Starting a Fund of Exchange Traded Fund

Good day,

Alright so I'm not saying this is going to happen, and I don't know if this is the right place to post this. But Reddit just made fun of me, so here I am.

I was thinking about starting an fund made of ETFs. The investment thesis is simple. It starts with every country in the world. I use market cap and gdp. I sort every country in terms of market cap, assign a market for each country, and invest accordingly.

It's basically the S&P 500 for countries instead of companies. I do something similar for fixed income side except I use GDP.

If you can figure out the equation go right ahead. Not many people are willing to drop their career and do this on their own. Not worried about people using this investment thesis. At all.

Okay so my question is;

  • Where do I start?
  • How do I structure the fund?
  • How do I raise capital?

Thanks,
Murphy

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Comments (15)

Jul 15, 2019 - 1:07pm

You're close. That's more like the benchmark. My portfolio beats the benchmark by about 50 basis points every year. You're thinking of it a little wrong, but you're close. That's every stock in the world from largest to smallest in terms of market cap. Think of every country from largest to smallest in terms of market cap. The idea is that every stock inside of every country is correlated together. You have to group these together. Countries each have their own laws and cultural differences, so it makes a little more sense to separate them out.

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Jul 16, 2019 - 4:02am

What is the point? You spend $1m setting this all up, and don't break even until $1bn in AUM. It would be easier to join Blackrock or Fidelity and then start this type of fund as a product within the company and get credit as the PM of the fund instead.

Jul 16, 2019 - 4:46pm

It doesn't sound like it would provide meaningfully different exposure than existing global ETFs.

Yes, of course you can point to construction differences (you're doing Mcap weighting by country whereas other ETFs you cite are Mcap weighted by stock) but that doesn't sound like a major differentiator to me. Have you calculated what the active share would be vs Vanguard Total World?

I've been legit amazed at how many different ETFs are offered for roughly the same thing. The fund co's websites look like a Chinese restaurant menu with every possible permutation of how to construct something. I never thought they'd make it this far. Skeptical that there's room for more, but I've been wrong already so it shows what I know.

25 bps is high these days, Vanguard Total World is 9 bps and to my earlier point, I'm not immediately seeing how yours is differentiated in a major way. But maybe I'm missing something, hence my question above.

Jul 16, 2019 - 9:07pm

pls make a $THOT ticker and interview basic white girls on college campuses every quarter to reallocate into new trends.

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