Anything ETF
Reckon we lack a thread for people in ETF and might as well create one. Wonder how everyone got into the industry in the first place and your visions regarding its future.
Trending Content
Career Resources
WSO Free Modeling Series - Now Open Through
April 30, 2024
9 Free Financial Modeling Lessons
Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.
+Bonus: Get 27 financial modeling templates in swipe file
+Bonus: Get 27 financial modeling templates in swipe file
Work in the mutual fund space in Product, but interested in the thread. Our portfolio managers run a few ETF allocation strategies that make an excellent "core" allocation in client portfolios. ETFs are great cost-effective building blocks.
Thanks for the comment, FlyingFox1. I too believe ETFs are just great products to work with when it comes to portfolio construction. I wonder how many people are interested in pushing it a tad harder to launch some more aggressive ETFs after the success of ARKK
Are you a product specialist?
Product Manager.
People tell me not to go into ETFs as a new grad. Most of them simply say a career passive is way less rewarding than active. I wonder how do people who actually work in ETF think of this. In my opinion, albeit ETFs have been around for a while, there's still a lot to do within the industry with more traditional fund houses eyeing a booming retail client base.
This is super interesting to me, I feel like it's the opposite, we've had record flows into ETFs the last few years and the teams are building rapidly. I feel like there's so much more nuance to ETFs now than ever and developments are coming quick & fast
There is a small but growing subset of active ETFs (especially in FI) that are pretty interesting. Because they trade like stocks in the secondary market, managers can take on more interesting roles as they don't have to worry about redemptions as they would with mutual funds. Not sure if this is happening in equity.
Sounds like an interesting corner to look into. I recently had a dinner with a CEF advisor, and, according to her, CEF seems to be the ultimate solution for the less liquid/expensive to trade asset classes compared to ETF.
I’ll look more into FI though.
CEFs are great for the right investor. I use them a lot in my portfolios. Typically pay very solid distributions (not all in dividends/cap gains so you need to be careful. Sometimes they're paying a return of capital which doesn't help you accomplish much). I like how they function for the PM. Unlike an open end fund, they don't always have to accept new money and deploy. They don't have to manage for redemptions as they're traded in the secondary market like a stock. They essentially work like an IPO. They raise $x and then move to the secondary market so the management can be very tight and deployed per their mandate.
Thanks for the explanations. Interesting how my college finance classes simply summarize CEFs as some gradually disappearing vehicles. And it sounds like it can as well play a role in the movement of democratizing investments for the retail investors.
Dunno how many of you are with me, but I truly believe ETFs have some decent amount of potential to be capitalized.
When I was looking for my new grad gig, I was told by the head of large LO fund house that they are launching their ETFs later this year. It reminds me of the fact that, still, few fund houses are leveraging their reps to launch their ETFs, and I believe many of them do want to.
Could an ETF advisory firm be interesting? Imagine leveraging on established relationship with APs, MMs, exchanges and custodians.
Actively managed ETFs, CEFs, Interval Funds (less liquid like Alts), and Alts are gaining traction. Specialists and large scale LO shops are making them a bigger part of their business. Differentiates them and offers juicier fees.
I never use anonymous, but I will here.
I got into ETFs by being right place, right time, right friends, and right price.
I'd been in the ass-end of WM, and got my CFA charter. After years of going nowhere got called by a friend who was a wholesaler for a startup smart beta ETF shop. Got the job, got pretty decent bump from my nothing salary. (but was still underpaid) We got bought, was a key guy. I won't go further or it'll reveal who I am.
A few thoughts:
"Passive" is BS. yes some are, but a lot of passive funds are very much not just holding the market. I can sell you a low volatility 'passive' fund or a targeted military-industrial compex 'passive' fund. Heck, I can sell you a 300%+ annual turnover tactical allocation 'passive' fund. If I can quantify it and turn it into an index, it's passive.
My thoughts are that a lot of 'passive' ETFs are just quantified active management, there also isn't a lot of impediment to transparent active either. (I'm personally bearish on ANTs) In many ways the ETF structure is better. Daily transparency and to the minute valuation. I think that 'hiding your portfolio' is basically BS in US equities, and only marginally important in FI. The benefits of Mutual funds are basically low effort funding/redemptions for retail, and marginally the same for company retirement accounts.
also, OP: I feel like your Avatar is from either one of Eric B's books or BBG/BuisnessWeek articles. He's a really cool dude, and we're on a first name basis, even though we disagree somewhat on Jack Bogle's impact.
