Muni Bond Market Collapsing: How Have Active ETFs Stacked Up vs. Their Passive Peers? [View article]
You have a point, but I'd beg to differ. The difference in duration is a function of the active security selection decisions that the portfolio manager behind MUNI is making. MUNI's mandate allows it to vary duration between 3-8 years, based on the manager's view on the market and the shorter duration relative to MUB is likely the way in which the manager is expressing his/her negative view on the muni market.
To your point, it would be unfair if I had made the comparison between MUB and PIMCO's SMMU - the short maturity muni fund, because those are clearly two completely different segments of the market. But MUB and MUNI are in the same maturity bucket and duration differences there are a result of the manager's active decisions.
It's almost like if you compared an active manager running a financial sector equity portfolio to the XLF, the passive financial sector ETF. If the market is falling, the portfolio manager could make a decision to overweight low-beta stocks to reduce his downside, relative to XLF. But just because the active manager's overall portfolio beta is lower than the XLF's beta doesn't mean it's an unfair comparison. The beta difference is a result of the manager's active decisions.
Rolling Mutual Funds Into Active ETFs [View article]
According to the President of Huntington, “We think the ETF market offers some advantages over mutual funds, and we want to participate in it,”. So from what I can infer, without talking to him, they believe they'll be able to attract a wider spectrum of investors to an ETF structure as opposed to a mutual fund.
And to your point about fees, from what I'm aware, most investment managers receive less than 1/4 of the total headline MER after unbundling all the costs that are built into the MER such as the advisor trailers, mutual fund operating costs etc. Looking at the case of HRIAX specifically, I dug into its expense structure and the total annual fund operating expense ranges between 2.06% - 2.81% depending on which class of shares you purchase. Of that total, the management fee portion across all 3 share classes is a flat 0.50%, coincidentally, exactly the number you pinpointed for an ETF. Though they haven't announced how much they'll be charging on their active ETF, my guess is that the choice of delivery vehicle is a revenue-neutral decision for Huntington because the management fee they receive is likely the same in either situation.
Spotlight on PIMCO Enhanced Short Maturity ETF [View article]
Dan, contango and backwardization issues are only relevant for ETFs that trade in futures markets. ie. Those ETFs trying to provide the spot return on a commodity by purchasing future contracts on that asset. As such those issues usually only apply to commodity ETFs.
Active ETFs at this moment do not have any commodity related strategies - their investment universe so far has been restricted to stocks and fixed income. But if down the road, an actively-managed commodity ETF comes along, then those issues will surface again if the manager invests in the commodities using futures.
Low Volume Active ETFs Are Not 'Illiquid' [View article]
Agree with you Thomas. Over the long-run, if very low volumes in an ETF persist, they would definitely be indicative of poor interest in the ETF and the long-term sustainability of the fund would come into question. However, low volumes over the short-term (as might be the case for new ETFs before they gather steam), don't mean much and don't imply illiquidity because as the market makers can "create" liquidity as and when necessary.
But as you said, if over a long period, there's very little volume, then the issuer of the ETF is quite likely not getting enough interest in their product to justify its existence.
RIM's Future Hangs in the Balance of Two Big Issues [View article]
PAULCNX,
Agreed, I think RIM's R&D prowess is under-estimated at times. Just in this latest quarter alone, they increased their R&D expenditure by 46% year-over-year. That is bound to count for something down the road.
With regards to the browser, RIM had acquired Torch Mobile in 2009, which brought mobile browsing expertise to the company. We'll have to wait and see whether that move paid off..
RIM's Future Hangs in the Balance of Two Big Issues [View article]
I tend to agree, I think investors/analysts/media tend to over-exaggerate the damage that will be done to the "incumbent", "slower-moving" player in any market. I liken RIMM's position in the smartphone market versus Apple's iPhone to Microsoft's position in the computers space versus Apple's Macs. People have been predicting the demise of Microsoft for a while now....but they didn't become the market leaders in the first place w/o having the ability to compete effectively. Just because they are slower-moving, more traditional player doesn't mean they don't have a few tricks up their own sleeves. The same applies to RIMM I feel.
