ETFs
Measuring the Inflation Risk of Three ‘Inflation-Hedges’
Nov 24th, 2020 | Filed under: Newly Added, Risk management, The Global Economy & Currencies, ETFs, Economics, Risk Management Strategies & Processes, Macroeconomics, Commodities, Allocating to Alts, Finance & Economics
By Doris Bao, FRM and Alex Botte, CFA, CAIA, Client Solutions Research team at Two Sigma In our previous post on inflation, we covered how the Local Inflation risk factor in Venn, Two Sigma’s risk analytics platform, is constructed and we reviewed its historical performance. The primary conclusion was thatRead More
OECD Works on Sorting Through the ESG Ratings Systems
Nov 8th, 2020 | Filed under: Newly Added, Risk management, Socially responsible investing, ESG, ETFs, Risk Management Strategies & Processes, SRI and Clean Energy, Other Topics in AltsA report from the Organization for Economic Cooperation and Development critiques “current market practices” in connection with Environmental, Social, and Governance investing. It says that the bewildering ratings, investment terminology, and individual metrics, “present a fragmented and inconsistent view of ESG risks and performances.” On the bright side, the OECDRead More
AI, What Have You Done for Me Lately?
Sep 10th, 2020 | Filed under: Newly Added, Fintech, Artificial Intelligence, ETFs, Machine Learning, Hedge Funds, Allocating to Alts, Other Topics in Alts
By Nicolas Rabener of FactorResearch (@FactorResearch) INVESTING IN AI VERSUS AI INVESTING “AI will probably most likely lead to the end of the world, but in the meantime, there’ll be great companies.” – Sam Altman If investors are looking for that one great AI company that will also end theRead More
ETFs, Systemic Risks, and a Real-Time Test
May 5th, 2020 | Filed under: Retail Investing, Newly Added, Liquid Alts, ETFs, The Alts Industry, Liquid Alternative InvestimentsETFs are one of the routes by which once alternative and elite-access-only strategies have become democratized or gone retail. As a result of this trend, we have synthetic ETFs, smart beta ETFs, leveraged ETFs, and inverse ETFs. A recent study study provides some reassurance about concerns that have motivated kickbackRead More
ESG ETFs: A Warning About Opacity
Mar 15th, 2020 | Filed under: Newly Added, Liquid Alts, ESG, ETFs, The Alts Industry, Liquid Alternative Investiments, Other Topics in AltsA recent paper by two legal scholars warns of the absence of transparency, of the opacity, that investors may face in ESG funds and ESG exchange-traded funds. “Buyer Beware: Variation and Opacity in ESG ad ESG Index Funds,” is the work of Dana Brackman Reiser and Anne M. Tucker, whoRead More
ESG vs Low-Carbon Investing
Mar 1st, 2020 | Filed under: Newly Added, Liquid Alts, ESG, ETFs, The Alts Industry, Liquid Alternative Investiments, Allocating to Alts, Other Topics in AltsBy Nicolas Rabener of FactorResearch @FactorResearch INTRODUCTION Investors seeking exposure to global equities with a low carbon footprint could consider the iShares MSCI ACWI Low Carbon ETF (CRBN) or SPDR MSCI ACWI Low Carbon ETF (LOWC). CRBN has $500 million of assets under management, compared with $90 million for LOWC.Read More
Pairs Trading Suggested for Energy Stocks
Dec 11th, 2019 | Filed under: CAPM / Alpha Theory, Hedge Fund Strategies, Alpha & Beta, Newly Added, Alpha Strategies, ETFs, The Alts Industry, Hedge Funds, Allocating to Alts, Finance & EconomicsCarlos Salas Najera, of the New York City Data Science Academy, has tested an old idea (pairs trading) for a strategy that could be tailored to energy stocks and related ETFs. The resulting paper is “Pairs Trading and VAR Analysis Applied to Energy Stocks.” His latest paper, though, has aRead More
How to Evaluate Smart Beta ETFs
Dec 8th, 2019 | Filed under: Newly Added, ETFs, Smart Beta, The Alts Industry, Liquid Alternative Investiments, Allocating to Alts, Other Topics in AltsBy Nicolas Rabener of FactorResearch (@FactorResearch) Beta is like ice cream and comes in many flavors. Broadly we can categorize it into the following four types: Plain beta: Market capitalization-weighted benchmark indices like the S&P 500 or FTSE 100. Smart beta: Indices with tilts to factors backed by academic andRead More
PORTFOLIO PROTECTION VIA MANAGED FUTURES LIQUID ALTS?
