,179.3 5.58 5.72 6.<strong>10</strong><br />
iShares S&P Natl Municipal Bond MUB 0.25 3,134.1 5.52 5.45 5.77<br />
Market Vectors Short Municipal SMB 0.20 168.6 2.13 3.04 -<br />
U.S. Fixed <strong>Inc</strong>ome: Municipal - Short-Term<br />
SPDR Nuveen Barclays Sh-Trm Muni Bond SHM 0.20 1,612.9 1.50 2.28 -<br />
iShares S&P Short Term Natl Muni Bond SUB 0.25 586.6 0.85 1.51 -<br />
U.S. Fixed <strong>Inc</strong>ome: Municipal - Intermediate<br />
Market Vectors Intermediate Muni ITM 0.24 617.8 5.62 6.16 -<br />
PIMCO Intermediate Muni Bond <strong>Strategy</strong> MUNI 0.35 183.0 4.29 - -<br />
U.S. Fixed <strong>Inc</strong>ome: Municipal - Long-Term<br />
Market Vectors Long Municipal MLN 0.24 <strong>10</strong>6.3 9.49 7.04 -<br />
U.S. Fixed <strong>Inc</strong>ome: Municipal - High Yield<br />
Market Vectors High-Yield Municipal HYD 0.35 864.0 14.51 7.76 -<br />
SPDR Nuveen S&P High Yield Municipal Bond HYMB 0.45 143.9 13.20 - -<br />
U.S. Fixed <strong>Inc</strong>ome: Municipal - VRDO<br />
PowerShares VRDO Tax-Free Weekly PVI 0.25 332.4 -0.01 0.34 -<br />
U.S. Fixed <strong>Inc</strong>ome: Municipal - Build America Bonds<br />
SPDR Nuveen Barclays Build America Bond BABS 0.35 1<strong>10</strong>.3 9.29 - -<br />
PowerShares Build America Bond BAB 0.28 1,073.0 8.80 - -<br />
U.S. Fixed <strong>Inc</strong>ome: Corporate - Investment Grade - Broad Maturities<br />
PIMCO Investment Grade Corporate Bond CORP 0.20 274.8 <strong>10</strong>.24 - -<br />
iShares iBoxx $ Inv Gr Corporate Bond LQD 0.15 24,477.5 9.93 9.43 8.18<br />
iShares Barclays Credit Bond CFT 0.20 1,384.7 7.07 8.04 7.58<br />
U.S. Fixed <strong>Inc</strong>ome: Corporate - Investment Grade - Short-Term<br />
Vanguard Short-Term Corporate Bond VCSH 0.14 3,981.1 4.90 - -<br />
SPDR Barclays Sh-Trm Corporate Bond SCPB 0.12 1,274.2 3.47 - -<br />
iShares Barclays 1-3 Year Credit Bond CSJ 0.20 9,555.3 2.59 2.66 3.96<br />
U.S. Fixed <strong>Inc</strong>ome: Corporate - Investment Grade - Intermediate<br />
Vanguard Intermediate Corporate Bond VCIT 0.14 2,858.6 9.14 - -<br />
SPDR Barclays US Intermediate Corp Bond ITR 0.15 308.6 7.30 6.77 -<br />
iShares Barclays Intermediate Credit Bond CIU 0.20 5,478.4 6.26 6.56 6.70<br />
U.S. Fixed <strong>Inc</strong>ome: Corporate - Investment Grade - Long-Term<br />
Vanguard Long-Term Corporate Bond VCLT 0.14 1,056.8 <strong>10</strong>.84 - -<br />
iShares <strong>10</strong>+ Year Credit Bond CLY 0.20 411.5 <strong>10</strong>.15 - -<br />
SPDR Barclays Long Term Corporate Bond LWC 0.15 120.7 9.58 <strong>10</strong>.67 -<br />
U.S. Fixed <strong>Inc</strong>ome: Corporate - Investment Grade - Fixed Maturities<br />
Guggenheim BulletShares 2017 Corporate Bond BSCH 0.24 150.4 9.34 - -<br />
Guggenheim BulletShares 2016 Corporate Bond BSCG 0.24 140.0 6.51 - -<br />
