Reviewing 'Inside ETFs' 2010: A Coming of Age Story

by: Street One Financial

By Paul Weisbruch

When the Street One Financial ETF trade execution/liquidity team arrived in Boca Raton on January 10th for the Inside ETFs Conference, none of us realistically expected local temperatures to be "Inside" 35 degrees Fahrenheit. Admittedly, we were unprepared for the cool weather, with not a sweater nor a jacket nor hat packed amongst our travel items, but the inviting, and symbiotic ETF atmosphere provided by the conference hosts, sponsors, attendees, and speakers quickly warmed us up from the unusually chilly air.

Jim Wiandt, Matt Hougan and the Index Universe/ETFR team continue to outdo themselves each year with the Inside ETFs Conference. It has become close to a perfect melting pot of ETF product/services sponsors, ETF end users such as RIAs, financial advisors, and institutional portfolio managers, with one common goal: to understand and be able to utilize the growing and quickly evolving ETF/ETP product spectrum within portfolios, setting misconceptions and barriers of misinformation aside.

Our team's attendees "split" the kickoff introductory sessions, "ETFs 101" and "Advanced ETFs" and after comparing notes upon the conclusion, we were elated to see that trading and the effective execution of ETFs was highlighted during both sessions. Having served as the Director of RIA/Institutional ETF Sales at a product sponsor (RevenueShares) for 2 years prior to joining Street One, I realize firsthand how important it is for investors to have all of the facts on the table regarding how to trade ETFs in their portfolios (understanding liquidity of the underlying, bid/ask spreads, shown versus actual liquidity on the electronic screens, limit and stop orders, etc.), lest they may inadvertently "screen out" ETFs that do not have a certain amount of average daily trading volume (ADV).

Tom Lydon of also served on the "ETFs 101" panel, and what is interesting is that everyone who attended the "101" walked out knowing much more than the basics of ETFs. RIAs and financial advisors were truly prepared for battle, and this was only the first session during Day 1 of the conference. I ran into Michael Johnston of ETF Database as well at the conference, and after speaking to him I realized that because the industry is evolving so rapidly, that the learning curve for ETFs has increased from a slow crawl to a near sprint, enriching even some of the savvy-est attendees.

If you have attended ETF conferences before, you have probably grown accustomed to the general "canned topics" for panel discussions. This was not the case at Inside ETFs. We learned about the rapid advance in Fixed Income ETFs, specifically relatively new enhanced strategies from Don Suskind of PIMCO and Ken Volpert of Vanguard, that will surely challenge industry mainstays SSGA and Blackrock iShares. Additionally, the topic of "ETF Model Portfolios" was discussed by John Lunt of Lunt Capital Management, Tim Collins of Tangle Trade Management, and Rick Ferri of Portfolio Solutions LLC., which was especially timely as RIAs and financial advisors are increasingly hiring "managers of ETF portfolios" in the form of SMAs of ETFs as well as Collective Investment Trusts (CITs) for 401k plans. Gary Gastineau of ETF Consultants LLC, Joseph Witthohn of Janney Montgomery Scott, Robert Brooks of Invesco PowerShares, and Ryan Isskainen of First Trust Advisors enlightened us on the growing stream of actively managed ETFs, which are surely designed to challenge conventional active mutual funds and ideally be less expensive, more tax efficient, and transparent. On that note, firms such as AdvisorShares and Grail Advisors were also among ETF product sponsors in the active ETF realm at the conference, and their stories are worth hearing if you are an ETF investor.

During the final day of the conference (Tuesday), perhaps my favorite ETF topic, "How To Trade ETFs: Getting the Best Execution for Your ETF Trades" was discussed to a full house of hundreds of listeners. At Street One, we have similar conversations with RIAs, institutions, and ETF product issuers on a daily basis in order to reinforce that the quality and viability of an ETF should never be judged by an analysis of ADV (average daily trading volume), Assets Under Management, or other mainstream "screens." This panel in particular reinforced my daily message to those that I interact with in the ETF realm that it is feasible to utilize nearly all, if not all of the ETF products out there if you follow a basic set of rules and maintain a dialogue with an ETF-centric liquidity provider such as Street One Financial.

Other areas of interest that were visited that truly illustrate how much the ETF landscape has evolved in a short timeframe were Emerging Market ETFs, particularly a discussion featuring Richard Kang of Emerging Global Shares and Adam Phillips of Van Eck which was moderated by Tom Lydon, as well as panels on Commodity ETPs and Alternatives ETPs such as private equity and hedge fund replication strategies. It seems like just yesterday that our industry spoke solely of plain vanilla equity index ETFs from a handful of household name providers. The Inside ETFs Conference reinforced that the industry can support a breadth of different products from a wide array of diverse fund sponsors.

As for Inside ETFs 2011? A year seems too long to wait, especially since there will no doubt be major progressions in the ETF industry in the coming months (i.e. new entrants such as management giants Russell, T Rowe Price, John Hancock, and others), so perhaps Jim Wiandt, Matt Hougan and the team will consider a "Mid Year Inside ETFs", and we can even hold it up north here in Philadelphia, say around June or July. Surely, we at Street One will be better prepared as far as seasonal wardrobe is concerned the next time around.