Best ETF websites

In response to my 3 best websites for ETFs post, Abnormal Returns’ Tadas Viskanta wrote his own list of A-level ETF resources (admittedly longer than 3…)

It’s a great conversation and I’m speaking to more and more entrepreneurs building and developing tools to help investors analyze ETFs.

Here’s a combined list — feel free to add/rate/comment.

Tradestreaming Cascade: Top links from the week ending 4/24/2011

A new addition to Tradestreaming, the Tradestreaming Cascade is a highlight reel of some of the past week’s most interesting information. Much of this comes from my Twitter feed, @newrulesinvest.

The Wizard of Lies: Bernie Madoff and the Death of Trust just came out. Looking forward to reading it.

Comparison of 4 commission free ETF portfolios for less than 20 bps (World Beta)

Introducing the most powerful (premium) stock charts (Ycharts)

PIMCO files for ETF version of Bill Gross’ Total Return Fund (SEC)

Ameriprise gets into the ETF game by buying Grail (ETFdb)

Geezeo launches referral engine to help financial institutions cross-sell (Finextra)

Who is the top stock picker of the decade? (InvestmentNews)

Up-beat note for company-sponsored equity research (Integrity Research)

3 best websites for ETFs

Since ETF Connect shut down :-(, my life has been the worse for it.  There are a lot of sites with ETF information but none as good.  I think the rest of the pack is catching up.

  • All ETF: All World ETFs is tech-shop Dorsey Wright‘s recent offering in the ETF space.  I think this is probably the best of the freely-available websites for investors to understand ETF composition, locate specific strategies, and general info.  I like the ETF X-Ray a lot. It seems best geared for more advanced users because you do need to know what you’re doing to get the value here.
  • Seeking Alpha: The site was one of the first movers.  CEO David Jackson composed his Seeking Alpha ETF Investment Guide (a must-read for investors new to ETFs) in 2006 and ETF content has been a mainstay of the site for all its existence.  There is an ETF Selector which is good (it’s hand written, not database driven) but as new products are launched, the site does better with its long-form content for analysis.  Once you drill down on an ETF you’re interested in, the site does a good job providing you with content and a table of competitive products (See IVE for example).
  • Morningstar: Morningstar’s best ETF content is typically behind a paywall.  But there are some nifty tools available at Morningsstar’s website that investors should use when researching the ETFs. Investors can build their own screens and there is a great list of upcoming launches of new ETFs.

*Most of the ETF provider sites like State Street’s SPDR and Blackrock’s iShares are quite good for their own funds.  The problem here is that for the most part, they don’t provide data/comparisons to funds from other providers.

**Yahoo Finance is surprisingly poor in their ETF coverage.  The site is geared for searching for ETFs by size, volume and fund family.  I don’t know of an investor who looks for ETFs like that.  I want to find the best small cap China ETF or short-term bond ETF.  Strategy is super important in helping investors identify actionable ideas in ETF land.

How your money is managed: the Mutual Fund industry up close (transcript)

This transcript is of a conversation I had with Theresa Hamacher (listen to the podcast), author of the new book,  The Fund Industry: How your Money is Managed. You can always subscribe to Tradestreaming Radio on iTunes.

Today’s episode is all about mutual funds, the product and the industry. As a guest on the program we have Theresa Hamacher, a co-author of the new book, The Fund Industry: How Your Money is Managed. She co-wrote the book along with Robert Pozen. Hamacher is currently the president at NICSA, a position that she’s held since March of 2008. For those of you who don’t know, NICSA is the National Investment Community Service Association, which bills itself as the leading provider of independent education and networking forums to professionals in the global investment management community.

Mutual Funds: How your $$ is managed by tradestreaming

Theresa had her background in investment management before that. She was the chief investment officer, CIO, for Pioneer, where she oversaw $15 billion in global equity in fixed income assets. Before that she was the CIO of Prudential Mutual Funds, where she supervised over $60 billion dollars in assets. Earlier in her career she was an equity fund manager. She began her career as a securities analyst.

Clearly the book is written from Hamacher’s extensive experience and perspective within the mutual fund industry. I do broaden the conversation to try to incorporate how the mutual fund industry is coping with new product innovation in the ETF, the exchange traded fund community.

I think talking about mutual funds is an interesting topic right now. They are a well designed product for a variety of situations. There seems to be an overriding mantra that sort of was born out of do it yourself investing that somehow mutual funds are inherently bad. I don’t see things that way. They have their time and their place. They’re particularly good products for scenarios where it doesn’t necessarily make sense to have an index product.

