Jeff Feldman's Comments RSS Syndication from SeekingAlpha.com http://seekingalpha.comuser/71095/comments http://seekingalpha.com/article/31559-interactive-q-a-jeffrey-l-feldman-creator-of-healthshares-and-founder-and-chairman-of-xshares-group-llc?source=feed#comment-84254 84254 Fri, 13 Apr 2007 20:56:40 -0400 http://seekingalpha.com/article/31559-interactive-q-a-jeffrey-l-feldman-creator-of-healthshares-and-founder-and-chairman-of-xshares-group-llc?source=feed#comment-84193 84193
WTFs, like other index funds in general, generate fewer capital gains due to low turnover of the securities in the portfolio. Generally, ETFs only sell securities to reflect changes in their benchmark index.

Investors in mutual funds may incur significant tax expense when the fund sees redemptions from shareholders. Because ETFs are exchange-traded, selling shareholders sell to other investors in the secondary market. In addition, since ETFs have a creation/redemption facility that allows actual securities, rather than cash, to be distributed to Authorized Participants, there is no realization of capital gain to be distributed to shareholders. Of course, liquidating an ETF position will generate capital gains or losses for the shareholder.]]> Fri, 13 Apr 2007 07:11:08 -0400
WTFs, like other index funds in general, generate fewer capital gains due to low turnover of the securities in the portfolio. Generally, ETFs only sell securities to reflect changes in their benchmark index.

Investors in mutual funds may incur significant tax expense when the fund sees redemptions from shareholders. Because ETFs are exchange-traded, selling shareholders sell to other investors in the secondary market. In addition, since ETFs have a creation/redemption facility that allows actual securities, rather than cash, to be distributed to Authorized Participants, there is no realization of capital gain to be distributed to shareholders. Of course, liquidating an ETF position will generate capital gains or losses for the shareholder.]]> http://seekingalpha.com/article/31559-interactive-q-a-jeffrey-l-feldman-creator-of-healthshares-and-founder-and-chairman-of-xshares-group-llc?source=feed#comment-84176 84176
As to State Shares, I believe many investors will be interested in these securities.

I have a hard time understanding why investors want to put significant assets into emerging markets. Peter Lynch has always said, "invest in what you know." Investing in emerging markets is investing in what you know....nothing about. But investors are seeking to isolate asset classes.

Personally, I'd rather isolate California and invest there as opposed to Turkey or Malaysia. Maybe that's just me.

Your conjecture about state governments is correct.]]> Thu, 12 Apr 2007 19:12:52 -0400
As to State Shares, I believe many investors will be interested in these securities.

I have a hard time understanding why investors want to put significant assets into emerging markets. Peter Lynch has always said, "invest in what you know." Investing in emerging markets is investing in what you know....nothing about. But investors are seeking to isolate asset classes.

Personally, I'd rather isolate California and invest there as opposed to Turkey or Malaysia. Maybe that's just me.

Your conjecture about state governments is correct.]]> http://seekingalpha.com/article/31559-interactive-q-a-jeffrey-l-feldman-creator-of-healthshares-and-founder-and-chairman-of-xshares-group-llc?source=feed#comment-84175 84175
To some extent, growth of ETFs will be a function of what happens in the stock market. I believe the biggest impediment to asset growth would be a roaring bull market. In such a scenario, greed routs fear and individuals are emboldened to buy the individual stocks that are rising the fastest. In a prolonged bear or sideways market, fear wins out and investors will seek to minimize costs which favors ETFs.

The ETF industry can be as profitable as the mutual fund business. Technology will continue to evolve and we will likely see costs decline faster than expense loads over the next several years. Of course, the wild card is what happens in the mutual fund industry. If mutual funds can become competitive with ETFs on fees and expenses, then the margins for ETFs will be squeezed.]]> Thu, 12 Apr 2007 19:08:13 -0400
To some extent, growth of ETFs will be a function of what happens in the stock market. I believe the biggest impediment to asset growth would be a roaring bull market. In such a scenario, greed routs fear and individuals are emboldened to buy the individual stocks that are rising the fastest. In a prolonged bear or sideways market, fear wins out and investors will seek to minimize costs which favors ETFs.

The ETF industry can be as profitable as the mutual fund business. Technology will continue to evolve and we will likely see costs decline faster than expense loads over the next several years. Of course, the wild card is what happens in the mutual fund industry. If mutual funds can become competitive with ETFs on fees and expenses, then the margins for ETFs will be squeezed.]]> http://seekingalpha.com/article/31559-interactive-q-a-jeffrey-l-feldman-creator-of-healthshares-and-founder-and-chairman-of-xshares-group-llc?source=feed#comment-84173 84173
From 2001 through 2006, based on our back-tested results, the HealthShares Indexes had correlations between 0.46 to 0.61 with the S&P 500 HealthCare Sector (not including the HealthShares Composite Index which came in at 0.7).

