ETF INSIDE-OUT. July 2014

(1)

July 2014

ETF INSIDE-OUT

(2)

A B O U T K O R I S I N T E R N A T I O N A L

Koris International is a financial investment advisory firm fully focused on designing and developing dynamic asset allocation models.

The company operates with a team of 14 professionals coming from the asset management industry and academia and benefits from the latest advances in financial engineering and a long proven know-how.

Located in Sophia-Antipolis on the French Riviera (head office) and in London, Koris International is wholly owned by its founders and has been operating for more than 10 years with key players in the asset management industry through an ‘Advisory’ business model entirely dedicated to asset allocation.

Koris International offers solutions that meet the needs of asset management companies, private banks and institutional investors throughout Europe. These advanced quantitative techniques are designed to satisfy the investors’ appetite for a better risk control.

Koris International develops portfolio solutions for multi-management implemented with index funds, Futures, Total Return Swaps, active funds as well as liquid alternative investment strategies through managed accounts.

www.koris-intl.com [email protected]

D I S C L A I M E R

Data and information provided in this document are for information purposes only. Koris International has strived to ensure information provided is as reliable and accurate as possible. Under no circumstances could the company be held accountable for potential errors or omissions.

Information reported and calculations have been made on the sole basis of publicly available information. Time series and information on financial instruments have been sourced independently and, whenever possible, cross-checked with the ETF providers.

It is stressed that information provided in this document can not be considered official and should be directly verified with the respective asset managers.

Detailed information on the calculation methodology used can be found in the final section of this document. Quantitative analyses have been performed on past historical data that might not reflect the future performance of those instruments.

The document is only presented as an indication of which qualitative and quantitative elements should be evaluated prior to investing in an ETF. In no circumstances could it be understood as a recommendation to invest in a financial instrument or enter into a transaction with a financial institution.

(3)

C O N T E N T

About The Index: Barclays EuroAgg Corporate Total Return Index Value Unhedged EUR ... 3

iShares Core Euro Corporate Bond UCITS ETF ... 4

About The Index: Markit iBoxx Euro Liquid Corporates ... 6

Lyxor UCITS ETF Euro Corporate Bond ... 7

Amundi ETF Euro Corporates UCITS ... 9

About The Index: Markit iBoxx € Liquid Corporates 100 TR ... 11

db X-Trackers II – iBoxx EUR Liquid Corporate UCITS ETF ... 12

About The Index: Markit iBoxx EUR Liquid Corporates Diversified Total Return ... 14

Deka iBoxx EUR Liquid Corporates Diversified UCITS ETF ... 15

Methodology ... 17

(4)

A B O U T T H E I N D E X : B A R C L A Y S E U R O A G G C O R P O R A T E

T O T A L R E T U R N I N D E X V A L U E U N H E D G E D E U R

G

ENERAL

I

NFORMATION

Bloomberg Ticker LECTPTREU Index

Base currency EUR

Creation date 01/06/1998

Asset Class Bonds

O

BJECTIVE

:

The Barclays Euro Corporate Bond Index is a broad-based benchmark that measures the investment grade, euro-denominated, fixed-rate corpofixed-rate bond market.

R

ATING

W

EIGHT AAA 0.4% AA 11.2% A 46.5% BBB 41.9% 1

_I

NDEX

M

ETHODOLOGY  Eligibility:

- Principal and interest must be denominated in Euro. - Bonds must be fixed rate coupon.

- Senior and subordinated issues are included.

- Bonds must have at least one year until final maturity, regardless of optionality. - Securities must be rated investment grade: Baa3/BBB- or above.

- Bonds must have a minimum amount outstanding of €300mn.

 Selection: Bonds near to their original term, rather than all bonds in a maturity range. Market capitalization weighting.

 Rebalancing: Monthly, on the last calendar day of the month.

 Total Return: Income received during the month is held as cash until the month-end rebalancing, at which point it is reinvested back into the index.

 Taxability: Barclays indices are published gross of any tax assumption.

