SSGA

Best Blogs of the Week #268

Posted by Anu Heda on May 22, 2017, in Best Blogs of the Week , tagged with ,

(Look below for a highly indicative price-to-book chart.)

Two posts this week capturing basic considerations about valuation: one for equities and one for bonds.

SSgA – Charting the Market: With Global Stocks at All-Time Highs, Where is Value Emerging? – It shows emerging market (EM) equities are the only regional equity gauge trading below their historical 10-year average based on P/B, while the US is trading at its 10-year high—although within the US there are opportunities for value, namely in financials.

Vanguard – Rates change, but the role of bonds doesn’t – Barring default, you can be certain of getting income until the bonds mature. It’s that income that drives returns for patient bond investors who resist the urge to jump in and out of the market.

Price

 

Best Blogs of the Week #267

Posted by Anu Heda on May 11, 2017, in Best Blogs of the Week , tagged with , ,

A midweek catch-up post detailing three interesting posts (not related to the French election)

BNY Mellon – The Pearl River Delta: the Achilles Heel of US protectionism – In our view, President Trump would need to introduce very stiff tariffs for any of this production to shift to the US, but the majority would probably still remain in China, leading to a rise in the end price instead.

SSgA – ESG Investing: One Size Does Not Fit All – For more benchmark-aware investors, a low carbon target index may be more suitable. For example, the MSCI ACWI Low Carbon Target Index assigns overweight positions to companies with low carbon emissions relative to sales and those with low fossil fuel reserves relative to market capitalization. The idea is to provide a lower-carbon exposure than that of the broad market.

WisdomTree – Stepping Up to BAT: Don’t Count It Out – … described the plan from House Speaker Paul Ryan and Rep. Kevin Brady as a comprehensive way to effectively replace the corporate income tax with a cash flow tax. This is a central feature of the border adjustment tax (BAT). The Ryan-Brady plan reduces rates, allows for immediate expensing of investments and moves to a territorial-based system.

Midweek

Best Blogs of the Week #266

Posted by Anu Heda on Apr 03, 2017, in Best Blogs of the Week , tagged with ,

Two posts covering a range of topics, including the recent US equity slumber.

BlackRock – The seesaw relationship of volatility and momentum stocks – The relationship between volatility and momentum has actually strengthened in recent years. Since the end of the financial crisis and the advent of the current period of extraordinary monetary accommodation, the relationship has become much stronger

William Blair – E and S Themes Drive ESG Growth – McKinsey estimates that 1.6 billion people out of 2 billion without bank accounts—more than half of whom are women— could be assimilated into the system via digital finance.

slumber

 

Best Blogs of the Week #265

Posted by Anu Heda on Mar 27, 2017, in Best Blogs of the Week , tagged with ,

Two excellent posts this week that utilize data to support arguments frequently discussed and investigated. Russell does an excellent job simplifying (perhaps too simple?) an advisor’s value to an investor. Personally, I enjoyed the investor behavior component greatly (chart below).

Russell – 2017 Value of a fiduciary advisor: more than 4% – Instead, the technical and emotional guidance that only a trusted, human advisor (as opposed to robo-advisors, for instance) can offer to investors who are attempting to undertake the complex job of coordinating the accumulation, distribution and transfer of their wealth, is invaluable – particularly in an environment that is likely to deliver lower returns and higher volatility than investors have grown accustomed to recently.

SSgA – Look Beyond the Label: The Importance of How a Smart Beta Index is Weighted – As these examples demonstrate, understanding underlying index construction is crucial to achieving desired investment results when choosing a smart beta ETF.

value

massive

ETF Issuers and the Missed Education Opportunity

Posted by Anu Heda on Feb 20, 2017, in Thoughts , tagged with , , ,

In January, Ignites published a piece titled “AQR Second to Vanguard in Active Flows” (subscription required). The primary points orbit active fund flows. What caught my eye was a link to 2016 passive and active fund flows from Morningstar. From their data, only 6% of passive ETF fund flows ($31.5B) went to issuers outside the top five (Vanguard, BlackRock, SSgA, Fidelity, and DFA). That means 120 ETF issuers split $31.5B (issuer list via etfdb). Seems like a massive issuer group sharing a small slice of the ETF flow pie. What types of products do these issuers provide?

To learn more, I sifted through issuer lists and AUM data. Many of the issuers offer leveraged or inverse ETFs (Direxion, ProFunds) while others have thematic ETFs (GlobalX, VelocityShares). To focus my research, I searched for ETFs with investment strategies classified as “alternatives.” Here’s a list of the top 25 alternatives ETFs (image to the right). Only one comes from BlackRock, SSgA, or Vanguard (it’s from SSgA). To support alternative products, issuers need to educate prospective buyers. That’s basic communication strategy. massiveSo, I studied the Web sites of the four firms with the 5 largest alternative ETFs: 2 from IndexIQ (now part of New York Life by way of MainStay), WisdomTree, First Trust, and Hull Capital. None of them highlight education on their homepages or product profiles. Rather, they model their sites off of traditional active managers with promotions of thought leadership (2017 Outlook, anyone?), product, and firm.

I think that’s a massive mistake. Focus on education by answering: what’s an alternative ETF? why should you care? how does it precisely fit into an asset allocation plan?