Sep 8th, 2019 | Filed under: Commodities, Hedge Fund Strategies, CTA, Investing in Commodities, Newly Added, Alternative Mutual Funds, Liquid Alts, ETFs, The Alts Industry, Macro and Managed Futures Funds, Hedge Funds, Liquid Alternative Investiments, Commodities, Allocating to Alts, Other Topics in AltsBy Nicolas Rabener of FactorResearch (@FactorResearch) INTRODUCTION The mafia and the hedge fund industry share some characteristics. Both are powerful, non-transparent, and create little value for society. Naturally the mafia is a criminal organization while the only “criminal” element of hedge funds are the high fees they are charging forRead More
Is it Time for the Gold Bug to Bite?
Aug 27th, 2019 | Filed under: Commodities, Hard metals, Investing in Commodities, Newly Added, Commodities: Examples, ETFs, The Alts Industry, Gold, CommoditiesDiane Merritt, of the Closed-End Fund Association (CEF) spoke recently with Axel Merk, of Merk Investments, about precious metals as part of a portfolio, and specifically the role these metals can play late in the business cycle: which, according to a rather broad consensus, is where we now are. TheRead More
Mind the Gap: The Unforeseen Consequences of Smart Beta
Jun 27th, 2019 | Filed under: Retail Investing, Alpha & Beta, Newly Added, Liquid Alts, ETFs, Smart Beta, The Alts Industry, Hedge Funds, Liquid Alternative Investiments, Other Topics in AltsA new paper by Sean Markowicz, a strategist at Schroders, looks into the possibility that fund flows into the assets generically called smart beta are having detrimental consequences for the financial system. It also sheds some light on investors’ bad timing regarding ETFs. The assets at issue are, according toRead More
A HORSE RACE OF LIQUID ALTERNATIVES
Jun 13th, 2019 | Filed under: Hedge Fund Strategies, CTA, Investing in Commodities, Equity Hedge Funds, Newly Added, Liquid Alts, ETFs, The Alts Industry, Macro and Managed Futures Funds, Hedge Funds, Liquid Alternative Investiments, Commodities, Other Topics in AltsBy Nicolas Rabener of FactorResearch (@FactorResearch) INTRODUCTION Investing is challenging as it is complex and complicated, which requires continuous learning and updating of mental frameworks. Conflicts and contradictions are found everywhere. For example, data from the mutual fund industry shows that most funds fail to outperform their benchmarks, but investors inRead More
HEDGE FUND ETFS: BETTER THAN THE ORIGINALS
May 12th, 2019 | Filed under: Hedge Fund Industry Trends, Retail Investing, Hedge Fund Strategies, Equity Hedge Funds, Newly Added, Event-Driven Hedge Funds, Alternative Investments in Context, ETFs, The Alts Industry, Macro and Managed Futures Funds, Hedge Funds, Relative Value Hedge Funds, Allocating to AltsBy Nicolas Rabener of FactorResearch (@FactorResearch) INTRODUCTION As Amazon has been decimating large parts of the retail industry over the last two decades, ETFs have done the equivalent to the mutual fund industry in the financial world. Today ETFs are covering nearly all areas of the markets, no matter howRead More
Risks & Rewards: The Future of Finance in Blockchain
Jan 6th, 2019 | Filed under: Newly Added, Risk management, Technology, Operations, Digital currencies, ETFs, Smart Beta, The Alts Industry, Risk Management Strategies & Processes, Emerging Alternative Investments, Risk Management & Operations, Other Topics in AltsA new article by Dave Dowsett and Heather Wied, both of Invesco, looks at blockchains and the way this new technology, precisely as it divorces itself from its original significance as a feature of the cryptocurrencies, is ready to transform finance. Dowsett and Wied contend that blockchain “offers the possibilityRead More
ETF Arbitrage and Its Consequences
Jan 1st, 2019 | Filed under: Retail Investing, Newly Added, Alternative Investments in Context, ETFs, The Alts Industry, Emerging Alternative Investments, Other Topics in AltsA new paper by Ilias Filippou and two other scholars looks at ETF arbitrage. This is a trading strategy that plays off of discrepancies between the value of the exchange-traded funds on the one hand and the value of their underlying stocks on the other. ETF arb is not new,Read More