(5)

I S H A R E S C O R E E U R O C O R P O R A T E B O N D U C I T S E T F

ETF

S

TRUCTURE

ISIN

EUR Share Class IE00B3F81R35

DE000A0RM454

Jurisdiction Ireland Expense Ratio 0.20%

Legal Structure Plc* Share creation costs 40bps**

Creation date 06/03/2009 Share redemption costs 10bps**

Base currency EUR Decimalisation of shares No

ETF Dividend policy Distribution NAV value 30/06/2014 €125.273

Index exposure Direct (Physical) Index value 30/06/2014 €223.85

Replication model Sampled Replication ETF AUM 30/06/2014 €3,590.88 Mios

Use of derivatives No Average AUM 2011-2013 €1,530.85 Mios

Securities Lending Yes Securities lending

Collateral Lending agent Blackrock UK Advisors

Limited

Nature Equities, Bonds, Certificate of Deposits and Cash

Maximum level of lending 50% Custodian State Street Custodial Services

Average level of lending (2013) 8.6% Maximum risk by counterparty

50%

Fee redistribution 62.5% gross revenue Full ownership Yes

Segregation of assets Yes

* Public Limited Company

** Indicative values based on market conditions for a minimum investment amount of 1 share More information available at http://www.ishares.com/

Notes on data:

Data was adjusted with the semi-annually distributed dividends. The dividend amounts are reintegrated to the NAV on their ex-date. 0 1,000 2,000 3,000 4,000 EU R M ill io n s

(6)

I S H A R E S C O R E E U R O C O R P O R A T E B O N D U C I T S E T F

ANNUALIZED RETURN ETF INDEX DIFFERENCE EXPENSE RATIO

Comparison Period 06/06/2011 – 30/06/2014 6.41% 6.54% -0.136%

0.20%

Period of Existence 06/03/2009 – 30/06/2014 7.96% 8.04% -0.073%

3 Last Years 30/06/2011 – 30/06/2014 6.66% 6.81% -0.149%

12 Last Months 28/06/2013 – 30/06/2014 7.11% 7.20% -0.090%

S

TATISTICS ON THE DAILY DIFFERENCE BETWEEN THE RETURNS OF THE ETF AND THE UNDERLYING INDEX

COMPARISON PERIOD PERIOD OF EXISTENCE 3LAST YEARS 12LAST MONTHS

Dates 06/06/2011 – 30/06/2014 06/03/2009 – 30/06/2014 30/06/2011 – 30/06/2014 28/06/2013 – 30/06/2014

Mean -0.001% 0.000% -0.001% 0.000%

Standard Deviation (Tracking Error) 0.017% 0.043% 0.017% 0.014%

Percentile 5% -0.028% -0.039% -0.028% -0.023%

Correlation 99.532% 96.930% 99.537% 99.333%

# datapoints 769 1334 751 251

S

TATISTICS ON THE ANNUAL DIFFERENCE BETWEEN THE RETURNS OF THE ETF AND THE UNDERLYING INDEX

TRAILING ON

COMPARISON PERIOD

TRAILING ON

PERIOD OF EXISTENCE

TRAILING ON THE

3LAST YEARS CALENDAR

Dates 06/06/2011 – 30/06/2014 06/03/2009 – 30/06/2014 30/06/2011 – 30/06/2014 31/12/2009 – 30/12/2013

Mean (Tracking Difference) -0.146% -0.244% -0.148% -0.115%

Standard Deviation 0.073% 0.343% 0.074%

Percentile 5% -0.247% -1.034% -0.247%

# datapoints 518 1083 500 4

VOLUME ON ORGANIZED MARKETS IE00B3F81R35

Stock Exchange London Stock Exchange NYSE Euronext Amsterdam Borsa Italiana

Ticker Bloomberg - Currency IEAC LN – EUR IEAC NA – EUR IEAC IM – EUR

Listing Starting Date Mar-09 May-09 Sep-09

ADV on Listing Period (€’000) 3,883 2,444 819

(7)

A B O U T T H E I N D E X : M A R K I T I B O X X E U R O L I Q U I D

C O R P O R A T E S

G

ENERAL

I

NFORMATION

Bloomberg Ticker IB8A Index

Base currency EUR

Asset Class Bonds

O

BJECTIVE

:

The Markit iBoxx Euro Liquid Corporates index represents the performance of 40 euro-denominated bonds, issued by international companies.

R

ATING

W

EIGHT AAA 0.00% AA 16.68% A 57.50% BBB 25.81% 2

_I

NDEX

M

- Only Euro and legacy currency denominated bullet fixed coupon bonds. The issuer domicile is not relevant.

