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Dave Nadig
3:25
As for "will this drive growth" -- I'd love to say that investors don't chase performance, but I have a brain and two working eyeballs so:  if the performance runs, the money will follow.  The new structures will make that money move a lot more easily.
Great juicy questions.
Ross
3:26
What's the future of non-transparent ETFs look like? Despite not gaining assets, ETMFs (nextshares) keep rolling out - is there a better wrapper/loophole for these products that can work? Is there any demand from investors?
Dave Nadig
3:26
We covered this a little last week, but ill add some nuance.
We made the decision at ETF.com not to "cover" ETMFS (Exchange Traded Mutual Funds) because we believe they're really just mutual funds with an interesting order processing tweak.
(and we're ETF.com, not AllFunds.com)
3:27
But that said: There's some cleverness behind the structure (Todd Braum and Gary Gastineau developed it ages ago, I believe), but I remain unconvinced it's solving a problem *investors* actually have.
So we've seen some adoption by issuers, but not a lot of assets.
That may end up being true when the non transparent active ETFs -- the true ETFs -- are eventually approved by the SEC.
3:28
One of the various structures will, I believe, eventually be approved. But are investors lined up for it?  I think that's a big if.  No crystal ball here -- it'll be grab the popcorn time.  But I'm pretty skeptical, short of a GIANT brand name (like contrafund or magellan or something)
Chuck Mangione
3:28
How come ETF market commentators focus so much on a fund's trading volume when liquidity is driven by the underlying stocks? Even ETF.com focuses on underlying liquidity in their analyses, yet every analyst just preaches onscreen volume. Its not that on-screen volume is unimportant but it doesn't tell the whole story. Advisors learning more about ETF trading for their clients would seem to be getting incomplete information unless they keep digging.
Dave Nadig
3:28
So this is a really great question too.  To clear it up a bit:
3:29
Onscreen volume = what you see when you enter "SPY" into your Schwab account.  you see how much its traded, or how much is quoted at different prices.
Underlying liquidity = The same thing, but for each stock in the S&P 500, which is what the SPY holds after all.
The short answer is both matter, but for different reasons.
3:30
Lets put asside the enormously liquid ETFs that trade like water.  Nobody has to worry about SPY or EEM or anything.
And put asside the very very smallest, forgotten 1million dollar ETFs that haven't traded since I had hair.
In the middle, both onscreen and underlying liquidity matter, depending on what kind of investor you are.
3:31
If you are trying to put 500 shares through on an ETF, well, the only liquidity that will matter for you is the superficial, open-market liquidity.  If it's trading 5% wide (like, bid 100, ask 105), thats just awful
you can try and game it (putting your order in at 102.50) and hope, but really, the lack of onscreen liquidity CAN make your life hard.
3:32
But if you're an institution looking at that same fund looking to buy 50,000 shares, you don't care much about that.
Because you can ask your broker to help make new shares for you.  And in that case, all you really should care about is the underlying liquidity.  If it's large cap U.S.? They'll MAKE you 50k shares at 102.50.
3:33
But if its, I dunno, canadian microcaps, maybe not? Maybe that spread is real there too.
So both CAN matter.
hope that helps.  Next one up ....
Wes
3:33
Why wouldn't you go with an etf wrapper? Ie choose mutual fund format
Dave Nadig
3:33
See above! The ETF wrapper brings with it a bunch of advantages (liquidity, transparency, tax efficiency, etc.) but introduces "trading."
3:34
If you don't want to deal with all of the above, and placing orders and worrying about fair value, an apples-to-apples mutual fund could be just fine.  The trick is in the "apples to apples."
For example, the Vanguard ETFs are generally the same price, and the same portfolios as the Mutual Funds (they're just share classes).
Pimco's BOND is pretty much the same whether you buy the institutional mutual fund share class or the ETFs.
3:35
There's an undeniable convenience to the Mutal Fund wrapper.
(Mutal funds, available at Walmart! Glad we proof this after the fact!)
And there's also the fractional share issue which we covered a bunch last week - you can't (easily) own half a share of an ETF in your 401k.  It's childsplay in a mutual fund.
So there are a few cases where it makes sense i think
3:36
few more here and then we'll wrap up.
Gary Curtis
3:36
Should I have more than one Emerging Markets ETF in my portfolio? Do they overlap in coverage? Advantage?
Dave Nadig
3:36
In general, I don't quite get the "own two of every animal" version of investing, but I see a lot of people do it.
If you look at the reports from even some large institutions, they'll own IVV and SPY -- two funds with the exact same portfolios, minimal cost difference, etc.
3:37
When I've asked, the answers I get from them are things like "well, if one of them has a blow up, the other wont."
Which is a bit of a belts and suspenders kind of thing.  I can see the logic, I just don't actually believe in it.
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