Robeco Researcher on Factor Premiums and ETFs
Mar 6th, 2018 | Filed under: Newly Added, ETFs, Smart Beta, Liquid Alternative Investiments, Allocating to Alts, Other Topics in AltsDavid Blitz has recently discussed the concern in some quarters that factor premiums may disappear as they are arbitraged away by exchange-traded funds. Blitz, the head of quantitative equity research at Robeco Asset Management, says that such a concern is not justified, because “the exposures of ETFs that may beRead More
Growth and Challenges for Asset Management in Italy
Jun 15th, 2017 | Filed under: Newly Added, Alternative Investments in Context, ETFs, The Alts Industry, Allocating to AltsA recent (May 2017) Deloitte white paper discussed asset management in Italy. The paper begins with the observation that key institutions in Italian finance have a relatively short history: going no further back than the mists of the 1990s. The Società di Intermediazione Mobiliare (SIM) – literally, the phrase meansRead More
Broad Commodities: Value, Inflation, Implementation
May 29th, 2017 | Filed under: Investing in Commodities, Newly Added, ETFs, CommoditiesETF Securities (US) LLC, a New York-based asset manager and manufacturer of ETP’s (Exchange Traded Products),” has issued a white paper written by its Director, Investment Strategy, (Maxwell Gold), on “broad commodities,” that is, on the use of a broad basket of commodities, as a way of allowing an investor’sRead More
Factor Investing And The Importance Of Market Cycles
Mar 15th, 2017 | Filed under: Newly Added, ETFs, Smart Beta, Allocating to Alts, Other Topics in AltsBy Scott Opsal, CFA Director of Equities, The Leuthold Group The widespread popularity of smart beta ETFs demonstrates that factor-based investing has advanced from the province of academia to rank among the most popular investment strategies for institutional and retail investors. Originally of interest to researchers looking to test, andRead More
BlackRock: Smart Beta Strategies Have Room for Growth
Mar 5th, 2017 | Filed under: Alpha & Beta, Newly Added, Liquid Alts, ETFs, Smart Beta, Liquid Alternative Investiments, Allocating to Alts, Other Topics in AltsA recent Columbia Business School research paper looks into the transaction costs associated with smart beta strategies in order to estimate the capacity of each strategy. The three authors of the report are all affiliated with asset manager BlackRock Inc. They are: Ronald Ratcliffe, Paolo Miranda, and Andrew Ang. RatcliffeRead More
Investors ‘Misoverestimate’ ETFs and a Push Towards ESG
May 26th, 2016 | Filed under: Industry Size & Managers, Newly Added, Socially responsible investing, ETFs, The Alts Industry, SRI and Clean Energy, Allocating to Alts, Other Topics in AltsIn a newly released report, Natixis Global Asset Management speaks to the quite positive views of passive investment vehicles and exchange traded funds that it finds in today’s marketplace. Their report inspires the neologism “misoverestimate,” as a logical analog of a former U.S. president’s term, “misunder ….” A Natixis surveyRead More
Delivering Alpha Highlights: Part One
Jul 19th, 2015 | Filed under: Currencies, Media Coverage of Hedge Funds, Alpha Hunters, Alpha Strategies, Alpha Seekers, ETFsLarry Fink is "deeply worried" that the combination of share repo with high-yield debt is "one of the reasons why we have a below trend-line economy. We're not investing in the future as much as we should." Carl Icahn, predictably, has a very different view of what ails us. Read More
European Investor Satisfaction with Smart Beta ETFs
Jun 28th, 2015 | Filed under: CAPM / Alpha Theory, Alpha Strategies, Risk management, Liquid Alts, ETFs, Smart BetaTwo authors at EDHEC remind us that 15% of the assets in any ETF or ETF-like products for European investors were in smart-beta indexed products as of August 2014, and that this amount is growing. They discuss the extent to which investors are pleased with their results. Read More
They Do It Right Down Under: Australian Institutional Funds
