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23. July 2015 06:16
by Allan

Half hedged or half baked?

23. July 2015 06:16 by Allan | 0 Comments

Today I read that IndexIQ has launched a trio of 50% Currency-Hedged ETFs, citing leading edge research that shows this is a good thing to do. 

A world first, nonetheless but I do await the next world first when another boutique ETF provider offers a 30% hedged ETF.

In the meantime we have been busy at Twenty20 designing an infinite family of partially hedged ETFs by simply taking a weighted combination of a hedged and an un-hedged ETF .  For example as a GBP investor, to implement an x% hedged exposure to the S&P 500, after ‘extensive’ research we have found that by deploying x% of our capital in the db x-trackers S&P 500 UCITS ETF 4C (GBP hedged) and the remaining (100% - x%) in the Source S&P 500 UCITS ETF we have managed to achieve our goal for an effective blended TER of 30bps * x% + 5bps * (100 – x)%.


14. June 2014 16:00
by Allan

It’s not about you, so it's time to put the investor first

14. June 2014 16:00 by Allan | 0 Comments

Sometimes in life it only takes the smallest of serendipitous moments to change one’s view forever, and when two such moments occur within the space of a few days you really know you are onto something. 

This week saw a conference held at The London Stock Exchange sponsored by iShares entitled ‘European ETFs: At the critical tipping point?’ with the keynote speaker from Google, Dan Cobley. Dan’s simple, but powerful message using Google’s trend tool was that over the last couple of years ETF as a search term has been trending down.  So much for the expansive take up of ETFs in Europe! 

As someone who makes a living to offering ETF managed portfolios to the UK and European market I feel that lack of love for all things ETF first hand.  The trending down for ETFs was not fiction, here were the facts.  What is the reason behind this counter cyclical trend?  Well, at the risk of stepping on a few ‘exchange traded toes’, the industry has spent too much time during the last few years focusing on each other and not putting the investor first.  The negative campaign by some industry insiders regarding the pros and cons of synthetic ETFs and securities lending has back fired quite considerably and seems to have set the market back by a couple of years.

One week earlier, the organizers behind Europe’s largest ETF conference, Inside ETFs, did a truly inspiring thing by chartering a plane from the UK to actively promote and encourage a wider level of interest in ETFs across the financial advisors community.  For many financial planners and advisors this would be their first contact with ETFs, and a special series of presentations were put together by the likes of Vanguard, Lyxor and the other leading ETF providers to help explain the product and proposition.

Having had the opportunity to speak to quite a few of the advisors on that plane I was stunned that after a couple of days in Amsterdam, for some, a somewhat different impression had been left with them.  So there they were trying to get to grips with the benefits of ETFs, and in too many instances all they could hear was this constant chatter about what is meant by ‘Smart Beta’, and other less than edifying debates.  With close to 1,000 ETFs now being listed on The London Stock Exchange, the situation calls for more clarity and not less.  Personally, I love the concept behind smart beta ETFs, but let’s not confuse the end user any more than we have already. 

Why bother putting the investor first when you can impress your fellow professionals?  If I were to buy the latest smartphone from either Apple or HTC I would expect the mobile phone industry to sell me on the compelling benefits of their proposition, and not just focus on the printed circuits inside the phone.  Taking up all of ‘my air time’ showing me how the wiring system inside operates is not how to win me over. I just want to know what it does and how I can use it.

With the recent changes by the UK government around pension annuities and the quite substantial increase in ISA investment levels, ETFs should be more and more considered by any financial planner and end-investor for their ease of use, liquidity, transparency and last but not least low cost.

It’s not about you, so it's time to put the investor first.


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