Comments on: ETFs are not created equal http://blogs.reuters.com/felix-salmon/2010/08/26/etfs-are-not-created-equal/ A slice of lime in the soda Sat, 25 May 2013 16:48:33 +0000 hourly 1 http://wordpress.org/?v=3.4.2 By: MilesDavis http://blogs.reuters.com/felix-salmon/2010/08/26/etfs-are-not-created-equal/comment-page-1/#comment-17723 MilesDavis Fri, 27 Aug 2010 12:52:06 +0000 http://blogs.reuters.com/felix-salmon/?p=5108#comment-17723 Good takeaway Paul - index fund management is not passive. There are horses for courses, and each manager has their pros and cons. [disclaimer - i am a former industry veteran who has no axe to grind here - just alot of experience with ETFs] Good takeaway Paul – index fund management is not passive. There are horses for courses, and each manager has their pros and cons.
[disclaimer - i am a former industry veteran who has no axe to grind here - just alot of experience with ETFs]

]]> By: Pamery http://blogs.reuters.com/felix-salmon/2010/08/26/etfs-are-not-created-equal/comment-page-1/#comment-17717 Pamery Fri, 27 Aug 2010 07:07:38 +0000 http://blogs.reuters.com/felix-salmon/?p=5108#comment-17717 Thanks Felix for the link and your comments. Miles, in my article (linked in Felix's first line) I do comment on the timing of the ETF outperformance vs. the index - which corresponds for some (but not all) of the funds to the April/May European dividend season, as you point out. Your comments about how revenue enhancement may be at a higher rate when a fund is small (to get it going and entice investors) and on the impact of size in the securities lending market are interesting,thanks. This surely reinforces how much discretion ETF and index fund managers have and how this industry is a lot less "passive" than it seems at first glance. Paul Amery, editor, www.indexuniverse.eu Thanks Felix for the link and your comments.

Miles, in my article (linked in Felix’s first line) I do comment on the timing of the ETF outperformance vs. the index – which corresponds for some (but not all) of the funds to the April/May European dividend season, as you point out. Your comments about how revenue enhancement may be at a higher rate when a fund is small (to get it going and entice investors) and on the impact of size in the securities lending market are interesting,thanks. This surely reinforces how much discretion ETF and index fund managers have and how this industry is a lot less “passive” than it seems at first glance.

Paul Amery, editor, http://www.indexuniverse.eu

]]> By: FifthDecade http://blogs.reuters.com/felix-salmon/2010/08/26/etfs-are-not-created-equal/comment-page-1/#comment-17712 FifthDecade Fri, 27 Aug 2010 01:52:40 +0000 http://blogs.reuters.com/felix-salmon/?p=5108#comment-17712 The only excuse I can come up with for the UBS poor performance (apart from a history of poor performance across their fund range generally and various scandals involving CHF 60 billion losses from sub-prime, CHF 900 million a few years back from options trading, and various other incidents) is that the UBS ETFs are index trackers... that would explain why they sat on the index pretty closely. If they aren't trackers, what on earth are they doing? The only excuse I can come up with for the UBS poor performance (apart from a history of poor performance across their fund range generally and various scandals involving CHF 60 billion losses from sub-prime, CHF 900 million a few years back from options trading, and various other incidents) is that the UBS ETFs are index trackers… that would explain why they sat on the index pretty closely. If they aren’t trackers, what on earth are they doing?

]]> By: MilesDavis http://blogs.reuters.com/felix-salmon/2010/08/26/etfs-are-not-created-equal/comment-page-1/#comment-17700 MilesDavis Thu, 26 Aug 2010 18:11:34 +0000 http://blogs.reuters.com/felix-salmon/?p=5108#comment-17700 Domicile (ongoing withholding rates) and size of securities lending revenue (dividend arbitrage) are key. You need to examine either: a) the swap contract with the fund if swap based - the proportion of "revenue enhancement" that will be shared with the fund - which may be a higher rate when the AUM is small (to juice performance) and lower when the AUM is large (to keep more revenues for the i-bank) b) how large the physical ETF asset manager is in the lending markets - BGI is huge, everyone else is small (relatively) For the Euro STOXX 50 index you may notice a bulk of the outperformance occurring in Q2 when dividend season occurs in the Continent and the effect of withholding rate mitigation is highest. Domicile (ongoing withholding rates) and size of securities lending revenue (dividend arbitrage) are key. You need to examine either:
a) the swap contract with the fund if swap based – the proportion of “revenue enhancement” that will be shared with the fund – which may be a higher rate when the AUM is small (to juice performance) and lower when the AUM is large (to keep more revenues for the i-bank)
b) how large the physical ETF asset manager is in the lending markets – BGI is huge, everyone else is small (relatively)
For the Euro STOXX 50 index you may notice a bulk of the outperformance occurring in Q2 when dividend season occurs in the Continent and the effect of withholding rate mitigation is highest.

]]> By: ErnieD http://blogs.reuters.com/felix-salmon/2010/08/26/etfs-are-not-created-equal/comment-page-1/#comment-17698 ErnieD Thu, 26 Aug 2010 18:03:38 +0000 http://blogs.reuters.com/felix-salmon/?p=5108#comment-17698 Historically, Gus Sauter was able to do the same at Vanguard. Their low expenses helped but good execution and use of options was the key. Historically, Gus Sauter was able to do the same at Vanguard. Their low expenses helped but good execution and use of options was the key.

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