Innovation in ETFs
Held on Monday, May 9, 2016
With support from Kemp Little
Deborah Fuhr (partner and co-founder, ETFGI)
Howie Li ( co-head of CANVAS, ETF Securities)
Peter Sleep (senior portfolio manager, 7IM)
Pierre Khemdoudi (managing director of securities finance, Markit)
Primer: Understanding Exchange-Traded Funds: How ETFs Work (ICI)
Podcast: ETFs Special Part 1: Triumphs and tantrums (Investors Chronicle)
Article: Goldman Sachs to Turn Its Hedge Fund Research Into an ETF (Bloomberg)
Article: Emerging Trouble in the Future? (The Economist)
When I came across ETFs (exchange traded funds) in the 1990s, I thought they were a marvellous invention. You could buy a basket of shares or bonds as easily as buying an individual share. The price was effectively the underlying net asset value – no discount to worry about – and the ETF was easy to trade. It seemed like the ideal building block for a diversified portfolio, and automation and direct access bore down on costs.
A couple of decades later and there are nearly 5,000 exchange traded products (ETFs are a sub-set), according to data from ETFGI. The ETF sector represents about $3 trillion in assets, still a drop in the ocean of capital markets overall, and continues to grow rapidly. The “baskets” now include securities that are chosen according to an investment style or quantitative screen, as well as the traditional market-cap-based replicas of big indices like the FTSE 100.
However, the sector is no longer controversy-free. Questions have been asked about the proliferation of products: for instance, has the arrival of “smart beta” raised unrealistic expectations of beating the market? Then there are liquidity concerns – is the real-time pricing just an illusion of liquidity that could dry up under stress? And are the biggest ETF players, such as BlackRock, systemically important but not regulated as such?
To help us learn more about this genuine area of innovation, and to discuss the concerns, we are delighted to welcome:
- Deborah Fuhr, a partner at ETFGI, the independent research provider and consultancy. She has been studying ETFs for 15 years, first from within the industry at BlackRock, Barclays Global Investors and Morgan Stanley, and from 2012 at ETFGI.
- Howie Li, co-head of CANVAS at ETF Securities, an innovator in ETPs and provider of investment solutions. Prior to becoming co-head of CANVAS, Howie was head of legal at ETF Securities – and, before that, he trained with Simmons & Simmons, where he advised hedge funds.
- Peter Sleep, senior portfolio manager of 7IM’s AAP fund, which invests in index tracking instruments (including ETFs). Before joining 7IM in 2007, Peter was an analyst with MF Global – and, before that, he spent 13 years with Citigroup, finishing as a VP.
- Pierre Khemdoudi, managing director of securities finance at Markit. He is responsible for Markit’s DeltaOne platform, which specialises in index and ETF data. He previously headed Japan and then London securities finance trading at BNP Paribas.