- Bonds must have a remaining time to maturity of at least 1.5 years at rebalancing date. - All bonds require a specific minimum amount outstanding of EUR 750mn.

- Bonds older than three years are excluded.

- The maximum permissible minimum lot size is EUR 50,000. - Each bond has a minimum run of one year.

 Selection: The number of bonds is limited to 40 bonds. Market capitalization weighting.  Rebalancing: Quarterly, on the last calendar day of the month.

 Total Return: Cash received from coupon payments and non-substituted bonds are invested at the end of each month in the money market until the end of the following month. Cash is reinvested in the index at the next rebalancing.

 Taxability: iBoxx indices are published gross of any tax assumption.

(8)

L Y X O R U C I T S E T F E U R O C O R P O R A T E B O N D

ETF

S

TRUCTURE

ISIN

EUR Share Class FR0010737544

Jurisdiction France Expense Ratio 0.20%

Legal Structure FCP* Share creation costs 27bps**

ETF Dividend policy Capitalization NAV value 30/06/2014 €137.5503

Index exposure Indirect ( Synthetic) Index value 30/06/2014 €203.97

Replication model Unfunded Swap ETF AUM 30/06/2014 €638.78 Mios

Counterparty Risk Average AUM 2011-2013 €547.30 Mios

Swap counterparty Société Générale Basket of securities

Swap reset strategy Every day on Euronext close Nature Bonds

Maximum risk by

counterparty 10% Custodian

Société Générale Securities Services

Securities lending No

* Fonds Commun de Placement

** Indicative values based under normal market conditions for a minimum investment amount of 3M EUR More information available at http://www.lyxoretf.fr/

0 200 400 600 800 EU R M ill ion s

Assets under Management

Notes on data:

The ETF switched from the 11am fixing to the 5pm fixing of the index on 3 June 2011, hence the analysis was only conducted from this date.

(9)

L Y X O R U C I T S E T F E U R O C O R P O R A T E B O N D

0.20%

3 Last Years 30/06/2011 – 30/06/2014 5.94% 6.16% -0.212%

12 Last Months 28/06/2013 – 30/06/2014 5.73% 5.94% -0.210%

S

Dates 06/06/2011 – 30/06/2014 06/06/2011 – 30/06/2014 30/06/2011 – 30/06/2014 28/06/2013 – 30/06/2014

Mean -0.001% -0.001% -0.001% -0.001%

Percentile 5% -0.005% -0.005% -0.005% -0.005%

Correlation 99.991% 99.991% 99.991% 99.984%

# datapoints 783 783 765 255

S

TRAILING ON

COMPARISON PERIOD

TRAILING ON

TRAILING ON THE

Dates 06/06/2011 – 30/06/2014 06/06/2011 – 30/06/2014 30/06/2011 – 30/06/2014 30/12/2011 – 31/12/2013

Percentile 5% -0.218% -0.218% -0.218%

# datapoints 532 532 514 2

VOLUME ON ORGANIZED MARKETS FR0010737544

Stock Exchange Borsa Italiana NYSE Euronext Paris Deutsche Börse

Ticker Bloomberg - Currency CRPE IM – EUR CRP FP – EUR LYXCRP GY – EUR

Listing Starting Date Jun-09 Apr-09 Jun-09

ADV on Listing Period (€’000) 981 754 273

(10)

A M U N D I E T F E U R O C O R P O R A T E S U C I T S

ETF

S

TRUCTURE

ISIN

EUR Share Class FR0010754119

Jurisdiction France Expense Ratio 0.16%

Index exposure Indirect (Synthetic) Index value 30/06/2014 €203.97

Swap counterparty Société Générale _{Basket of Securities}

Swap reset strategy Mark to market at 0% every day at 4PM

Nature Investment Grade Bonds issued by OECD countries and corporates

Maximum risk by counterparty 10% Custodian CACEIS

** Indicative values based on market conditions, there is no minimum investment amount More information available at http://www.amundietf.com/

Notes on data:

6 NAV missing from public data were added back to the time series. Public data also contained 5 wrong NAV that were corrected before computing the statistics.