For a complete analysis of the correlation of the HealthShares Indexes contact us at 800.925.2870.]]> Thu, 12 Apr 2007 18:42:07 -0400
From 2001 through 2006, based on our back-tested results, the HealthShares Indexes had correlations between 0.46 to 0.61 with the S&P 500 HealthCare Sector (not including the HealthShares Composite Index which came in at 0.7).

For a complete analysis of the correlation of the HealthShares Indexes contact us at 800.925.2870.]]> http://seekingalpha.com/article/31559-interactive-q-a-jeffrey-l-feldman-creator-of-healthshares-and-founder-and-chairman-of-xshares-group-llc?source=feed#comment-84161 84161
You are correct, this is truly a gating issue that must be addressed.]]> Thu, 12 Apr 2007 14:37:38 -0400
You are correct, this is truly a gating issue that must be addressed.]]> http://seekingalpha.com/article/31559-interactive-q-a-jeffrey-l-feldman-creator-of-healthshares-and-founder-and-chairman-of-xshares-group-llc?source=feed#comment-84160 84160 Thu, 12 Apr 2007 14:34:23 -0400 http://seekingalpha.com/article/31559-interactive-q-a-jeffrey-l-feldman-creator-of-healthshares-and-founder-and-chairman-of-xshares-group-llc?source=feed#comment-84157 84157 Thu, 12 Apr 2007 14:16:24 -0400 http://seekingalpha.com/article/31559-interactive-q-a-jeffrey-l-feldman-creator-of-healthshares-and-founder-and-chairman-of-xshares-group-llc?source=feed#comment-84149 84149
We’re one of a handful of companies in the world that has exemptive relief from the 1940 SEC Act to manufacture and distribute ETFs.

The comprehensive development process includes testing the index, lining up authorized participants, index calculation agents, custodians, administrators, market makers, filing of the prospectus and finding the appropriate national exchange for listing. We take our partner’s products step by step through the compliance requirements and assist in the development of marketing materials, websites, tear sheets, brochures and other collateral material and events to support the launch of the product.

Our value proposition to our partners is simple: to provide them with the platform to get their ETFs to market as soon as possible in an effort to capture as much market share as possible in this rapidly growing space.]]> Thu, 12 Apr 2007 13:13:37 -0400
We’re one of a handful of companies in the world that has exemptive relief from the 1940 SEC Act to manufacture and distribute ETFs.

The comprehensive development process includes testing the index, lining up authorized participants, index calculation agents, custodians, administrators, market makers, filing of the prospectus and finding the appropriate national exchange for listing. We take our partner’s products step by step through the compliance requirements and assist in the development of marketing materials, websites, tear sheets, brochures and other collateral material and events to support the launch of the product.

Our value proposition to our partners is simple: to provide them with the platform to get their ETFs to market as soon as possible in an effort to capture as much market share as possible in this rapidly growing space.]]> http://seekingalpha.com/article/31559-interactive-q-a-jeffrey-l-feldman-creator-of-healthshares-and-founder-and-chairman-of-xshares-group-llc?source=feed#comment-84136 84136
In addition, someone who has a chronic illness might use these ETFs as a hedging strategy. A 30 year old diabetic, who expects to be treated for the next 50 years, may want to own a basket of companies working on metabolic disease (HHM), the very companies that a patient is likely to be paying for treatment. We have already seen purchasers of Long Term Care Insurance buy our Patient Care Services ETF (HHB) which owns companies that own and operate assisted living, nursing home and hospice facilities.]]> Thu, 12 Apr 2007 11:38:53 -0400
In addition, someone who has a chronic illness might use these ETFs as a hedging strategy. A 30 year old diabetic, who expects to be treated for the next 50 years, may want to own a basket of companies working on metabolic disease (HHM), the very companies that a patient is likely to be paying for treatment. We have already seen purchasers of Long Term Care Insurance buy our Patient Care Services ETF (HHB) which owns companies that own and operate assisted living, nursing home and hospice facilities.]]> http://seekingalpha.com/article/31559-interactive-q-a-jeffrey-l-feldman-creator-of-healthshares-and-founder-and-chairman-of-xshares-group-llc?source=feed#comment-84132 84132
Consider Dendreon, which got an FDA advisory panel last week for Provenge, a vaccine for prostate cancer. This drug (which costs $42,000 for an entire regimen) will benefit only 50,000 of the 3 million patients with prostate cancer. Yet this is potentially a $2 billion drug and with the aging baby boomers, there will be, unfortunately, many more patients in years to come. Other treatments will benefit other segments of the market. We believe there will be dozens of examples of these targeted customized medicines and there are many companies in our portfolios that are developing just such products.

