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Dave Nadig
2:59
Good Afternoon!  And welcome to ETF.com Live!
As always you can drop questions in the box at the bottom of the page.
3:00
I'll type till my fingers go numb (about half an hour) and get to as many of your questions -- hopefully ETF related, as I can.
With that, let's get started.
Anon
3:00
Now it's like a thing: what's today's soundtrack?
Dave Nadig
3:00
Hillarious.
So, at the moment, Greta Van Fleet, three kids from the midwest:
3:01
But on to the real questions. Let's start with Todd:
Todd Rosenbluth - CFRA Research
3:01
Hi Dave. On the latest ETF Prime podcast you mentioned a lot can be done with technology to support ETF investors and proxy voting to ensure corporate governance is not a big problem as the Big 3 own more of Microsoft, Apple, etc stock. I'm intrigued. Can you kindly share examples?
Dave Nadig
3:01
So the core issue is this.  If I own SPY, how does State Street take into account my preferences when it comes time to vote the proxies for the 500 companies?
Right now the answer is "they don't, at all."
3:02
Instead, they have their own set of principles based on which they vote in each companies proxy.  So in the SPY example, SSGA has been clear they want more board diversity, so they skew that way.
But they don't, for instance, ask me if I want this person or that person.
(and to be clear, the vast majority of the time, I won't have an opinion).
3:03
So whats needed is a way for them to essentially "poll" me about the things I care about.  There are only so many hot button issues: risk management, finance/M&A, governance, social/environmental factors and so on.
3:04
Right now there are firms like Say.com trying to solve part of this problem -- connecting companies one at a time with actual shareholders.
but I imagine a world in which SSGA sends me a survey once a year, asks my opinions, and then either fractionates their vote (57% of our shareholders vote for X), or majority-rules.
Nobody's doing it yet, but it's just a tech problem.  Tech problem's get solved
3:05
And that would solve a lot of the concerns about "too much power" in the hands of the big index managers.
Margot Iver
3:05
Is there a key difference between investing in gold ETFs and investing in gold miners ETFs?
Dave Nadig
3:05
Hi Margot, great question!  HUGE difference.
3:06
For years, it was actually pretty tricky to buy gold itself.  If you wanted more than a few ounces, you needed a vaulting system, or a certificate system where you buy "shares" of gold in a specific vault.
Back in those days, investors would often use miners as a proxy for gold prices.  And gold companies actually managed their own hedge books to make their performance even more tied to the price of gold than it might otherwise be.
3:07
But in todays world, most miners don't do that anymore, and are also MUCH more diversified.  So they're mining copper and rare earths etc.
And, of course, buying GLD or BAR or something is just as easy.
So I'd think about them completely independently.  You get single stock risks with miners, but you also get actual businesses that can do things like pay dividends or invest in new ideas.  THe yellow metal can't do either.
3:08
(There are also tax differences -- Gold ETFs are taxed as collectables at a flat 24% when you sell on gains, over any time period).
Dina
3:08
How soon do you think the amount of money in passive funds will surpass that of actively managed funds?
Dave Nadig
3:08
Funny you should ask, as this is a slide in my stump speech for Inside ETFs every year.  Short answer: 2025ish.
3:09
That's the date Matt Hougan and I put on the board 10 years ago, and so far, we seem to be on track.
Thats ETFs vs. Mutual Funds, in the U.S.
Which is of course only one way to count.  If we go active in ALL its forms vs passive in ALL its forms, I wouldn't be surprised if we're much closer.  There's a LOT of undercounted institutional money tied to indexes in separate accounts.
And of course, the definition of "passive" is shifting by the day.
3:10
but that's my short prediction: 2025.
Two questions on the defined outcome ETFs:
Nemo
3:10
As the Defined Outcome etfs are indexed to the price only return of the S&P 500, is it fair to mentally add the estimated dividend yield to the fund expenses for comparison purposes? With limited price upside and such a significant expense drag(2.60-3.0%), wouldn't there be major concerns about longevity risk if trying to substitute them for part of an equity portfolio?
Dave Nadig
3:10
So your not wrong.  The funds (like BOCT) use SPX options, which are tied to the price index.
3:11
that doesn't make them "wrong."  It's how the options market generally works.
So in that sense, if your comparison is purely SPY vs. BOCT (for instance) than yes, you should consider the TOTAL return of both.  In the case of SPY, that includes reinvesting the dividends as you get them.
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