In general, the staying power of incumbents is often underestimated.
RIM's Future Hangs in the Balance of Two Big Issues [View article]
Thanks for your comment jopocop,
Outside North America, the smartphone market is definitely in its infancy (other than Japan/South Korea maybe) and the market is open for the first entrant to conquer. That is what RIMM is trying to do by getting into Indonesia and China.
On your second point though - while I agree that just sheer growth of the smartphone segment itself will keep RIMM's sales growing in terms of absolute numbers, the key discussion when it comes to looking at RIMM as an investment is whether they can meet expectations for their growth. So even if the growing smartphone segment provides RIMM with increasing sales, if that growth is not what the market is looking for or expecting, than the stock could tank. So I'd say you have to factor in how much growth people are expecting from RIMM and then figure out if their positioning in the market can actually beat those expectations.
RIM's Future Hangs in the Balance of Two Big Issues [View article]
Thanks for your comment RK. I feel the only market where smartphone growth might be even close to leveling out is North America...where there are quite a few players as you suggest. But I believe there is still quite a lot of room for growth even in North America.
As for markets outside North America, the playing field is WIDE open..and that's where RIMM might well be able to derive a lot of its growth from - the potential of which is underestimated right now I feel.
There is definitely a specturm when you move from passive to active...it's tough to discern a distinctive line between the two when classifying strategies.
Here's how I tend to see it. Most ETFs so far are according to their mandates tracking their underlying index and that's their only responsibility - to track the index as closely as possibly. This includes those ETFs tracking enhanced indices. The portoflio manager of these ETFs only needs to track the index, but it's the index provider in this case that uses a unique selection rule to admit companies into the index - thereby making it enhanced.
In the case of Active ETFs as I see them, it is the portfolio manager that is making the active security selection decisions and their mandate is to beat their underlying benchmark and not track it. That's where I tend to draw the line to define actively-managed ETFs.
Active ETFs Stung by SEC's Derivatives Review [View article]
Hi Ron,
Thanks for your comment. I know you're referring to the 8 WisdomTree currency ETFs. I don’t count the WisdomTree Currency ETFs in my tally of actively managed funds, as most investors think of the funds as providing exposure to currency exchange rates. They are not “active funds” in the minds of investors, even if the underlying strategy is registered as actively managed. And that is most evident when you look at how these products are marketed by WisdomTree itself. The emphasis in the marketing message is not the fact that these are actively-managed, investors would have to dig to the prospectus to find out that they are.
Of these 8, the ones that hold a basket of currencies are actively-managed only to the extent that they rebalance the portfolio quarterly to maintain an equal weighting of currencies - which are selected annually. As for those devoted to individual currencies, I don't believe they are involved in any active selection at all.
Muni Bond Market Collapsing: How Have Active ETFs Stacked Up vs. Their Passive Peers? [View article]
To your point, it would be unfair if I had made the comparison between MUB and PIMCO's SMMU - the short maturity muni fund, because those are clearly two completely different segments of the market. But MUB and MUNI are in the same maturity bucket and duration differences there are a result of the manager's active decisions.
It's almost like if you compared an active manager running a financial sector equity portfolio to the XLF, the passive financial sector ETF. If the market is falling, the portfolio manager could make a decision to overweight low-beta stocks to reduce his downside, relative to XLF. But just because the active manager's overall portfolio beta is lower than the XLF's beta doesn't mean it's an unfair comparison. The beta difference is a result of the manager's active decisions.
Just One ETF: Emerging-Market Debt Yielding Over 4.7% With No Dollar Exposure [View article]
Rolling Mutual Funds Into Active ETFs [View article]
And to your point about fees, from what I'm aware, most investment managers receive less than 1/4 of the total headline MER after unbundling all the costs that are built into the MER such as the advisor trailers, mutual fund operating costs etc. Looking at the case of HRIAX specifically, I dug into its expense structure and the total annual fund operating expense ranges between 2.06% - 2.81% depending on which class of shares you purchase. Of that total, the management fee portion across all 3 share classes is a flat 0.50%, coincidentally, exactly the number you pinpointed for an ETF. Though they haven't announced how much they'll be charging on their active ETF, my guess is that the choice of delivery vehicle is a revenue-neutral decision for Huntington because the management fee they receive is likely the same in either situation.