Apr 14th, 2015 | Filed under: CAPM / Alpha Theory, Institutional Investing, Alpha Hunters, Alpha Strategies, Indexes, Alpha Seekers, ETFsThe hapless U.S. mutual funds Chen and Gallagher sample have a nominally positive pre fee alpha only when measured against CAPM. That disappears into the negatives when the baseline used is the Fama-French model, and deeper into the negatives when the momentum factor is added. Read More
EDHEC: Smart Beta Indexes May Be On a Launch Pad
Apr 6th, 2015 | Filed under: CAPM / Alpha Theory, Risk management, ETFsThere have been "a considerable number of product launches in the area of smart beta ETFs," but investors are eager for more, perhaps in the hope the developers will get beyond the "few popular strategies" in that area on which they have so far focused. With more variety may come a real take-off. Read More
Intraday Momentum Confirmed: Day Traders Credited
Mar 24th, 2015 | Filed under: CAPM / Alpha Theory, Derivatives, Behavioral finance, ETFsThe first half-hour return of the S&P 500 ETF predicts the last half-hour return of the same trading day rather well. Why isn't this effect arbitraged away and a random walk restored? Read More
Traders Sometimes Want Macro-News to Be Free
Jul 9th, 2014 | Filed under: Indexes, ETFsThere exists “robust evidence of informed trading during lockup periods ahead of the Federal Open Market Committee … monetary policy announcements” say three authors. Some agencies can embargo news effectively. The FOMC doesn't seem to be among them. Read More
What Will Drive ETF Growth? Not Active Management
Feb 3rd, 2014 | Filed under: Alpha Strategies, ETFsPimco is expanding its active ETF offerings significantly. By serendipity, The Cerulli Edge contains some fascinating data on the growth of the ETF industry. both active and passive. Read More
Indexical Question: How Much Transparency is Enough?
Jul 10th, 2013 | Filed under: Regulatory, ETFsIn an initial consultation report in January of this year, the IOSCO Board took an aggressive position on transparency, saying that transparency of indexes used for ETFs should be such that market participants have "the ability to replicate a published Benchmark level...." The new final statement, EDHEC complains, has lost that language.Read More
The Present and Future of Actively Managed ETFs
Apr 28th, 2013 | Filed under: ETFsA recent paper by the SEI in collaboration with ETF Trends explains that the share creation/redemption process sets up a feature of ETFs, and in particular of active ETFs, that constitutes a potential competitive disadvantage vis-à-vis mutual funds. The former, not the latter, are susceptible to front running. Read More
EDHEC, EMA in Broad Concord on ETFs
Apr 23rd, 2012 | Filed under: ETFsIn January, the European Securities and Markets Authority set out in a consultation paper its guidelines on exchange traded funds and other issues relating to the Undertaking for Collective Investment in Transferable Securities, and it asked for comments by March 30. Much of the ESMA paper involves issues of tracking and disclosure. Read More
Alpha Hunters: Bringing Long-Short Equity to the Masses
Feb 2nd, 2012 | Filed under: Hedge Fund Industry Trends, Retail Investing, Hedge Fund Strategies, Alpha Hunters, Alpha Strategies, ETFsAAA sat down with Alex Gurvich and Jim Mitchell, both of The Rockledge Group, an investment advisory firm headquartered in Brooklyn, New York. We began by discussing the mid-January launch of a new product that gives the long-short equity strategy an ETF format, and ended up talking about a good deal else, such as the inherent superiority of ETFs over mutual funds, and Pimco's recent recognition of that fact. Read More
ESMA and EDHEC on Indexes and Tracking Errors
Feb 1st, 2012 | Filed under: Alpha Strategies, Indexes, ETFsSince transaction costs and the illiquidity of certain portions of an index make ideal tracking impossible, there will be a difference between the return of a tracking ETF, such as those tracking ETFs that are structured as UCITS in Europe, and the return of the underlying index or benchmark. The European Securities and Markets Authority maintains that investors should be informed of the factors that are likely to affect the size and the volatility of this difference. Read More