Guggenheim BulletShares 2015 Corporate Bond BSCF 0.24 153.7 5.59 - -<br />
Guggenheim BulletShares 2014 Corporate Bond BSCE 0.24 169.0 3.06 - -<br />
Guggenheim BulletShares 2013 Corporate Bond BSCD 0.24 156.7 1.92 - -<br />
Guggenheim BulletShares 2012 Corporate Bond BSCC 0.24 <strong>10</strong>1.3 -0.17 - -<br />
U.S. Fixed <strong>Inc</strong>ome: Corporate - Investment Grade - Floating Rate<br />
iShares Floating Rate Note FLOT 0.20 341.9 3.70 - -<br />
U.S. Fixed <strong>Inc</strong>ome: Corporate - High Yield - Broad Maturities<br />
Peritus High Yield HYLD 1.36 134.5 11.81 - -<br />
SPDR Barclays High Yield Bond JNK 0.40 12,453.0 9.64 11.32 -<br />
iShares iBoxx $ HiYld Corporate Bond HYG 0.50 17,188.0 8.06 <strong>10</strong>.63 6.31<br />
PowerShares Fundamental HiYld Corp Bond PHB 0.50 1,088.4 7.38 9.51 -<br />
U.S. Fixed <strong>Inc</strong>ome: Corporate - High Yield - Short-Term<br />
Pimco 0-5 Year High Yield Corporate Bond HYS 0.55 492.1 8.04 - -<br />
U.S. Fixed <strong>Inc</strong>ome: Corporate - High Yield - Fixed Maturities<br />
Guggenheim BulletShares 2015 HiYld Bond BSJF 0.42 294.0 8.26 - -<br />
Guggenheim BulletShares 2014 HiYld Bond BSJE 0.42 163.0 7.68 - -<br />
Guggenheim BulletShares 2013 HiYld Bond BSJD 0.42 188.3 5.77 - -<br />
U.S. Fixed <strong>Inc</strong>ome: Corporate - Convertibles<br />
SPDR Barclays Convertible Bond CWB 0.40 850.0 11.82 7.86 -<br />
U.S. Fixed <strong>Inc</strong>ome: Corporate - Loans<br />
PowerShares Senior Loan BKLN 0.76 927.3 8.70 - -<br />
U.S. Fixed <strong>Inc</strong>ome: Corporate - Preferred Stock<br />
PowerShares Financial Preferred PGF 0.66 1,723.0 20.14 13.06 4.36<br />
iShares S&P US Preferred Stock PFF 0.48 <strong>10</strong>,202.2 16.35 <strong>10</strong>.47 4.45<br />
PowerShares Preferred PGX 0.50 1,993.8 13.46 <strong>10</strong>.33 -<br />
SPDR Wells Fargo Preferred Stock PSK 0.45 286.6 12.98 <strong>10</strong>.69 -<br />
International Fixed <strong>Inc</strong>ome: Blended Development<br />
SPDR DB Intl Govt Infl-Protected Bond WIP 0.50 1,339.5 9.82 6.15 -<br />
WisdomTree Asia Local Debt ALD 0.55 430.4 5.24 - -<br />
november 2012 29
Fund Name Ticker ExP Ratio % AUM ($M) YTD % 3Yr % 5Yr % Fund Name Ticker ExP Ratio % AUM ($M) YTD % 3Yr % 5Yr %<br />
PIMCO Enh Short Maturity <strong>Strategy</strong> MINT 0.35 1,977.5 2.17 - -<br />
Guggenheim Enhanced Ultra-Short Bond ETF GSY 0.27 215.2 1.07 0.33 -<br />
International Fixed <strong>Inc</strong>ome: Developed<br />
PowerShares Intl Corporate Bond PICB 0.50 1<strong>10</strong>.6 11.53 - -<br />
iShares S&P International Preferred Stock IPFF 0.55 111.9 9.53 - -<br />
SPDR Barclays Intl Treasury Bond BWX 0.50 1,907.0 5.94 3.76 -<br />
iShares S&P/Citi Intl Treasury Bond IGOV 0.35 344.5 4.08 1.32 -<br />