Edit: Forgot to add, in-kind creation/redemption means that you can basically wash out cap gains pretty easily with turnover. You have no idea how many ETFs sitting on huge gains are sitting on tax losses even bigger than their AUM because of this.
This is freaking awesome. Yes the avatar is from the book. Putting his opinions aside, personally, I think Balchunas did quite a good job preaching about ETFs. I read his ETF tool book before my summer intern in 2022 and I have to say it was a good one.
I am curious about your visions for the industry and how newcomers like me (a senior at college boutta joining the workforce in 2023) can stay and contribute to the industry. There’s perhaps way too much junior bankers talking about exits, but I don’t think anyone in ETF is talking about it these days.
Besides, I’m extremely interested in your experience working with a ETF startup, as it is one of my dreams now to launch my own ETF.
And I’m interested in your opinion on Bogle’s effect. I just finished reading a book called in pursuit of the perfect portfolio by Andrew Lo. And that book offers a quite similar conclusion about Bogle’s influence to Balchunas.
That's a lot of questions in several responses. I'll do my best to answer them, but I'm going to be a little brief. (I'm working on a couple annual pitchbook updates and a blast email on my work PC and could use a break)
To be honest, even though Eric gave me a signed copy of his book at the launch event at 731Lex, and I asked a loaded question that he bitched at me in the cocktail hour about because it could have taken twice the length of the event to do justice to, I haven't read it yet. There's a good limited run podcast he did a while back on the history of the ETF that you should listen to. I think it was called something like 'The ETF Effect'
Broadly speaking, I think that without Bogle a shift to passive was inevitable. He didn't launch the first S&P 500 fund, there was an institutional one a couple years before. It's also low risk for FAs. They can tell clients "Your investments declined, but so did the market by that same amount." Anything else requires due diligence. (God do I hate having to help with due diligence reports) My favorite fund has awesome performance, but extreme tracking error. I've seen 3% divergence from the broad market in a WEEK. I know all the details for that, but for FAs that means 'career risk' if it goes the wrong way.
About your other questions: There isn't an exit from AM. AM IS the exit. To start there is to win the lottery. I'd say do whatever you can to get in. I'm an anomaly, but I've seen commited kids from the RFP team (mindless and horrible) jump into product roles. What I do is highly peaky, and there are 80 hour weeks where I feel destroyed coming home from work 6 days a week and weeks where I work 20 hours and say "I got tickets to the tuesday afternoon game, so I'll just be checking email from it, and take care of any leftover stuff Saturday." and my boss is like "OK." I'd guess I put in 40-45 hours/wk on average. About career planning: I'd have to guess, my path involved a lot of luck and timing and is probably un-repeatable. Get in somewhere that has an ETF department and keep pushing to work with it.
Launch an ETF: Forget it. at 50bps breakeven is around $50m (that's before you start paying salaries) Filing/launching/etc. is about 1/4 mil. I've got a friend at a white lsbel shop in Philly (If you're in the industry you know which one that is) if you're really serious and have backing.
The future of the industry btw is going to be the continued migration of both active and passive funds. The likes of Vanguard are going to continue to offer both, but look at all the conversions and even freakin DFA jumping in. There aren't careers in pure passive, there is no marketing or sales (Unless it's one of the 4 or so UITs) and like 3 people on the PM Team. Look at smart beta and active.
Another question I have is about career planning. When I asked my mentors/ senior people in finance, they always tell me to go into private and active ASAP, even though I believe I have a strong passion for ETFs.
(Father was a retail trader in China when I was a kid, and due to the lack of knowledge and appropriate vehicles, my family missed out the opportunity to achieve financial security. Wish I could do something for the retail traders)
PS: dont want it sound too rude, but mind if we could have a quick chat sometime? Job hunt for an exciting ETF role is still ongoing for me.
My friend told me that uSMART SG is nice. One account can easily invest in over 10000 stocks and ETFs，as well as trade US stock options and so on, regulated by the Monetary Authority of Singapore, it is very safe.
Doloremque sed iure ut omnis. Voluptas iusto at pariatur eveniet optio enim nam. Voluptatum id omnis illum itaque nesciunt sint. Numquam est voluptas molestias temporibus. Sint porro et necessitatibus.
Autem dicta facilis eos beatae natus nihil sit corporis. Ratione quod at est facere odio nesciunt animi. Doloremque tempore sunt non id. Quia rem sapiente dolore illum laudantium.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...