Spotlight on PIMCO Enhanced Short Maturity ETF [View article]
Active ETFs at this moment do not have any commodity related strategies - their investment universe so far has been restricted to stocks and fixed income. But if down the road, an actively-managed commodity ETF comes along, then those issues will surface again if the manager invests in the commodities using futures.
Low Volume Active ETFs Are Not 'Illiquid' [View article]
But as you said, if over a long period, there's very little volume, then the issuer of the ETF is quite likely not getting enough interest in their product to justify its existence.
5 Essential Tips for Analyzing ETFs [View article]
ETFs, ETNs and Your Taxes: Street One's Paul Weisbruch Explains All [View article]
Apple vs. Research in Motion: Which Stock Is a Better Buy? [View article]
RIM's Future Hangs in the Balance of Two Big Issues [View article]
Agreed, I think RIM's R&D prowess is under-estimated at times. Just in this latest quarter alone, they increased their R&D expenditure by 46% year-over-year. That is bound to count for something down the road.
With regards to the browser, RIM had acquired Torch Mobile in 2009, which brought mobile browsing expertise to the company. We'll have to wait and see whether that move paid off..
RIM's Future Hangs in the Balance of Two Big Issues [View article]
In general, the staying power of incumbents is often underestimated.
RIM's Future Hangs in the Balance of Two Big Issues [View article]
Outside North America, the smartphone market is definitely in its infancy (other than Japan/South Korea maybe) and the market is open for the first entrant to conquer. That is what RIMM is trying to do by getting into Indonesia and China.
On your second point though - while I agree that just sheer growth of the smartphone segment itself will keep RIMM's sales growing in terms of absolute numbers, the key discussion when it comes to looking at RIMM as an investment is whether they can meet expectations for their growth. So even if the growing smartphone segment provides RIMM with increasing sales, if that growth is not what the market is looking for or expecting, than the stock could tank. So I'd say you have to factor in how much growth people are expecting from RIMM and then figure out if their positioning in the market can actually beat those expectations.
RIM's Future Hangs in the Balance of Two Big Issues [View article]
As for markets outside North America, the playing field is WIDE open..and that's where RIMM might well be able to derive a lot of its growth from - the potential of which is underestimated right now I feel.
Active ETFs: The Month in Focus [View article]
There is definitely a specturm when you move from passive to active...it's tough to discern a distinctive line between the two when classifying strategies.
Here's how I tend to see it. Most ETFs so far are according to their mandates tracking their underlying index and that's their only responsibility - to track the index as closely as possibly. This includes those ETFs tracking enhanced indices. The portoflio manager of these ETFs only needs to track the index, but it's the index provider in this case that uses a unique selection rule to admit companies into the index - thereby making it enhanced.
In the case of Active ETFs as I see them, it is the portfolio manager that is making the active security selection decisions and their mandate is to beat their underlying benchmark and not track it. That's where I tend to draw the line to define actively-managed ETFs.
Active ETFs Stung by SEC's Derivatives Review [View article]
Thanks for your comment. I know you're referring to the 8 WisdomTree currency ETFs. I don’t count the WisdomTree Currency ETFs in my tally of actively managed funds, as most investors think of the funds as providing exposure to currency exchange rates. They are not “active funds” in the minds of investors, even if the underlying strategy is registered as actively managed. And that is most evident when you look at how these products are marketed by WisdomTree itself. The emphasis in the marketing message is not the fact that these are actively-managed, investors would have to dig to the prospectus to find out that they are.
Of these 8, the ones that hold a basket of currencies are actively-managed only to the extent that they rebalance the portfolio quarterly to maintain an equal weighting of currencies - which are selected annually. As for those devoted to individual currencies, I don't believe they are involved in any active selection at all.
Active ETFs vs. Index ETFs: Don't Call It a Competition [View article]
You can find a full list of actively-managed ETFs currently trading on the US market here: etfshub.com/archives/a.../
Hope it helps.