0 100 200 300 400 EU R M ill ion s

(11)

A M U N D I E T F E U R O C O R P O R A T E S U C I T S

0.16%

3 Last Years 30/06/2011 – 30/06/2014 5.96% 6.16% -0.197%

12 Last Months 28/06/2013 – 30/06/2014 5.76% 5.94% -0.177%

S

Dates 06/06/2011 – 30/06/2014 22/06/2009 – 30/06/2014 30/06/2011 – 30/06/2014 28/06/2013 – 30/06/2014

Mean -0.001% -0.001% -0.001% -0.001%

Percentile 5% -0.005% -0.005% -0.005% -0.005%

Correlation 99.991% 99.916% 99.991% 99.983%

# datapoints 783 1286 765 256

S

TRAILING ON

COMPARISON PERIOD

TRAILING ON

TRAILING ON THE

Dates 06/06/2011 – 30/06/2014 22/06/2009 – 30/06/2014 30/06/2011 – 30/06/2014 31/12/2009 – 31/12/2013

Percentile 5% -0.211% -0.209% -0.211%

# datapoints 532 1035 514 4

VOLUME ON ORGANIZED MARKETS FR0010754119

Stock Exchange SIX Swiss Exchange NYSE Euronext Paris Deutsche Börse

Ticker Bloomberg - Currency CC4 SW – EUR CC4 FP – EUR CC4GR GY – EUR

Listing Starting Date Jul-10 Jun-09 May-10

ADV on Listing Period (€’000) 258 243 232

(12)

A B O U T T H E I N D E X : M A R K I T I B O X X € L I Q U I D

C O R P O R A T E S 1 0 0 T R

G

ENERAL

I

NFORMATION

Bloomberg Ticker IBOXLC00 Index

Base currency EUR

Asset Class Bonds

O

BJECTIVE

:

The index represents the performance of up to 100 euro denominated corporate bonds within the liquid universe of euro denominated corporate debt issued by corporate issuers taking into account re-balancing costs.

R

ATING

W

EIGHT AAA 0.00% AA 26.24% A 53.66% BBB 20.10% 3

I

NDEX

M

- Only Euro and legacy currency denominated bullet fixed coupon bonds. - Only issuers classified as corporates. The issuer domicile is not relevant.

- Bonds must have a remaining time to maturity of at least 2 years at rebalancing date. - Bonds must have a minimum amount outstanding of EUR 750mn.

- The maximum permissible lot size is EUR 50,000. - Each bond has a minimum run of one year.

 Selection: The number of bonds is limited to 100 bonds. Market capitalization weighting.  Rebalancing: Semi-annually, on the last calendar day of the month.

(13)

D B X - T R A C K E R S I I – I B O X X E U R L I Q U I D C O R P O R A T E

U C I T S E T F

ETF

S

TRUCTURE

ISIN

EUR Share Class LU0478205379

Jurisdiction Luxembourg Expense Ratio 0.20%

Legal Structure OPCVM* Share creation costs variable**

Creation date 23/02/2010 Share redemption costs variable**

Index exposure Indirect (Synthetic) Index value 30/06/2014 €143.8436

Swap counterparty _{Deutsche Bank AG} Basket of Securities Swap reset strategy - If there is a

Subscription/Redemption - If the counterparty

exposure > 5%

Nature Eurozone Investment Grade Government, Corporate and Convertibles Bonds

Maximum risk by counterparty

5% Custodian State Street Bank

Luxembourg

* Organisme de Placement Collectif en Valeurs Mobilières

** Indicative values based on market conditions for a minimum cash investment amount of EUR 250k More information available at http://www.etf.db.com/

0 100 200 300 EU R M ill ion s

Assets under Management

Notes on data:

(14)

D B X - T R A C K E R S I I – I B O X X E U R L I Q U I D C O R P O R A T E U C I T S E T F

0.20%

3 Last Years 30/06/2011 – 30/06/2014 5.45% 5.65% -0.204%

12 Last Months 28/06/2013 – 30/06/2014 4.69% 4.88% -0.195%

S

Dates 06/06/2011 – 30/06/2014 23/02/2010 – 30/06/2014 30/06/2011 – 30/06/2014 28/06/2013 – 30/06/2014

