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Hot ETF Topics From Wealth/Stack

Dave Nadig

I’m writing this from Phoenix Sky Harbor airport after a whirlwind three days at the inaugural Wealth/Stack conference here in Phoenix. The event is the brainchild of Ritholtz Wealth Management and the Informa team that puts together Inside ETFs every year in Florida, with the stated intent of discussing the intersection of technology and wealth management.

Much of the event featured demos of various tech platforms and how they can help advisors differentiate and streamline their practices. But ETFs were part of almost every conversation.

This wasn’t a typical audience of advisors. If I had to paint with a broad brush, I’d say the average attendee was younger, more diverse, more tech savvy, and probably smaller and hungrier than the usual crew I see at these kinds of events.

Here are the topics that seemed to be resonating with this audience, both from the stage and from the networking lounge.

Lots Of Darned ETFs

I heard this observation a lot, and it’s not wrong. With more than 2,200 ETFs on the U.S. market, and more coming every day, there’s a definite sense of being overwhelmed. Many advisors simply limit themselves to a pretty small list of funds to consider based on rules of thumb (assets under management, volume) or brand loyalty or even just name recognition.

They are very, very skeptical of any new product being promoted by the local wholesaler.

In some ways, this is really a shame. While skepticism is completely appropriate, the reality is there are new products every day that are in fact better mousetraps. The challenge is wading into those newfangled products and separating the useful tools from the me-too late entrants.

Fixed Income Is Hot

While Wealth/Stack has far fewer asset-class panels, fixed income was an exception, and it’s clear the attendees are wrestling with how to approach the fixed income problem. While flows have been very strong into fixed income ETFs in the past year, it’s not clear those flows have been great for investors.

Much of the flow has looked like “duration shortening”—which made sense in an era of rising rates, and maybe even in a world of declining rates when the curve is flat or inverted. But with so many ways to slice and dice fixed income, there was broad concern that many folks are looking to fixed income as an alpha generator, as opposed to its historical use as a counter-correlated asset to the real risk assets: equities.

Smart Beta? Prove It

While many folks I talked to use a value fund here or a min vol fund there, overall, there was enormous skepticism that multifactor and more esoteric single-factor funds were really that useful for their practices.

Many folks decried the lack of tools to help evaluate the claims funds are making in their “smartness” beyond the shiny rearview mirror of after-the-fact performance.

Nontransparent Active? For Who?

This was a smart, well-informed crew. Many folks knew about the forthcoming nontransparent products from Precidian, but not a lot of direct interest in specific brands they hoped to see show up.

My thinking on the demand issue for nontransparent active has changed. Over the past few weeks, I’ve heard from more and more folks who believe there’s pent-up institutional demand for a more liquid version of popular active mutual funds. I remain skeptical, but I can see the argument. There is still, after all, an enormous pile of money in actively managed mutual funds.

Bogeymen

It’s almost inevitable (if a bit tiring) that any collection of ETF Nerds is going to involve a discussion of the continuous stream of ETF naysaying that comes from some corners of the financial press.

Whether it’s the old “indexing kills price discovery and is worse than Marxism” saw, or more legitimate concerns about just how illiquid an underlying you can put in an ETF wrapper, the cloud of misguided publicity hovered over many conversations. Luckily, these are myths that are generally pretty easy to bust.

How About Y’all?

This is the place where I point out that all of the above are the reasons ETF.com exists in the first place: to help answer the hard questions, and provide the best tools we can to make better decisions. It’s what we do with our daily coverage, our education library and our ETF.com Live! sessions every week.

On Wednesday, September 18, we’re going to try something new: We’re going to try and answer all these questions and more in a live webinar setting, taking your ETF due diligence conundrums and walking through how we’d approach the problem, using tools both at ETF.com and elsewhere.

It’s free, there’s no sponsor or agenda, and I’m hopeful we’ll get some good hard challenges. Hope you can join us. (Register here ­- ETF 201: The Due Diligence Toolbox)

Dave Nadig can be reached at dnadig@etf.com

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