So, there will be many new products which will improve therapy for all diseases in the coming years (there better be because we cannot afford to treat all patients with current products) and unless you are a brilliant investor/biologist/phy... the best way to access these opportunities in my opinion is to divide the industry into vertical segments. Now, one may develop knowledge that allows one to favor one sector over another. There may be setbacks in the development of cancer drugs at the same time there are breakthroughs in cardiology. One can then trade these portfolios against each other.

You must remember that the entire GDP of the U.S. was $2 trillion in 1977 when mutual funds first became popular. And healthcare is growing at more than 8% per year, a rate the economy has not come close to in the past 30 years. We know, looking back, that the correct way to invest in the economy over the past 30 years was using an asset allocation model to be able to rotate between sectors. The same theory applies to healthcare today.]]> Thu, 12 Apr 2007 11:37:23 -0400
Consider Dendreon, which got an FDA advisory panel last week for Provenge, a vaccine for prostate cancer. This drug (which costs $42,000 for an entire regimen) will benefit only 50,000 of the 3 million patients with prostate cancer. Yet this is potentially a $2 billion drug and with the aging baby boomers, there will be, unfortunately, many more patients in years to come. Other treatments will benefit other segments of the market. We believe there will be dozens of examples of these targeted customized medicines and there are many companies in our portfolios that are developing just such products.

So, there will be many new products which will improve therapy for all diseases in the coming years (there better be because we cannot afford to treat all patients with current products) and unless you are a brilliant investor/biologist/phy... the best way to access these opportunities in my opinion is to divide the industry into vertical segments. Now, one may develop knowledge that allows one to favor one sector over another. There may be setbacks in the development of cancer drugs at the same time there are breakthroughs in cardiology. One can then trade these portfolios against each other.

You must remember that the entire GDP of the U.S. was $2 trillion in 1977 when mutual funds first became popular. And healthcare is growing at more than 8% per year, a rate the economy has not come close to in the past 30 years. We know, looking back, that the correct way to invest in the economy over the past 30 years was using an asset allocation model to be able to rotate between sectors. The same theory applies to healthcare today.]]> http://seekingalpha.com/article/31559-interactive-q-a-jeffrey-l-feldman-creator-of-healthshares-and-founder-and-chairman-of-xshares-group-llc?source=feed#comment-84125 84125
We took this concept into consideration when we developed HealthShares and based upon our analysis we do not perceive liquidity issues in these funds and the underlying stocks unless and until there is well in excess of $1 billion in assets in each fund.

The creation and redemption process takes place generally by aggregating the constituent stocks, with an appropriate program trading desk or through their internal securities lending process, and assembling the baskets that can be deposited with the ETF custodian in order to create new ETF shares. The institutional investor can obtain the position it desires and the fund can accumulate significant assets even with low ADTV of the ETF shares themselves. This is the mechanism through which many institutional investors initially enter an ETF market and may involve the establishment of an Authorized Participant Agreement with the fund distributor. ALPS distributors, Inc. are the distribution agent for the HealthShares ETFs.

Finally many of the large Authorized Participants have ETF trading desks that will assemble the baskets and create high quality block executions for institutional investors without regard to the underlying Exchange Traded Fund’s ADTV. This opportunity exists for both creation and redemption of ETFs.]]> Thu, 12 Apr 2007 11:07:05 -0400
We took this concept into consideration when we developed HealthShares and based upon our analysis we do not perceive liquidity issues in these funds and the underlying stocks unless and until there is well in excess of $1 billion in assets in each fund.

The creation and redemption process takes place generally by aggregating the constituent stocks, with an appropriate program trading desk or through their internal securities lending process, and assembling the baskets that can be deposited with the ETF custodian in order to create new ETF shares. The institutional investor can obtain the position it desires and the fund can accumulate significant assets even with low ADTV of the ETF shares themselves. This is the mechanism through which many institutional investors initially enter an ETF market and may involve the establishment of an Authorized Participant Agreement with the fund distributor. ALPS distributors, Inc. are the distribution agent for the HealthShares ETFs.