Mean -0.001% -0.001% -0.001% -0.001%

Percentile 5% -0.002% -0.002% -0.002% -0.002%

Correlation 99.952% 99.967% 99.950% 99.644%

# datapoints 766 1088 750 248

S

TRAILING ON

COMPARISON PERIOD

TRAILING ON

TRAILING ON THE

Dates 06/06/2011 – 30/06/2014 23/02/2010 – 30/06/2014 30/06/2011 – 30/06/2014 31/12/2010 – 31/12/2013

Percentile 5% -0.216% -0.215% -0.216%

# datapoints 515 837 499 3

VOLUME ON ORGANIZED MARKETS LU0478205379

Stock Exchange Deutsche Börse Borsa Italiana

Ticker Bloomberg - Currency XBLC GY – EUR XBLC IM – EUR

Listing Starting Date Mar-10 Jun-10

ADV on Listing Period (€’000) 239 52

(15)

A B O U T T H E I N D E X : M A R K I T I B O X X E U R L I Q U I D

C O R P O R A T E S D I V E R S I F I E D T O T A L R E T U R N

G

ENERAL

I

NFORMATION

Bloomberg Ticker IBOXCDTR Index

Base currency EUR

Asset Class Bonds

O

BJECTIVE

:

The index represents the performance of up to 75 euro denominated corporate bonds within the Markit iBoxx EUR Liquid Corporates Index.

R

ATING

W

EIGHT AAA 0.00% AA 19.07% A 55.07% BBB 25.86% 4

_I

NDEX

M

- Only Euro and currency denominated bullet fiwed rate coupon bonds. Only senior debt. - Bonds older than three years are excluded.

- Bonds must have a remaining time to maturity of at least 1.5 years at rebalancing date. - The Markit iBoxx rating must be BBB- or higher for a non-financial bond and A- or higher for

a financial bond.

- Only issuers whose HQ is in a Euro country or in Denmark, Norway, Sweden, Switzerland or the United Kingdom.

- The minimum outstanding is EUR 1bn for financial bonds and EUR 500m for non financials.  Selection: The number of bonds is limited to 75 bonds. Market capitalization weighting.

 Rebalancing: Quarterly, on the last calendar day of the month.

(16)

D E K A I B O X X E U R L I Q U I D C O R P O R A T E S D I V E R S I F I E D

U C I T S E T F

ETF

S

TRUCTURE

ISIN

EUR Share Class DE000ETFL375

Jurisdiction Germany Expense Ratio 0.20%

ETF Dividend policy Distribution NAV value 30/06/2014 €109.373

Index exposure Direct (Physical) Index value 30/06/2014 €167.4

Replication model Full Replication ETF AUM 30/06/2014 €112.91 Mios

Use of Derivatives No Average AUM 2011-2013 €112.62 Mios

Securities lending Yes Securities lending Collateral Lending Agent DekaBank, Deutsche

Girozentrale Nature

Bonds, Equities, European Central Bank -Basket

Maximum level of

lending 100% legal limit Custodian DekaBank

Average level of lending

(2013) 11,93% (16,52% max) Maximum risk by counterparty

10%, except Clearstream Banking Frankfurt***

Fee redistribution 100% Full ownership Yes

Segregation of assets Yes

** Indicative values based on market conditions for a minimum cash investment amount of EUR 1M

*** Deka Investment can lend up to 100% to Clearstream Banking Frankfurt (CBF). KAGplus, the securities lending system of CBF enables investment trust companies to improve yield and also assists in the minimisation of legally defined risks. CBF has been certified as an organised system under Section 56 of the German Investment Act (InvG), ensuring investor protection. Investment trust companies that use KAGplus are recognised as fulfilling investor protection requirements. KAGplus offers additional operational advantages, since CBF handles the transactions entirely, including matching, margining, collateralisation, as well as comprehensive and transparent reporting

More information available at http://www.deka-etf.de/

0 50 100 150 200 EU R M ill ion s

Assets under Management

Notes on data:

Data was adjusted with the quarterly distributed dividends. The dividend amounts are reintegrated to the NAV on their ex-date.