SPDR Barclays Sh-Trm Intl Treasury Bond BWZ 0.35 232.4 3.80 1.09 -<br />
iShares S&P/Citi 1-3 Yr Intl Treasury Bond ISHG 0.35 185.8 1.67 -0.89 -<br />
International Fixed <strong>Inc</strong>ome: Emerging<br />
PowerShares Emrg Mkts Sov Debt PCY 0.50 2,277.8 16.57 11.60 -<br />
iShares JPM USD Emrg Mkts Bond EMB 0.60 5,727.7 13.96 <strong>10</strong>.96 -<br />
Market Vectors EM Lcl Currency Bond EMLC 0.47 841.0 11.37 - -<br />
WisdomTree Emrg Mkts Local Debt ELD 0.55 1,352.9 <strong>10</strong>.17 - -<br />
SPDR Barclays Emrg Mkts Local Bond EBND 0.50 237.2 9.93 - -<br />
Commodities: Broad Market<br />
PowerShares DB Commodity Tracking DBC 0.85 6,707.3 6.86 9.14 1.22<br />
ETRACS CMCI ETN UCI 0.65 150.4 6.23 8.46 -<br />
United States Commodity USCI 0.95 466.3 5.11 - -<br />
ELEMENTS Rogers Intl Commodity ETN RJI 0.75 669.8 4.70 8.37 -<br />
iPath DJ-UBS Commodity ETN DJP 0.75 2,111.6 4.66 4.66 -3.84<br />
iShares S&P GSCI Commodity GSG 0.75 1,325.7 2.49 4.43 -6.44<br />
iPath S&P GSCI ETN GSP 0.75 116.1 1.96 5.92 -6.33<br />
GreenHaven Continuous Commodity GCC 0.85 516.7 1.94 8.36 -<br />
GS Connect S&P GSCI Enh ETN GSC 1.25 252.4 1.76 6.99 -2.59<br />
Commodities: Agriculture<br />
iPath DJ-UBS Grains ETN JJG 0.75 156.0 33.58 19.02 -<br />
iPath DJ-UBS Agriculture ETN JJA 0.75 120.4 15.42 14.81 -<br />
ELEMENTS RICI Agricultural ETN RJA 0.75 403.5 7.49 11.13 -<br />
PowerShares DB Agriculture DBA 0.85 1,916.6 1.84 4.92 0.67<br />
Commodities: Energy<br />
PowerShares DB Energy DBE 0.75 176.8 2.93 6.37 -0.51<br />
United States 12 Month Oil USL 0.85 115.1 -7.26 3.28 -<br />
PowerShares DB Oil DBO 0.75 679.3 -8.61 1.64 -1.47<br />
United States Oil USO 0.65 1,086.8 -<strong>10</strong>.47 -1.94 -11.42<br />
iPath S&P GSCI Crude Oil ETN OIL 0.75 427.5 -11.15 -2.12 -13.59<br />
United States Natural Gas UNG 0.85 1,155.0 -17.41 -38.98 -41.29<br />
Commodities: Industrial Metals<br />
iPath DJ-UBS Copper ETN JJC 0.75 130.5 8.06 7.13 -<br />
PowerShares DB Base Metals DBB 0.75 380.2 6.17 2.70 -4.29<br />
Commodities: Precious Metals<br />
iShares Silver SLV 0.50 11,053.3 24.28 26.91 19.65<br />
ETFS Physical Silver SIVR 0.30 641.8 24.27 27.07 -<br />
ETFS Physical Platinum PPLT 0.60 869.7 18.55 - -<br />
ETFS Physical Precious Metal Basket GLTR 0.60 211.5 16.39 - -<br />
PowerShares DB Precious Metals DBP 0.75 357.3 14.44 20.44 17.33<br />
iShares Gold Trust IAU 0.25 11,407.9 13.39 20.41 18.59<br />
ETFS Physical Swiss Gold SGOL 0.39 2,000.6 13.14 20.27 -<br />
SPDR Gold GLD 0.40 75,391.5 13.09 20.25 18.53<br />
PowerShares DB Gold DGL 0.75 439.4 12.18 18.98 16.79<br />
ETFS Physical Palladium PALL 0.60 508.4 -2.65 - -<br />
Currency: Developed<br />
CurrencyShares Australian Dollar FXA 0.40 594.1 3.89 9.29 7.20<br />
