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Dave Nadig
3:16
We've actually had to decide what to include under the bucket ourselves -- for instance, we don't cover Exchange Traded Managed Funds (ETMFs) from Eaton Vance, because we think they don't check all the ETf boxes for us.
so not actually a dumb question!!!!
Bennie Jones
3:16
What 2-3 multi Factor ETFs do you think will do the best over the next 10 years in terms of total return?
Dave Nadig
3:16
Well, there's no way I can possibly be right here, but I would look for low-beta strategies that are primarily about risk reduction: I've singled out QUAL and DEF before.
3:17
Of course, if we have a 10 year bull market (or even just a flat, low vol one) I would expect them to underperform.
I haven't seen any "magic bullet" strategy that claims to outperform in all market conditions that I believe in.
OK, here's a meaty one:
J. Gross
3:17
United States Commodities Funds just introduced a new fund - SummerHaven Dynamic Commodity Strategy No K-1 Fund (Symbol: SDCI). This is essentially the same fund as the United States Commodity Index Fund (Symbol: USCI) but with a better structure (as a 40 act fund). This new fund is cheaper with no K-1. Do you expect other established funds (WisdomTree Continuous Commodity Index Fund, Symbol: GCC and PowerShares DB Commodity Index Tracking Fund, Symbol: DBC) to do the same and come out with No K-1 versions of these funds? In addition, is there any mechanism to simply convert a 33 act fund into a 40 act fund rather than having to introduce a new fund?
Dave Nadig
3:18
So a bit of background:  traditional commodities ETFs like, say USO, are commodity pools by law, and as an investor, your a "partner" in the pool, and thus get partnership tax forms (the K1).  Which is, put bluntly, a real pain come April 15 each year.
To answer:
There's definitely no way to just "morph" a commodity pool into a traditional mutual fund.  They're not even regulated by the same entities (CFTC vs SEC).
3:19
I supposed in some extraordinary circumstance you could do some kind of simultaneous dissolution of the commodity pool and distribute "proceeds" in shares of a new 40 act fund, but I imagine it would require a LOT of shenanigans, and I doubt anyone would think it's worth it.
But it's also worth pointing out that the K-1 isn't always a bad thing.
The K-1 funds give you 60/40 blended long/short gains each year - you basically get treated the same as if you were a personal futures trader with "inventory."
3:20
But most commodities ETF strategies never hold a position for 12 months, so this is actually pretty favorable treatment -- at least SOME of your gain gets the LT treatment.
3:21
In the no-K-1 structures, all your gains get distributed as income, so you have simpler taxes, but probably worse tax treatment.
If you're investing with taxable money, you may actually be better off in the "old" structure, if you can handle the non-zero hassle of filing K1 forms.
As for whether everyone comes out with one?
We'll, we've seen some of the no-K1 stuff get traction, so if that's how the market wants to invest, I imagine we'll see most popular funds launch clones eventually.
Bill Donahue
3:21
Dave, as you know the ETF market is dominated by the top 3 issuers.  However, many large asset managers have entered the ETF market over the past 3 years.  How do you expect the ETF market share will evolve over the next 5 years? Will the top 3 continue to dominate flows/AUM or are there opportunities for the other firms to cut into their market share?
Dave Nadig
3:23
Hi Bill.  So, I think we'll continue to see mostly what we've seen -- strong dominance at the top of the chart. I think the mid tier (issuers 3-10, say) will expand to include new players who get real traction because of distribution (like we saw with schwab), so in a decade, maybe that 3-10 becomes 3-20
But you either have to have a captive audience/brand, or you have to have a better mousetrap.
which is why I continue to think the big threat is not, say, Gabelli, or American Funds, but Google or Amazon.
3:24
They have distribution and brand, for sure.
Imagine getting free asset management with your 120 a year Amazon Prime subscription!
I mean, it makes me chuckle, but maybe that means we should all be worried about it!
Toby Loftin
3:24
How do you define ‘energy’ and do you view it as a trade or an investment?   If a trade, then what inning are we in?
If an investment, do you know of an ETF that approaches investment in 'energy' in a balanced fashion including  other industries who potentially benefit from increasing economic activity reflected in oil prices?
Dave Nadig
3:24
So how *I* define energy isn't all that important, because it's how the financial industry defines that determines your exposures.
3:25
In short: oil.
I believe the broadest portfolio tracking energy is Vanguard's (VDE) which has something like 150 companies in it, but it doesn't matter much, because it's cap weighted and thus is the Exxon/Chevron portfolio like everyone else's.
3:26
The big integrateds and a few of the service companies (Schlumberger, for instance) just dominate by market cap.  So unless you explicitly exclude or cap them, dabbling in, say transports and such, it won't move the needle much on your exposure.
So if you really want more diversification, you have to combine, say, solar and wind, and MLPs and so on, to create some of what you're talking about.
The building blocks are there in ETFs, but nobody's made a combo platter for you yet.
As for whether it's a trade or an investment -- I just see it as a sector.
If you go heavily overweight, you're definitely making a call.  It's about 6% of the global economy, so if you make it 12% of your portfolio, you're for sure making a trade.
Nicholas Stein
3:27
I would like to follow ETF funds flow.  Is there a free source of ETF funds flow or Creation/Redemptions I can download daily as a csv or excel file?
Dave Nadig
3:27
Hi Nicholas - so we have a fund flows tool here, which we source the data from FactSet for, but we don't have license to distribute that out.
3:28
It's surprisingly complicated and messy data, so in general nobody is going to give it away, as it takes real effort to maintain and clean (adjusting for splits, fixing NAV errors, and so on).
The two main approaches are the FactSet approach and Bloomberg's approach.
both will SELL you the data, but not give it away I'm afraid.
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