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Dave Nadig
2:59
Howdy folks, and welcome back to ETF.com Live!
3:00
As always, you can enter questions in the box below and I'll get to as many as I can in the next half hour.
Fair warning: having some RSI from typing too much, so I might be a little slower than normal.  Bear with me please!
And we'll have a transcript up on the home page shortly after we're done.
So let's roll.
Tunes
3:00
Soundtrack?
Dave Nadig
3:01
Been on a "new big rock" phase, so today it's Bleeker: https://open.spotify.com/artist/64tT0KKbU4AFWkO6v1VvXv
Grace L.
3:01
Hi Dave. For some time now, it seems passive investing has really become the preferred choice over active management. Are the new non-transparent ETFs an attempt to reverse that trajectory, or …?
Dave Nadig
3:01
Hi Grace!  So, all the new structures are certainly an attempt by the traditional active managers to reverse it.
3:02
And I think they'll be mildly successful.  If an active manager is adding real value, they really have to deliver that value in a modern package.
And the ETF IS the modern package.
I suspect the slow transition away from the old Mutual Fund structures will also weed things out.  I'd expect Active firms to "bring their best" to the new structures.  So I'm hopeful this is at least giving investors choices some of them want.
3:03
But I don't think this is some sort of pendulum swing, where in 15 years we're going to be talking about how Indexing was a fad.
It's been 40 years or so, going in one direction.  I'm willing to call that a trend (grin).
George Ralls
3:03
I often ask myself, where are people in the industry investing? What % is in cash, bank notes etc. Since editors, analysts, fund managers expound on why their offering serves investors well, are they invested in their own portfolios? What is etf.com position on personal investment transparency? Thank you.
Dave Nadig
3:03
Hi George, great question.
3:04
We follow basic conflict of interest disclosure rules: if one of us owns or is otherwise connected to a fund we're writing about, then we disclose that.
I can't speak for what every employee is doing with their investments, but I can say for myself (and have occasionall)...
3:05
Like many people, I have some retirement accounts stuck in different places, but if you amalgamated it all: I'm in low cost index mutual funds from big well known firms, generally captive to those retirement plans.
I don't own any ETFs - a decision I made 10 years ago to make it easier to talk without any appearance of conflict.  My asset allocation is extremely boring, and I don't touch anything but maybe once a year for a rebalance.
Sorry it's not more exciting.
Quinn
3:06
Does “corporate social responsibility” appear as much as “impact investing” “ESG” and “socially responsible investing” in ETFs?
Dave Nadig
3:06
Hi Quinn, and you're hitting a core issue.  Nobody agrees what "ESG" or "SRI" or "Sustainable" or whatever buzz you want to use even means.
3:07
There are definately funds that use corporate actions (whether its donations, community programs, investments, board construction, HR policies, etc) in their scoring of how "ESG" a company is.
And that gets captured in the MSCI data we show on our site as well. I'd say it permeates almost all ESG methodologies -- what does the company DO.
3:08
This then gets added to things like the industry the company is in and so on.
But then building a portfolio you personally agree with is tricky.
Because, for instance, maybe some Solar company has awful HR policies. Or maybe some Gun manufacturer is hugely philanthropic on the side, etc...
Things can easily cancel each other out.
3:09
Its for this reason I think ESG is where direct indexing will continue to catch hold -- because its so personal by nature.
James Naughton
3:09
I’d seen for years the phrase “you can’t invest directly in an index; you can only invest in a fund that tracks one.” Yet this new direct indexing seems to allow you to do that after all. How did that reversal occur, and how exactly does it work?
Dave Nadig
3:09
Picking up on that thread
3:10
Generally speaking there are two models.  One is where you literally deposit your money with a firm (say, Parametric) who builds you a customized portfolio of securities, starting with an index as the core, and then tweaking it based on your desires.
So maybe you get the S&P 499, minus Apple, because youre Tim Cook.
That tends to be very high minimums (7 figure).
3:11
The second model uses someone like Schwab or TD as the custodian (like most financial advisors do already) and then the DI company directs the trading in the account on your behalf, buying up, say, the same S&P 499-Apple.
3:12
With the change to zero commission, and fractional shares, this could theoretically become economical even at very small dollar amounts.  But its not gelled yet -- it will be a few years yet before this becomes a mainstream option.
I'd expect it to follow the same pattern as Robo Advisors did.
Starting out with some niche, proprietary companies, and then getting swamped by giant firms like Schwab and Vanguard.
ETF Doc
3:13
I’d read your earlier interview with Investopedia about what you think are the current biggest ETF trends. Of the 5 mentioned, is this the one you see as the TOP trend, or were those 5 in random order? “Choices for investors are increasing rapidly.” Tx
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