CurrencyShares Canadian Dollar FXC 0.40 520.5 3.70 2.87 0.78<br />
CurrencyShares Swiss Franc FXF 0.40 345.7 -0.39 2.87 4.31<br />
CurrencyShares Euro FXE 0.40 402.6 -0.95 -4.35 -1.30<br />
CurrencyShares Japanese Yen FXY 0.40 176.7 -1.66 4.36 7.65<br />
Currency: Emerging<br />
WisdomTree Dreyfus Emrg Currency CEW 0.55 283.0 5.48 1.75 -<br />
WisdomTree Dreyfus Chinese Yuan CYB 0.45 253.8 0.75 0.93 -<br />
Asset Allocation<br />
PowerShares CEF <strong>Inc</strong>ome Composite PCEF 1.56 356.0 16.32 - -<br />
iShares S&P Growth Allocation AOR 0.31 139.7 9.77 8.27 -<br />
iShares S&P Moderate Allocation AOM 0.31 149.8 7.05 6.54 -<br />
iShares S&P Conservative Allocation AOK 0.30 <strong>10</strong>6.8 5.32 6.11 -<br />
Alternatives: Absolute Return<br />
PowerShares S&P 500 BuyWrite PBP 0.75 281.6 7.75 8.28 -<br />
30 <strong>Index</strong>Universe.com/ETFReport<br />
PowerShares DB G<strong>10</strong> Currency Harvest DBV 0.75 329.5 6.78 3.31 -1.42<br />
IQ Hedge Multi-<strong>Strategy</strong> Tracker QAI 1.03 273.4 3.99 2.61 -<br />
WisdomTree Managed Futures <strong>Strategy</strong> Fund WDTI 0.95 142.0 -<strong>10</strong>.57 - -<br />
Alternatives: Tactical Tools<br />
iPath S&P Dynamic VIX ETN XVZ 0.95 326.1 -6.70 - -<br />
iPath S&P 500 VIX Mid-Term Futures ETN VXZ 0.89 129.1 -44.16 -26.50 -<br />
ProShares VIX Short-Term VIXY 0.83 165.8 -74.62 - -<br />
iPath S&P 500 VIX Short-Term Futures ETN VXX 0.89 1,682.5 -74.67 -64.43 -<br />
Leveraged<br />
ProShares UltraPro QQQ TQQQ 0.95 218.5 78.38 - -<br />
Direxion Daily Technology Bull 3x TECL 1.<strong>10</strong> 136.4 62.41 29.05 -<br />
Direxion Daily Financial Bull 3x FAS 1.<strong>10</strong> 1,114.9 61.78 -8.38 -<br />
ProShares UltraPro S&P 500 UPRO 0.95 303.1 50.26 28.06 -<br />
VelocityShares 3X Long Silver ETN USLV 1.65 126.7 49.75 - -<br />
ProShares Ultra QQQ QLD 0.95 602.4 49.35 33.64 3.44<br />
Direxion Daily Large Cap Bull 3x SPXL 1.11 176.1 48.29 27.22 -<br />
ProShares Ultra Financials UYG 0.95 785.8 40.95 2.07 -35.32<br />
ProShares Ultra Silver AGQ 2.58 984.9 40.09 26.79 -<br />
Direxion Daily Small Cap Bull 3x TNA 1.13 625.5 37.18 15.63 -<br />
ProShares Ultra Real Estate URE 0.95 359.4 32.82 32.29 -20.52<br />
ProShares Ultra S&P 500 SSO 0.92 1,088.7 32.68 22.11 -6.93<br />
ProShares Ultra Russell 2000 UWM 0.98 664.3 26.51 18.31 -8.21<br />
ProShares Ultra MidCap 400 MVV 0.95 600.9 25.67 22.31 -3.86<br />
PowerShares DB Gold Dbl Long ETN DGP 0.75 561.6 23.65 36.97 -<br />
ProShares Ultra Dow30 DDM 0.95 2<strong>10</strong>.1 23.37 25.53 -3.83<br />
ProShares Ultra Gold UGL 1.85 388.7 22.67 36.00 -<br />
Direxion Daily Emrg Mkts Bull 3x EDC 1.15 324.6 19.09 -12.38 -<br />
Direxion Daily Energy Bull 3x ERX 1.09 262.2 14.28 15.74 -<br />
ETRACS 2X Monthly Lev MLP Infrastr ETN MLPL 0.85 123.1 12.67 - -<br />