Finally many of the large Authorized Participants have ETF trading desks that will assemble the baskets and create high quality block executions for institutional investors without regard to the underlying Exchange Traded Fund’s ADTV. This opportunity exists for both creation and redemption of ETFs.]]> http://seekingalpha.com/article/31559-interactive-q-a-jeffrey-l-feldman-creator-of-healthshares-and-founder-and-chairman-of-xshares-group-llc?source=feed#comment-84107 84107
ETFs are a disruptive technology and the industry being disrupted is the $10 trillion mutual fund industry. There is more than enough for everyone.]]> Thu, 12 Apr 2007 08:47:39 -0400
ETFs are a disruptive technology and the industry being disrupted is the $10 trillion mutual fund industry. There is more than enough for everyone.]]> http://seekingalpha.com/article/31559-interactive-q-a-jeffrey-l-feldman-creator-of-healthshares-and-founder-and-chairman-of-xshares-group-llc?source=feed#comment-84104 84104
However, most ETFs are broad risk mitigated indexes. We are not addressing ourselves to investors who are capital appreciation oriented. There have been a number of articles in the press lately about how wealth polarity has reached an all-time high in the U.S. One percent of the epopulation has 20% of the wealth. And those people did not achieve their wealth by buying risk-mitigated broad diversified indexes. That's what the other 99% are buying.

Individuals should have the opportunity to participate in the private equity and venture capital and arbitrage strategies available to the wealthy.. Those who are satisified with their net worth should buy the broad indexes and preserve their wealth. But we DIVERSIFY to stay rich; we CONCENTRATE to get rich. The beauty of narrowly focused ETFs is they represent diversified concentration.

I do not believe any portfolio should be "entirely" filled with anything. My key words would be focus and flexibility.

Personally, I believe the greatest opportunity for wealth creation in the U.S. is in healthcare. I want to be substantially overweighted in HealthShares and will avail myself of funds that are replicating capital appreciation strategies, whether from XShares or any other provider.]]> Thu, 12 Apr 2007 07:57:12 -0400
However, most ETFs are broad risk mitigated indexes. We are not addressing ourselves to investors who are capital appreciation oriented. There have been a number of articles in the press lately about how wealth polarity has reached an all-time high in the U.S. One percent of the epopulation has 20% of the wealth. And those people did not achieve their wealth by buying risk-mitigated broad diversified indexes. That's what the other 99% are buying.

Individuals should have the opportunity to participate in the private equity and venture capital and arbitrage strategies available to the wealthy.. Those who are satisified with their net worth should buy the broad indexes and preserve their wealth. But we DIVERSIFY to stay rich; we CONCENTRATE to get rich. The beauty of narrowly focused ETFs is they represent diversified concentration.

I do not believe any portfolio should be "entirely" filled with anything. My key words would be focus and flexibility.

Personally, I believe the greatest opportunity for wealth creation in the U.S. is in healthcare. I want to be substantially overweighted in HealthShares and will avail myself of funds that are replicating capital appreciation strategies, whether from XShares or any other provider.]]> http://seekingalpha.com/article/31559-interactive-q-a-jeffrey-l-feldman-creator-of-healthshares-and-founder-and-chairman-of-xshares-group-llc?source=feed#comment-84102 84102
Different therapeutic areas will look "more promising" at different times. That is why it is important to have well-defined portfolios.]]> Thu, 12 Apr 2007 07:44:09 -0400
Different therapeutic areas will look "more promising" at different times. That is why it is important to have well-defined portfolios.]]> http://seekingalpha.com/article/31559-interactive-q-a-jeffrey-l-feldman-creator-of-healthshares-and-founder-and-chairman-of-xshares-group-llc?source=feed#comment-83916 83916 HHM) includes several companies that are working on new treatments for diabetes and obesity.]]> Tue, 10 Apr 2007 12:31:13 -0400 HHM) includes several companies that are working on new treatments for diabetes and obesity.]]> http://seekingalpha.com/article/31559-interactive-q-a-jeffrey-l-feldman-creator-of-healthshares-and-founder-and-chairman-of-xshares-group-llc?source=feed#comment-83913 83913
Our ETFs are designed to own companies that have products on the market or in late stage clinical trials. The ETFs are organized by therapeutic area (cancer, metabolic disease, cardiology, infectious disease, etc.) to allow groupings that give investors exposure to innovation with mitigation of single-stock risk. The biotechnology industry is on the threshold of revolutionary innovation. However, it is very difficult to select the companies that will ultimately be successful. There probably are some folks who are capable of choosing the “winners” but for most this is too daunting a task. So a portfolio approach is the logical answer.

