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Dave Nadig
2:59
Good afternoon, and welcome to ETF.com Live!
3:00
You can ask questions below, and I'll get to as many as I can in the next 30 minutes, and I'll fire up a video for a longer answer on something that catches my eye later on.
We'll post all of it right here with a transcript.
As always, there's a soundtrack, but today it's vinyl: listening to Loretta Lynn's Coal Miners Daughter.
3:01
From the excellent Vinyl Me Please record club: http://www.vinylmeplease.com/
But lets get to the ETFs:
Roy
3:01
Was curious whether it's true that many of these dual-share class IPOs won't be added major indexes including the S&P 500?
Dave Nadig
3:01
Each index provider is dealing with this differently, but in general, index providers are reluctant or flat out refusing to add non-voting shares to major indexes.
3:02
So in some cases, they're only going to own the voting class, and de-weight (if the index is cap weighted) to only represent the voting share class.
But this is a huge ongoing governance issue, and I actually think we'll see some regulatory action here in the next few years.
3:03
The non-voting shares violate a core tenet of public ownership that the markets are designed around.
this, combined with a lot of focus on "passive" ownership in index funds, is a big deal issue for regulators I know.
J. Gross
3:03
Hello Dave, Vanguard recently filed for a new commodity fund in a mutual fund format (https://institutional.vanguard.com/VGApp/iip/site/institutional/resear...). It is launching in June 2019 and comes in with an expense ratio of 0.20%. Do you think this will finally spur etf issuers to lower expenses on their diversified commodity etfs? I believe this is one area of the etf universe which is still very expensive and needs more competition. The largest diversified commodity futures etf (symbol: DBC) still has a mgmt. fee of 85 bps. Your thoughts would be appreciated.
Dave Nadig
3:04
So, first off: yes - everytime Vanguard makes a move it pressures the industry.
However, I'd point out theres a great broad based ETF right now thats 25 basis points: COMB
3:05
Its light on energy, but its a solid, widely tracked index, and it doesn't force you into dealing with K1 partnership taxes.
It's a little small, and a little harder to trade than the biggest, but its a completely viable fund
Don't be scared off that it's listed as "active" - thats more of a structural peculiarity than any real active management.  It tracks the Bloomberg Commodities index.
Pink Pony
3:06
What's the most unique use of an ETF you've seen?
Dave Nadig
3:06
Great name.  So, a few years ago, a major institution wanted to get access to a specific set of corporate bonds that were hard to trade.
3:07
So they worked with an AP to accumulate a huge junk of an ETF that held a bunch of what they wanted, had the AP present for redemption, took ownership of the bonds they wanted, and dumped what they didn't.
3:08
I think that's a pretty ingenious and unique use of the creation/redemption process to effectively force efficiency into an inefficient market.
Todd Rosenbluth - CFRA Research
3:08
Hi Dave. The second cannabis ETF is now available, joining a pair of cyber security ETFs, multiple video gaming ETFs and other themes like robotics, online retail, etc. How do you think investors should compare these similarly sounding products?
Dave Nadig
3:08
Hi Todd!  I think you mean YOLO, but I thought it didnt launch until tomorrow!
Regardless, I think Yolo is interesting ... for a few reasons.
3:09
Here's Lara's excellent summary:
but the fact that they worked with BNY to be a "real" normal custodian for this is really fascinating
Im really eager to see what's actually in the portfolio -- which will be somewhat driven by what BNY is comfortable holding in custody.
3:10
I suspect that whatever restrictions BNY puts in place will make the fund look quite different than it's big competitor (MJ).
So as you love to hear me say: its gonna be all about what's under the hood.
All else equal, I like having a more "normal" set of partners like BNY than the rather odd Wedbush/ComputerShare setup MJ currently as.
Alicia K.
3:11
Good morning Dave. Could ETFs exist without indexing, the creation/redemption process, or authorized participants?
Dave Nadig
3:11
Without indexing, sure.
But the C/R process is really what makes ETFs work at all.  Without it (or something new) there's no reason for an ETF to trade at a fair price.  They just become closed end funds.
3:12
Almost everythign cool about ETFs is a side effect of the C/R process: the efficiency, the tax advantages, the access, transparency.  It's almost all from C/R.
And to do C/R in large blocks, you need a market maker to sit in the middle, so thats the AP.
so its hard for me to see how you get something that works the same, that's not built the same way.  Or from the same bones.
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