Exchange traded funds are obviously the fastest growing security, in terms of gaining new assets within the industry. It’s also interesting to me that mutual funds view exchange traded funds as competitors, and not necessarily as just new products, or innovative products in the industry.

I ask Hamacher a lot of these questions, but one thing that’s important to me is that when I speak to investors they say first thing, “Mutual funds are bad.” They have a connotation obviously, particularly ones that are sold with the sales load of being expensive, and that’s true. Continue reading “How your money is managed: the Mutual Fund industry up close (transcript)”

How your money is managed: the Mutual Fund industry up close (podcast)

Mutual funds have introduced millions of Americans to investing in the stock market.  While their popularity and usage may have changed throughout the last 30 years,mutual funds still play a critical role in many portfolios.  Yet, many investors — smart, educated people — still don’t quite understand how they work.

Summary

In this episode of Tradestreaming Radio (if you don’t see it below, click here), we talk to Theresa Hamacher, a true mutual fund industry veteran.  Along with Bob Pozen, Hamacher is the co-author of the new book, The Fund Industry: How Your Money is Managed (Wiley Finance).  It’s a good read and an important book to have in your investment library because it’s scope is so broad.  The book discusses the history of mutual funds, their legal structure, career paths in the industry, how different funds are managed (stocks vs. bonds), and how fund analysts decide which securities to invest in.

Our discussion meanders through different facets of the industry, investing, and Hamacher’s book.

We discuss:

  • how to use mutual funds
  • the asset management industry
  • the financial crisis and how funds were involved/affected
  • how mutual funds shape up against exchange traded funds (ETFs).
  • why the mutual fund industry views the upstart ETF industry as competitive.

Listen below

 

 

Resources:

When the anti-Wall Street rant morphs into just another sales pitch

I know there’s a movement spearheaded by indexers, Bogleheads, Efficient Market Hypothesists, Random Walkers and just plain haters of vampire squid to hate everything Wall Street.  This is not a post defending the barbarians at the gate or even the monkeys in charge of the business.  Rather, I’m riffing on a more recent phenomenon I’m experiencing — that of the mainstream contrarian.

Just another sales pitch

Listen, with so much money at stake, Wall Street has brought opprobrium on itself with outsized returns, lavish lifestyles and bigger than life personalities.  Cramming poor investment schemes and products down clients who should and shouldn’t know better has been a staple of the business for decades.

So, of course, it comes as no surprise that a lot of people have been looking for alternatives.  Better ways of investing, saving and planning for their financial futures.  And it comes as no surprise that a whole industry of products and services arose to supply these investors.  From slick investment newsletters, communities of pundits punters like Seeking Alpha, talking heads on CNBC and even the ETF industry — all have merely taken the old Wall Street model and merely updated it.

Enter the mainstream contrarian.

So, instead of crappy structured products being sold hard by brokers, investors are left with hundreds of arcane ETFs without any real idea what to do with them.  Buy and hold ’em?  Well, that doesn’t really work for investors on the cusp — or in — retirement who need to actively generate income.  Asset allocation?  Well, who really knows what the right mix of risk and return is for anyone?  401(k)s?  Well, those are being manipulated and forcibly rebalanced in a way that’s good for the mutual fund companies, bad for investors.

Evoluton, not revolution

We’ve taken the honorable pursuit of looking for better alternatives to Wall Street yet have merely replaced Wall Street with another manifestation of slick sales people taking advantage of unsuspecting investors.  Investors eat up the anti-Wall Street pitch.  That there is a better way.

And there is.  But it can’t be sold; It has to be bought.  It requires being intellectually honest and not just compliantly honest.  It requires creating technologies, services, and platforms that say:

hey, the old way typically didn’t work.  We have just one possible solution.  But to be honest — we’re dealing with uncertainty. Nobody really knows the right way to do this.  We believe ours is a good product/service but ultimately, we’re all in this together, trying to plan for a future which is ultimately unknowable.

I guess these aren’t really solutions as much as they are gamemplans.  This way, this evolution (not, revolution) in financial services truly departs the old way.  Otherwise, it’s just the Wall Street wolf dressed up in anti-wolf clothing.

Retail Brokerage Manifesto

I’ve been in the investment business for 10 years now wearing a variety of hats.  I’ve been a hedge fund analyst (small cap/tech/retail/food), ran business development for Seeking Alpha, and hold both a brokerage rep license (Series 7) and an investment advisory license (Series 65).

For the nuanced, a broker makes a living transacting stuff and an advisor is prohibited from doing this.  Even though the vast majority of my business is done as a fee on assets (not based on commissions), it’s sometimes strange wearing both hats.  I approach the business as an investment advisor would but typically manage accounts under my brokerage license — this allows me to develop unique portfolios for individual clients.  It’s inherently less scalable than an one-size-fits-all portfolio but it’s also good service and good business.

