Pages Menu
TwitterRssFacebook

Posted by on Mar 12, 2015 in CEO Corner, ETF Education

Why Transparency Matters and the Merits of Exchange-Traded Funds

Why Transparency Matters and the Merits of Exchange-Traded Funds

By Noah Hamman I will start by offering that much in the ETF industry can be improved overall including people, process and product. I think we can all agree with that assessment but what is more concerning is when a representative of the $18 trillion dollar mutual fund industry offers a perplexing critique of the exchange-traded fund (ETF) space and its full transparency. After reading Mr. Faust’s Sunday commentary on InvestmentNews.com, it was rather ironic the piece would begin with a quote from former Supreme Court associate justice Louis Brandeis. While we hold differing viewpoints, I will attempt to address the concerns about ETF transparency that were outlined. First, the key benefit of ETFs is not their transparency, but rather the operational cost and tax efficiency of the ETF structure. While those key benefits may not be itemized on an expense table, they provide real returns to investors and allow a manager to perform better in an ETF structure than in a mutual fund structure. In fact, a white...

Read More

Posted by on Nov 13, 2014 in CEO Corner, ETF Education

New Innovation, Just Not in the ETF Space

New Innovation, Just Not in the ETF Space

By Noah Hamman   First, congratulations to Eaton Vance on the SEC approval of their exemptive relief on the exchange-traded managed fund (ETMF). Interestingly, that distinction is very important as Eaton Vance has not created a new ETF. Instead, they have created an entirely new product category call the ETMF. The SEC makes this categorization clear by listing the Eaton Vance exemptive relief under “other,” and not under ETF. This truly marks the start of a new product type. I know Eaton Vance and other firms have spent a significant amount of time and resources to reach this point, and they should be congratulated on their persistence and success. After reading through the regulatory filings, here is what I understand to be key functionalities of the new structure and how it compares to both mutual funds and ETFs. Difference Between Mutual Funds First, let us look at the comparison against a traditional mutual fund. On the positive side, ETMFs should be both more cost-efficient and tax-efficient, due to the...

Read More

Posted by on Oct 1, 2014 in CEO Corner

My response to Dave Nadig on his article regarding our recent 5 star announcement

My response to Dave Nadig on his article regarding our recent 5 star announcement

It seems like some in the media think of active managers who outperform their passive benchmarks as the golden unicorns of investing.  The reason why is that we all know how difficult it is to outperform a passive benchmark, especially in a category such as domestic equities.  Looking at the latest update that monitors active manager’s performance to their underlying benchmark, we know that in the domestic large cap space (S&P 500 benchmark) 84.94% of active managers in the last three years have underperformed the S&P 500.  It is, the indexers will tell you, basically impossible to beat the index, and not worth paying a manager a higher fee to do it. At AdvisorShares, we like to turn the stat around. We always say “alpha is hard to deliver, but not hard to find.”  For example, if there are 100 funds (there are more of course) that try to outperform the S&P 500, then 15 of them, according to the high level statistics, will do it.  With the help...

Read More

Posted by on May 30, 2014 in CEO Corner

Gillooly Would Be Proud

Gillooly Would Be Proud

By Noah Hamman   So having just commented on BlackRock’s perspective on the potential blow up of inverse and leveraged ETFs, I now see headlines that BlackRock views active ETFs as an “out of money option.” I am thinking to myself, they just finished hitting the extendable baton on the shins of the inverse and leverage guys, and now active – why, why, why? For a firm that manages close to $1 trillion in ETF assets, in addition to somewhere over $4 trillion globally, and through services that otherwise likely touch close to $20 trillion in assets (give or take a trillion), shouldn’t they be more concerned with dealing with the politicians and regulators who view them as a systemic risk to the financial system – for which I don’t agree. Maybe highlight giving back to local communities, or just pat themselves on the back for all their achieved success – anything besides going after two industries that combine to represent a rounding error for a company the size...

Read More

Posted by on May 29, 2014 in CEO Corner

Leveraged ETFs Won’t Blow-Up the Entire Industry

Leveraged ETFs Won’t Blow-Up the Entire Industry

By Noah Hamman   I don’t think Larry Fink is right about leveraged and inverse ETFs with his remarks yesterday.  And for the record, AdvisorShares was recently described as a firm proposing to offer an ETF “to double down on junk rated loans” which is absolutely inaccurate. Here are some thoughts to give a proper framework to understand leveraged and inverse ETFs. First, I should start off by saying registered investment company funds are one of the most heavily regulated, shareholder friendly fund structures, and which 99% of assets in ETFs are offered in that structure type.  Also, investors have benefited from the daily transparency of ETFs by being able to quickly and easily know exactly what their funds are holding—bonds, domestic equities, international equities, international bonds, futures, options, swaps—no matter what it is, there is no reason for investors to be surprised about what is being held in their ETFs. If I were to suggest a particular ETF would have a higher risk, it might be a country...

Read More