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Dave Nadig
3:11
So first a bit of a correction (unless I missed something).
3:12
I don't believe Vanguard's S&P ETF (VOO) had any changes, at least not that was in their press release:
And VT - their total market etf - dropped 1 basis point (.01%) from .10% to .09%.
3:13
BUT all that said to answer your question: indeed, there are some pretty pricey "default" ETFs out there now.
Consider iShares EEM at .67%   -- that's outrageously expensive compared to the cheapest competitive fund.
3:14
Schwab's offering for very similar exposure, SCHE, is 13 bps if I recall.
So that begs the question, why would you pay FIVE TIMES as much for EEM
the short answer is: because you're not planning on holding it, your planning on trading it.
3:15
EEM is incredibly liquid, and has a well developed derivatives market.  If you're running an HFT algo, or even just planning on trading in and out a few times this quarter, that liquidity advantage can overwhelm the cost disadvantage.
So: horses for courses.  EEM might be a bad call for a buy and hold investor, but IEMG or VWO or SCHE might be better.
Harold F.
3:15
Are investors skeptical of actively managed ETFs?
Dave Nadig
3:16
I think investors are skeptical of claims, period, and should be.
And active management is always a claim: we're going to do better (by some measurement).
Managers that show they deliver tend to do well, whether they're in an ETF or not.
3:17
So we've seen some real successes (Ark, Davis, Pimco, DoubleLine)
But the math is never on the side of active managers, writ large, so I think its always a battle, regardless of the wrapper.
Mojo
3:17
Why can't I buy some ETFs  like VXX ETFs and some leveraged/inverse ETF on my BAML account.  If the SEC says it is good to go, why would a brokerage put up gates to what has been OK's by the SEC?
Dave Nadig
3:17
THis is a phenomenal question and one we don't talk about enough.
3:18
Quite a few brokerages have "gates" over certain trades.  Whether that's a regulatory one (you can't trade futures until you fill out CFTC paperwork) or a less transparent one (I don't think you can buy MJ at Merrill either).
It's shockingly hard to find out what's on these banned lists.  A bit easier if your and advisor, because often theres a separate communication channel to affiliated advisors.
3:19
but as an individual, you really won't know until you ask, and it's a moving target.
After all, with 300 or so new ETFs a year, someones making choices upstairs.
It's actually for this reason firms like Interactive Brokers exist -- they get entirely out of the way, and if you blow yourself up, you blow yourself up.  But many investors don't want their experience that stripped down.
3:20
Most folks with an BAML account for instance, also have other financial relationships with the firm than just ETF trading.
So its protectionism.. To make a short answer too long!
Julie
3:20
“Sustainable investing” used to be considered niche investing. Would you classify that area as officially mainstream now?
Dave Nadig
3:20
13 Trillion in U.S. money is pretty darn mainstream
3:21
that's the number from the big SRI research firms.  THe vast majority of that is institutional.  So where it's not really mainstream right now is in the quintessential "mom and pop" accounts.
There's always a lag from institutional to retail, and the rise in SRI/ESG/Impact INvesting is just following that pattern.
SM
3:22
Hi Dave - The industry keeps saying that active and passive go together, yet the SPIVA reports show that active management has failed to deliver. In which segments does active makes sense? And is ETF the right way to get that access?
Dave Nadig
3:22
BOy, big question.
You are correct that the math is just bad for active -- as a group.
The problem isnt that nobody beats the market.  It's that its hard to figure out WHO will beat the market.
3:23
And when you look at legends (Buffet, Marks) they win over LOOOONG cycles.  Longer than most individuals can stomach losing.
The traditional wisdom is that active *should* do well where information is scarce: emerging markets, junk bonds, etc...
That's the standard answer.  But the math suggests it almost doesn't matter.
3:24
You tend to see "reported" outperformance in bonds most often, but that to me almost always comes down to picking the wrong benchmark.  If you're benchmarking off the AGG and your running a DUration 3 portfolio that's half corporate debt, well, you're not outperforming anymore than my Miata "outperforms" my bicycle.
George
3:24
With so many NL MF’s being offered, are passive ETF’s still the best strategy?
Dave Nadig
3:25
I think the mutual fund headcount is well over 8000 in the US, and ETFs are at about 2000.
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