Consider our Emerging Cancer ETF (HHJ). Last week, one of the constituent companies, Dendreon (DNDN), received preliminary FDA Advisory Board approval for its prostate cancer drug Provenge. The stock was about $5 on Thursday and closed this past Monday at $23. On Monday, another constituent, Ariad Pharmaceuticals, announced that its Phase III trial for a drug to treat metastatic sarcoma is being delayed. The stock declined by 15%. Other related companies in the portfolio have experienced sympathetic volatility, both positive and negative. In total, the Emerging Cancer ETF was up 17% for the year at the close of business on Monday. I don’t know if we are dealing with fear or simply the fact that this is a new way of investing with which the market needs to get comfortable.

HealthShares are designed for long term investment but are quite suitable for short term trading. Dendreon had its FDA announcement last Wednesday and several owners of the stock were short the ETF going into the announcement (under the theory that bad news for DNDN would negatively impact the entire portfolio). But the primary purpose is for long term holders.

Healthcare currently represents 16% of the U.S. economy and is expected to grow to 20% in just the next 8 years. The “baby boom” generation is now 42 to 60 years of age and numbers 78 million people. Primarily they are healthy and have not needed to rely on the healthcare industry. But that is about to a change in a big way as this group ages. This is happening at a time when healthcare is already in dire straits with 45 million people with no health insurance, costs growing at more than 8% per year and Medicaid and Medicare facing multi-trillion dollar deficits. At the same time, technology is advancing rapidly as we evolve from the classical pharmacology model to customized medicine (pharmacogenomics).

But most of the mutual funds and ETFs that own pharmaceuticals and biotech are market cap weighted and therefore heavily skewed toward Big Pharma (Pfizer, Merck, Schering, Wyeth, etc.). So most of the opportunity is in biotech and most investment is going to the pharmaceutical companies. HealthShares affords investors the opportunity to align their investment dollars with the technologies that will be treating them in the future.]]> Tue, 10 Apr 2007 12:25:05 -0400
Our ETFs are designed to own companies that have products on the market or in late stage clinical trials. The ETFs are organized by therapeutic area (cancer, metabolic disease, cardiology, infectious disease, etc.) to allow groupings that give investors exposure to innovation with mitigation of single-stock risk. The biotechnology industry is on the threshold of revolutionary innovation. However, it is very difficult to select the companies that will ultimately be successful. There probably are some folks who are capable of choosing the “winners” but for most this is too daunting a task. So a portfolio approach is the logical answer.

Consider our Emerging Cancer ETF (HHJ). Last week, one of the constituent companies, Dendreon (DNDN), received preliminary FDA Advisory Board approval for its prostate cancer drug Provenge. The stock was about $5 on Thursday and closed this past Monday at $23. On Monday, another constituent, Ariad Pharmaceuticals, announced that its Phase III trial for a drug to treat metastatic sarcoma is being delayed. The stock declined by 15%. Other related companies in the portfolio have experienced sympathetic volatility, both positive and negative. In total, the Emerging Cancer ETF was up 17% for the year at the close of business on Monday. I don’t know if we are dealing with fear or simply the fact that this is a new way of investing with which the market needs to get comfortable.

HealthShares are designed for long term investment but are quite suitable for short term trading. Dendreon had its FDA announcement last Wednesday and several owners of the stock were short the ETF going into the announcement (under the theory that bad news for DNDN would negatively impact the entire portfolio). But the primary purpose is for long term holders.

Healthcare currently represents 16% of the U.S. economy and is expected to grow to 20% in just the next 8 years. The “baby boom” generation is now 42 to 60 years of age and numbers 78 million people. Primarily they are healthy and have not needed to rely on the healthcare industry. But that is about to a change in a big way as this group ages. This is happening at a time when healthcare is already in dire straits with 45 million people with no health insurance, costs growing at more than 8% per year and Medicaid and Medicare facing multi-trillion dollar deficits. At the same time, technology is advancing rapidly as we evolve from the classical pharmacology model to customized medicine (pharmacogenomics).

But most of the mutual funds and ETFs that own pharmaceuticals and biotech are market cap weighted and therefore heavily skewed toward Big Pharma (Pfizer, Merck, Schering, Wyeth, etc.). So most of the opportunity is in biotech and most investment is going to the pharmaceutical companies. HealthShares affords investors the opportunity to align their investment dollars with the technologies that will be treating them in the future.]]> http://seekingalpha.com/article/31559-interactive-q-a-jeffrey-l-feldman-creator-of-healthshares-and-founder-and-chairman-of-xshares-group-llc?source=feed#comment-83907 83907 Tue, 10 Apr 2007 12:08:00 -0400