With interest rates at historic lows and ongoing credit concerns and market volatility driving ever increasing cash levels, investors would be wise to rethink their cash allocations. In this ‘new normal’, investors should take a more sophisticated approach to the management of their cash portfolios and consider the creation of ‘liquidity tiers’ to better match asset duration to cash liabilities. As part of this approach, short-maturity ETFs can enhance portfolio returns while preserving capital and maintaining daily liquidity.

iShares has announced the launch of a GBP currency-hedged ETF that provides access to the Japanese equity market whilst reducing currency risk for sterling-referenced investors. Listed on the London Stock Exchange, the iShares MSCI Japan Monthly GBP Hedged ETF (IJPH) offers exposure to over 300 of the largest companies in Japan, representing approximately 85% of the entire listed Japanese equity market. The fund is physically-backed and, due to the composition of the Japanese economy, has a focus on industrial, consumer discretionary, financial, and technology companies.

FTSE Group has leveraged its combined index and analytics experience to launch a series of indices aimed at delivering reduced index volatility. The newly launched FTSE Global Minimum Variance Index Series provides investors with a broad, diversified and investable portfolio incorporating a low volatility/variance objective, thereby offering potential improvements to the risk/reward trade-off versus conventional indices. The index series will compete against similar products from MSCI, S&P, Stoxx and Russell and could form the basis for future ETF launches.

EDHEC-Risk Institute, a financial research facility of the respected EDHEC business school, has ‘strongly welcomed’ the UCITS ETF guidelines released last week by the European Securities and Markets Authority (ESMA). According to EDHEC-Risk Institute, the guidelines are consistent with both the conclusions of their own research on ETF risks and ESMA’s consultation paper. However, the institute notes that the guidelines go further than the consultation document in two notable areas: securities lending and financial indices.

BlackRock Canada has announced that its iShares business has launched a suite of five minimum volatility ETFs to the Canadian marketplace. Mary Anne Wiley, Head of iShares, BlackRock Canada, said the funds “offer investors a unique opportunity to retain equity exposure in their portfolio while seeking to reduce the overall equity risk in these turbulent times.”

After a period of consultation, ESMA has published its guidelines on UCITS ETFs. Despite the potential for higher compliance costs and curtailment of profitable securities lending activities, the guidelines have broadly been welcomed by ETF providers and represent a positive step towards ensuring investors better understand the risks and attributes associated with exchange-traded products (ETPs).

Research from Legal & General Investments shows emerging markets to be the most popular geographical investment destination in the next six months, with two fifths (40%) of independent financial advisers (IFAs) choosing it as the likely best performer in the short term. When it comes to emerging markets ETFs, investors are spoilt for choice with a huge range of ETFs offering broad, regional, country and sector exposure.

Standard & Poor’s has reaffirmed the UK’s ‘AAA’ credit rating. The stable outlook reflects the expectation that the UK government will continue to consolidate public finances, enabling government debt as a percentage of GDP to stabilise by 2014 before declining in 2016 and beyond, and that an economic recovery will begin to gain traction. The news is encouraging for gilt-based ETFs, which have proved popular with investors seeking protection from the ongoing turmoil in the Eurozone.

Passive investing is gaining greater traction in the UK as the adviser community becomes frustrated with the performance and cost of many active funds, says Defaqto. The independent financial research company also suggests that product development from passive fund groups, recent new entrants to the market and cost pressures imposed by regulation, all point to further growth of passive investments such as ETFs.

US-based Huntington Asset Advisors has announced the launch of a second actively managed ETF through its new ETF family, Huntington Strategy Shares. The Huntington US Equity Rotation Strategy ETF (HUSE) has been listed on the NYSE Arca and seeks capital appreciation in any given market environment by overweighting industry sectors or segments the adviser believes to offer the best potential, while underweighting those that are expected to underperform.