July 7, 2014
A little more on TAN and Sec Lending

A story I wrote for The Wall Street Journal details how the Guggenheim Solar ETF beats its index with help from securities lending. Though an extreme case, the fund’s semi-annual report shows that roughly 26% of the fund’s securities were on loan as of Feb. 28, and the fund had earned nearly $3.3 million in just six months from lending. (It’s worth noting that this income is not tax advantaged, unlike dividends and capital gains.)

That’s a healthy clip for a nearly $500 million fund. Remember, the securities are over-collateralized and can be pulled back at any time, including to meet redemptions, if needed, according to my conversation with William Belden, Guggenheim’s head of product development. 

Finding sec lending stats on an ETF mean looking at the fund’s income statement (see income from securities lending) and the balance sheet, where you will find cash for securities on loan and total securities on loan at value. 

See pages 25 and 26.

Also worth noting is the percent of securities lending income earned by the fund. Many funds report 100% - see ETF.com/TAN under “Efficiency.” Though some fund/agent splits can be less. What’s difficult to argue in the sec lending world, however, is that fee split/share says little about the efficacy, efficiency and skill of the lending agent…i.e. are they doing all they can for the fund. 

Here’s an old piece I wrote that details sec lending arrangements for ETFs

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May 29, 2014
Recent Contributions to BBC Capital

COLUMN

(Harley Schwadron)

If it’s expensive, it must be worth it, right? Not exactly. So why do we keep spending more to earn less? 

(Harley Schwadron)

Skip your investment statement. First consider what the value of “you” is —you might be shocked at how at-risk your money is.

(Harley Schwadron)

Sure, frequent flyer miles and credit card reward points are valuable. But don’t be fooled, the payoff isn’t for you. 

(Thinkstock)

Unravelling how fluctuating currency movements translate to the cash in your wallet. 

(Harley Schwadron)

Savers who want better interest rates are fuelling a boom in crowdfunded loans. Sure, they might earn 7% interest… but is it worth the risk? 

(Harley Schwadron)

January is a good time to reflect on our financial choices. But can we really change our foolish money behaviour? Maybe. 

(Harley Schwadron)

Tempted to take a chance on digital currency? Read this first. A bit of insight can help you cut your risks of getting burned.

Why universal health insurance matters (Chris Schneider/Getty Images)

People voluntarily insure themselves against risks like theft and fire but health insurance is another story. As the US goes universal, how and why it matters.

(Harley Schwadron)

Don’t judge your investments against a generic index. Instead, create a game plan tailored to your needs. 

We can trick ourselves into thinking we are taking the right risks with our money(iStock)

What a financial planner and a Nobel Prize-winning psychologist know that you don’t.

(Harley Schwadron)

Math or economics? Studying one can actually hurt your financial acumen — and credit health.

(Harley Schwadron)

"Buy it now!" is becoming "Buy it whenever." Why flash sales captured our attention — and then faded away. 

Investor scams continue, despite tougher monitoring. (Timothy A Clary/AFP/Getty Images)

Investor scams are alive and well even after multibillion dollar schemes were exposed. What’s a small investor to do?

(Harley Schwadron)

Why are home buyers still attracted to risky ARMs? Blame the future-resistant brain.

(iStockphoto)

Getting a home loan in the US from Wells Fargo isn’t easy — and that’s exactly how the bank wants it. One lender’s take on risk.

(Harley Schwadron)

Crowdfunding is turning financing for small business and the arts on its head, but what do funders get in return for their money? 

Long lines to rebook cancelled flights (Thomas Lohnes/Getty Images)

Airlines have the same goals as travellers: minimizing costs, time and risks. An inside look at how flight schedules and ticket pricing really work.

(Harley Schwadron)

Shoppers are outraged by working conditions abroad and vow to boycott — but do they follow through?

(Harley Schwadron)

There is a misguided belief that saving 6% in an employer-sponsored savings plans will leave Americans short — but not for the reasons you think. Read more…

