Skip to main content

The unnecessarily complex alphabet soup of ETF investing


Whilst advisers and investments are comfortable and familiar with the simple term “funds” (has anyone heard of an “CIS (Collective Investment Scheme) Conference” or being an “AUT (Authorised Unit Trust) investor”?  There is much less familiarity with the once-institutional and now pervasive ETFs (Exchange Trade Funds).  That lack of familiarity means that for some reason that particular TLA has stuck.

Claer Barrett in FT Weekend’s FT Money section tries to demystify the jargon  – but ends up makes thing sound more complicated than they need to be.

Advisers wanting to check or brush up on the difference between an ETP, ETF, ETN and ETC could do well to invest 2 hours of their time to earn accredited CPD (Continuous Professional Development) from the roadshow being run by Copia Capital Management to get a solid understanding of this increasingly popular and pervasive investment vehicle.

As for civilians – customers and investors – it's actually quite simple.  It’s about money. Client money. And how it gets put to work.  So forget the TLAs and the alphabet soup of ET-this and ET-that.  The key question to ask managers is “What are you doing for your fee, and how do I get to keep the most of my available return?”


The investment management industry is waking up to the fact that its customers deserve more English-language dialogue, and fewer abbreviations. QED.

NOTICES: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.  I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it.
This article has been written for a US and UK audience.  Tickers are shown for corresponding and/or similar ETFs prefixed by the relevant exchange code, e.g. “NYSEARCA:” (NYSE Arca Exchange) for US readers; “LON:” (London Stock Exchange) for UK readers.  For research purposes/market commentary only, does not constitute an investment recommendation or advice, and should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.  This blog reflects the views of the author and does not necessarily reflect the views of Elston Consulting, its clients or affiliates.  For information and disclaimers, please see www.elstonconsulting.co.uk
Photo credit: squarespace,com; Chart credit: N/A; Table credit: N/A



Labels:

Comments

Post a Comment

Popular posts from this blog

The cost of Marmite, and Brexit’s quiet fear gauge

UK commentators are looking for data points that vindicate the Referendum result one way or the other Sterling’s slide and the FTSE 100 Index level together or in isolation are not the best indicators for a Brexit fear gauge The potential inflationary impact of a ‘hard Brexit’ has caused UK breakeven rates to spike, creating a real challenge for the Bank of England Give me a sign Just as high priests in Roman times, after slaughtering their offering, examined its entrails to gauge the Gods’ favour,  so too have UK commentators been searching for any statistical insight or market data point to declare whether the shock Brexit result is likely to lead to economic success or failure. The data point phoney war The data that has come out since the EU Referendum on 23 rd June 2016 is meaningless as we still don’t know what Brexit looks like.  It’s been a phoney war for headlines, as stunned commentators search for a gauge to measure policymakers by. ...
Post a Comment
Read more

Market timing is a mug’s game

John Authers’ Long View article in the FT this weekend addresses market timing.  While he claims that just passive investors are such bad timers, we would go further: most are. Attempts to time the market (choosing the right moment to buy or sell into risk assets) are a mug’s game.  Great for brokerages that delight in investors’ fees levied to senselessly overtrade.  Bad for investor’s portfolio outcomes.  Despite the annual survey by Dalbar that investors’ attempts to time the market is really bad for their portfolio, people – including some portfolio managers – still try and have a go. The problem is that in timing the market, we become slaves to our behavioural biases around entry points, and the noise around market sentiment.  An investor fearing Brexit might have – out of emotion – sold everything to cash stocked up on gold sovereigns and run for the hills whilst tracing Irish ancestry.  The smart thing was to acknowledge sterling weakn...
1 comment
Read more

More for less: Stateside ETFs have just got cheaper

BlackRock announced today that is cutting its fees on its iShares Core (US) range.  Investors can gain broad market exposures for 4-14bp.  This compares to 7-25bp for the iShares Core (UK) range. A diversified multi-asset 70/30 ETF portfolio will cost US investors can 8bp (that’s 8 cents per $100), compared to 14bp for a similar strategy for UK investors. Might the UK follow suit? We’ll see. Big dreams The cuddly  caption announcing the move says “Smaller Fees means Bigger Dreams”, which is warm-hearted.  But it’s also sort of fair.  Today’s retail investor has more access to breadth and depth of international markets than our parents ever dreamed of (if they ever dreamed of that sort of thing). What does this mean, apart from being cheaper? Well firstly, Moore’s law applies to ETF pricing & capacity as much as it does to semiconductors.  That’s not  new or surprising.  But the sustained deflationary pressure on fund fees is ...
Post a Comment
Read more