(17)

D E K A I B O X X E U R L I Q U I D C O R P O R A T E S D I V E R S I F I E D U C I T S E T F

0.20%

3 Last Years 30/06/2011 – 30/06/2014 6.72% 6.86% -0.147%

12 Last Months 28/06/2013 – 30/06/2014 7.19% 7.44% -0.247%

S

Dates 06/06/2011 – 30/06/2014 17/02/2010 – 30/06/2014 30/06/2011 – 30/06/2014 28/06/2013 – 30/06/2014

Mean -0.001% -0.001% -0.001% -0.001%

Percentile 5% -0.022% -0.025% -0.022% -0.019%

Correlation 99.742% 99.678% 99.744% 99.735%

# datapoints 780 1112 762 253

S

TRAILING ON

COMPARISON PERIOD

TRAILING ON

TRAILING ON THE

Dates 06/06/2011 – 30/06/2014 17/02/2010 – 30/06/2014 30/06/2011 – 30/06/2014 30/12/2010 – 30/12/2013

Percentile 5% -0.184% -0.176% -0.185%

# datapoints 529 861 511 3

VOLUME ON ORGANIZED MARKETS DE000ETFL375

Stock Exchange Deutsche Börse

Ticker Bloomberg - Currency ETFLCD GY – EUR

Listing Starting Date Mar-10

ADV on Listing Period (€’000) 230

(18)

M E T H O D O L O G Y

D A T A

Our selection methodology consists in ranking all existing ETFs on the related index from largest to smallest average assets under management (in EUR) from 2011 to 2013, with a minimum of 50M AuM. We then apply a track record filter restricting the selection to those ETFs with more than 3 years of existence. Finally, we select all ETFs from the five first providers that meet the two first criteria. The ETFs are presented in decreasing size order based on their average AUM over 2011-2013.

For the ETF, we use the official Net Asset Value (NAV), assets under management and trading volumes. Should an ETF distribute a dividend, the amount paid would be reintegrated into the ETF valuation on the ex-date, which is the reinvestment date.

For the underlying index, we use the official index tracked by the ETF.

The historical data is downloaded on a daily basis, according to the ETF NAV schedule.

The expense ratio includes administration and management fees but not the swap fees (when applicable) nor the transaction costs.

Volume on organized markets: The ADV is the Average Daily Volume of the ETF traded on the three main exchanges where it is listed. This statistic is computed on the listing period and on 2013. It is presented in thousands of USD and sorted by decreasing ADV on 2013.

S T A T I S T I C S

The statistics are computed over daily and annual basis. We compute several statistics for the analysis part:

 Annualized return: compounded over each given period and annualized over 365 days.  Mean: arithmetic average computed over the whole data period for each chosen return

periodicity.

 Standard deviation: computed on the overall available data for each chosen return periodicity.

 Percentile 5%: threshold value below which the worst 5% returns belong.

 Correlation: correlation coefficient of the daily and yearly return series between the ETF and the index.

(19)

C H A R T S

 Assets under Management: daily series of the ETF total assets under management consolidated in EUR throughout all existing share classes.

Version of the methodology Date issued Change control

1.0 March 31st 2014 Initial release.

1.1 April 30th 2014 Historical charts removed pending review Inclusion of a three year time period

(20)

G U I D E O N H O W T O R E A D T H E F I G U R E S

D E S C R I P T I V E S T A T I S T I C S

Tracking Error

The tracking error is commonly measured as the standard deviation of the differences between the returns of the ETF and those of the index. However, it excludes the drag component, which makes it possible to have a tracking error equal to zero in spite of large differences between the returns. This single measure is thus incomplete and we therefore provided several statistics that encompass each aspect of these differences.

- Average difference of returns: It can be interpreted as the drag between the returns of the ETF and that of the Index. For each trading period it is the difference of returns the investor can expect to be exposed to.

- Standard Deviation: Gives a measure of the dispersion of the differences around the above-mentioned average. A large value is synonym to more uncertainty in evaluating the impact of investing in the ETF: on short investment periods, the differences might be quite far from the mean. On the contrary, a standard deviation equal to zero means that for each period, the difference of returns is equal to the average.

- 5% percentile: Gives a measure of the extreme differences that might occur. It represents the threshold under which the 5% worst differences can be found.

One year trailing difference

This provides statistics on a one year long investment. The mean difference can be interpreted as the difference that one can expect on average when investing in the ETF for a period of one year. The standard deviation gives a measure of the dispersion of this difference: a low figure indicates that the difference of returns at the end of the one year period is generally quite close to the mean difference. On the contrary, a high figure indicates that the difference can differ widely among these one year investments. The 5% percentile represents an extreme case of such an investment.