May 29, 2014
Recent Contributions to Pensions & Investments

5/26/2014 ETF returns more than just indexes, expense ratios 

5/12/2014 Potholes litter road to ETF investment by DC plans 

3/31/2014 Endowment chief enjoys flexibility offered by ETFs 

2/17/2014 Skepticism needed when evaluating new strategies 

1/20/2014 Subadvisory deals open ETF doors for many firms 

12/23/2013 Use of ETPs by institutional investors still elusive 

11/25/2013 Hedged ETPs looking to move beyond currency niche 

10/28/2013 Distribution, education take on renewed importance for ETF managers 

9/30/2013 ETF flows could offer clues about investor sentiment 

8/19/2013 ETPs attractive as overlay for equity portfolios, liquidity 

7/22/2013 Volatile markets put spotlight on mechanics of ETFs 

6/24/2013 International bond ETFs could bear some scrutiny 

5/27/2013 ETFs being used to get foot into institutional doors  

4/29/2013 Exchanges creating programs to attract ETP investors and market makers  

3/18/2013 Institutions’ resistance to active ETFs may ease 

2/18/2013 Hot market, ETF popularity hurting securities lending 

1/21/2013 ETFs open doors to other institutional accounts 

12/24/2012 Fees, indexes take center stage in ETF competition 

10/29/2012 More pension funds see value investing in fixed-income ETFs  

May 27, 2014
Recent Contributions to The Wall Street Journal

6/2/2014 Index ETFs May Not Track Benchmark As Expected

5/6/2014 Do Investors Need an ETF Strategist? 

3/3/2014 Active Stock ETFs are Poised to Take Off

2/4/2014 How Investors Can Play Europe in 2014

1/5/2014 Key Trends in a Milestone Year for ETFs

11/3/2013 Some Indexers Grouse about Smart-Beta Approaches

11/3/2013 Schwab Makes Case for Its Long-Awaited ETF 401(k)

11/3/2013 Converting from ‘Hedge’ to ‘Mutual’ Fund

9/4/2013 Have ‘Alternative’ Investments Lost Their Diversification Value?

8/4/2013 An Extra Data Point on ETF Values May Not Be Helpful

7/7/2013 Short Looks Beautiful to Bond Investors

5/5/2013 Companies Add to Lineups of ‘Free’ ETFs

3/3/2013 Qwafafew: Quants and Quaffs

2/3/2013 Firms Try Varied Designs to Add ETFs

1/3/2013 The Myth About ETF Managers Not Trading

1/3/2013 ETF Management: Behind the Scenes

10/23/2012 The Outlook for ETFs

9/5/2012 The Largest and Smallest ETFs

8/6/2012 PIMCO’s Bold Move into ETFs

7/9/2012 Index Funds and Tracking Error

5/7/2012 An Expert Talks About ETFs

1/9/2012 When It Comes to Tax Efficiency, Not All ETFs are Equal

May 14, 2014
Pay for performance? Hardly, at BBC.com. 
This column was a response to frequent discussions about the value-add of alternative investments, particularly hedge funds, relative to low-cost indexing. In general, I think investors are headed to a barbell model with cheap, low-cost beta on one side and expensive, high-conviction alpha-seeking (or uncorrelated) management on the other. A mushy middle of stock pickers will continue to exist, as well as institutions and individuals who have particular business reasons to be overweight a particular security.
At a recent event for financial advisers in New York, Mark Wiedman, who manages the global iShares business for BlackRock described the future of funds as an hour glass. (So let’s call that a barbell rotated 90 degrees!)
As an executive at the world’s largest index shop (and one that has struggled with traditional actively managed mutual funds but excelled at allocation models), he has seen this development first hand. And it likely only gets more polarizing from here. 
One of the hardest things, I think, for the hedge fund and alternative asset management community to do, in general, is communicate their value-add. Those who play outside of public market liquidity (PE/VC) should deliver non-public market returns to their investors. Those specifically targeting market neutral strategies should hone in on their value-add relative to cash and the risk-free rate.
A challenge for writers in articles like the one featured here is that a portfolio view (and risk/return discussion) can significantly weigh down the article and confuse the reader, so the default is to price and performance. It’s not elegant, but it’s a start. 

Pay for performance? Hardly, at BBC.com

This column was a response to frequent discussions about the value-add of alternative investments, particularly hedge funds, relative to low-cost indexing. In general, I think investors are headed to a barbell model with cheap, low-cost beta on one side and expensive, high-conviction alpha-seeking (or uncorrelated) management on the other. A mushy middle of stock pickers will continue to exist, as well as institutions and individuals who have particular business reasons to be overweight a particular security.

At a recent event for financial advisers in New York, Mark Wiedman, who manages the global iShares business for BlackRock described the future of funds as an hour glass. (So let’s call that a barbell rotated 90 degrees!)

As an executive at the world’s largest index shop (and one that has struggled with traditional actively managed mutual funds but excelled at allocation models), he has seen this development first hand. And it likely only gets more polarizing from here. 

One of the hardest things, I think, for the hedge fund and alternative asset management community to do, in general, is communicate their value-add. Those who play outside of public market liquidity (PE/VC) should deliver non-public market returns to their investors. Those specifically targeting market neutral strategies should hone in on their value-add relative to cash and the risk-free rate.

A challenge for writers in articles like the one featured here is that a portfolio view (and risk/return discussion) can significantly weigh down the article and confuse the reader, so the default is to price and performance. It’s not elegant, but it’s a start.