5/6/2014 Do Investors Need an ETF Strategist?
11/3/2013 Converting from ‘Hedge’ to ‘Mutual’ Fund
3/3/2013 Qwafafew: Quants and Quaffs
2/3/2013 Firms Try Varied Designs to Add ETFs
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
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.
My appearance in February on The ETF Store Show—a radio program produced by the ETF Store in Kansas City, Mo., on ESPN 1510, fulfilling my dream of following Mike & Mike on air.
For those (few) of you who follow my blog, it’s been quite a while since I’ve caught up on articles published elsewhere. So, this first post will just include links to some recent stories from Pensions & Investments and The Wall Street Journal.
Hot market, ETF popularity hurting securities lending (sub) - This article took a look at the somewhat controversial area of securities lending, including pension funds that moved into ETFs for the additional income from lending. As ETFs increased in both assets and liquidity, demand to borrow dropped and had some funds reconsidering. ETFs also lend their underlying securities, a topic I covered in 2011.
Institutions’ resistance to active ETFs may ease (sub) - During the 20th anniversary celebration for SPY, many people began to ask the next question…when will active ETFs take hold? To truly catch on, it will take institutional-level faith in the product and, perhaps, a less transparent vehicle. Money-market mutual fund reform, however, could turn institutions and corporations to ultra-short active ETFs (which I during the 2012 hearings).
Firms Try Varied Designs to Add ETFs - As asset managers look for more cost-efficient ways to offer their strategies across platforms, they have honed in on a few alternatives to launching entirely separate investment companies.
Qwafafew: Quants and Quaffs - On the lighter side, I worked with Rachel Louise Ensign on this amusing story about a group of quantitative analysts and their regular gatherings in New York and around the U.S.