ProShares Ultra Oil/Gas DIG 0.95 249.1 11.26 15.37 -12.86<br />
ProShares Ultra Basic Materials UYM 0.95 168.7 9.65 8.84 -15.75<br />
Direxion Daily Gold Miners Bull 2X NUGT 1.26 375.0 -9.45 - -<br />
ProShares Ultra DJ-UBS Crude Oil UCO 0.99 382.0 -23.77 -11.38 -<br />
VelocityShares Daily 2X VIX Sh-Trm ETN TVIX 1.65 163.2 -95.24 - -<br />
ProShares Ultra VIX Short-Term Futures UVXY 1.56 188.7 -95.76 - -<br />
Inverse<br />
VelocityShares Daily Inv VIX Sh-Trm ETN XIV 1.35 246.8 161.44 - -<br />
ProShares UltraShort DJ-UBS Crude Oil SCO 0.93 116.5 5.25 -21.24 -<br />
ProShares UltraShort Yen YCS 0.93 229.2 0.93 -12.05 -<br />
ProShares UltraShort Euro EUO 0.93 756.8 -1.13 3.67 -<br />
PowerShares DB US Dollar Bullish UUP 0.75 1,008.1 -2.45 -1.29 -1.54<br />
ProShares Short 20+ Yr Treasury TBF 0.95 800.0 -6.67 -14.94 -<br />
ProShares UltraShort 7-<strong>10</strong> Yr Treasury PST 0.95 307.8 -9.73 -19.32 -<br />
ProShares Short MSCI EAFE EFZ 0.95 153.2 -11.83 -9.17 -<br />
ProShares Short Dow30 DOG 0.95 265.4 -12.35 -15.83 -7.33<br />
ProShares Short MSCI Emrg Mkts EUM 0.95 294.0 -13.09 -12.00 -<br />
ProShares UltraShort 20+ Yr Treasury TBT 0.93 2,992.6 -13.72 -29.24 -<br />
ProShares Short S&P 500 SH 0.90 1,986.4 -15.66 -15.39 -7.21<br />
ProShares Short Russell 2000 RWM 0.95 447.9 -15.84 -18.91 -13.01<br />
Active Bear HDGE 1.85 326.7 -16.07 - -<br />
ProShares UltraShort FTSE China 25 FXP 0.95 172.0 -17.65 -20.08 -<br />
ProShares Short QQQ PSQ 0.95 232.6 -21.32 -19.86 -13.06<br />
Direxion Daily 30-Yr Treasury Bear 3x TMV 1.09 290.0 -21.65 -41.76 -<br />
ProShares UltraShort Dow 30 DXD 0.95 302.0 -23.58 -30.72 -19.04<br />
ProShares UltraShort S&P 500 SDS 0.89 1,924.1 -29.34 -30.38 -19.74<br />
ProShares UltraShort Russell 2000 TWM 0.95 276.5 -30.41 -38.37 -32.55<br />
ProShares UltraShort Real Estate SRS 0.95 126.0 -30.60 -44.01 -53.87<br />
ProShares UltraShort MSCI Europe EPV 0.95 130.2 -32.04 -31.37 -<br />
Direxion Daily Energy Bear 3x ERY 1.20 115.7 -32.36 -52.66 -<br />
ProShares UltraPro Short Dow 30 SDOW 0.95 <strong>10</strong>3.3 -33.95 - -<br />
ProShares UltraShort Financials SKF 0.95 203.2 -36.33 -27.76 -34.45<br />
ProShares UltraShort QQQ QID 0.95 450.6 -38.84 -37.88 -29.94<br />
Direxion Daily Emrg Mkts Bear 3x EDZ 1.12 132.6 -40.38 -44.91 -<br />
ProShares UltraPro Short S&P 500 SPXU 0.95 563.8 -41.54 -44.72 -<br />
Direxion Daily Large Cap Bear 3x SPXS 1.14 193.8 -41.82 -45.66 -<br />
Direxion Daily Small Cap Bear 3x TZA 1.13 1,002.9 -43.81 -56.61 -<br />
ProShares UltraShort Silver ZSL 2.69 116.0 -49.41 -66.63 -<br />
Direxion Daily Financial Bear 3x FAZ 1.13 743.6 -51.21 -44.04 -<br />
ProShares UltraPro Short QQQ SQQQ 0.95 194.7 -53.30 - -
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