As I reflect on the past and plan for the future, I’d like to share the tenets of how I personally approach the business of investments.  It’s the creed I live by and it’s what helped me continue to grow.  Some of this is required by law, regulatory statute or is just plain my opinion.

Tradestreaming Broker’s Manifesto

  1. I don’t believe it’s inherently wrong being paid to manage client assets, even if I get paid a commission
  2. That’s because I always have the client’s best interest in mind
  3. Even if it conflicts with my own personal financial incentives
  4. Even if I *lose money* on the trade (independent reps have transaction costs on trades that they need to cover)
  5. I always told myself that in spite of the power a broker has over client decision making, I would never hard sell anything
  6. Always look for ways for clients to save money
  7. That may mean comparing Mutual Fund A vs. Mutual Fund B but it also means comparing Mutual Fund A vs. ETF A (one pays a trailer, the other is a transaction)
  8. Nobody says anyone needs to be in the market or needs to have a 60/40 portfolio
  9. The extension of this is that the best client performance sometimes comes from designing a portfolio from the ground-up, not top down and not by cramming a client into a pre-ordained portfolio or allocation
  10. I don’t believe in the Efficient Market Hypothesis (EMH) and do believe that clients can do better than the markets without having to assume more risk
  11. That said, while the potential to beat the market exists, it may be elusive and in specific cases, may not be worth trying
  12. Sometimes an honest broker makes his money by keeping clients out of trouble and that’s worth something, too, even if clients don’t necessarily recognize this
  13. There are a lot of brokers making their clients a lot of money and really doing good by them.  I want to be part of this group.
  14. Everyone in financial services has conflicts of interests and how you get paid is just one of them.  Regardless of licensing structure, good financial advice requires being honest and open with yourself and clients.
  15. Clients don’t begrudge their advisors making money and some feel good giving the business even if they could transact using an online broker
  16. But they won’t forgive if it’s done at their expense
  17. That said, very few clients could rightfully decipher if this was the case so the whole thing rests upon the broker/advisor being honest and open with him/herself.
  18. There aren’t many of us who behave as we do and that’s OK.

Do you have anything to add? Let me know in the comments.

photo courtesy of battlecreekCVB

Blowing up the fine print in financial product marketing

As a user of various financial products over the years, I sometimes wonder what it is I actually own (most of the time this occurs sometime after hitting some single malt before bed and sometime before day break).  I dunno — I read the labels on food that I ingest.  Just thought it might be interesting to know what’s in the mutual fund into which I invested all my life’s savings.  Just for kicks, you know?

So, I decided to do a little sleuth work and *pull back the covers* on the disclaimer language on some of the most widely held financial products.  What I found written in Arial font size 6 might be a little surprising to owners of mutual funds and ETFs:

Of course, past results are not at all, in any way, form, or fashion indicative of future performance.  No way and it doesn’t even matter that we have to say that.  We probably would anyway just to cover our own asses.  Anyway, in terms of performance, it’s really just a crapshoot.  Who wrote that Random Walk thingie again?  We’re not big fans of him (he’s probably an academic).  We don’t love Bogle either — he’s the one who tried to force us into buy and hold strategies.  Cramer’s more our speed, if you care.  We sell/market financial products that trade in a secondary market so we don’t really care all that much anyway how they perform.  As long as we grow our assets under management and provide liquidity to the products.  In fact, we’re not quite sure what to make of all the blogger research that shows that our ETFs don’t come close to tracking the indices they’re supposed to follow.  And those leveraged ones — the 2x, 3x, 4x, XXXs — who really understands how all those things work?  I mean, can you really use daily future rebalancing as part of a core strategy anyway??  Thankfully for us, it’s products like these that enable us to raise our management fees in an environment that continuously pushes fees down.  We had it good with mutual funds — whose stupid idea was to transition to lower-fee ETFs? By the way, if you really want performance, why not try just giving your money to one of those fancy hedge fund vehicles?  They seem to know what they’re doing, right?  Man, I’d like to be in their shoes.  Me?  I’d be David Tepper or maybe  Bill Ackman.  Yeah, Ackman.  With his build and that gray heirhair, he’s totally a baller investor. Also, you should know, that we don’t really believe all that new-fangled behavioral research that shows that for investors, our products are sort of like drugs in the hands of addicts.  In essence, there’s no way these people are going to make money in the market anyway.  So, why not provide a vehicle that purports to do as much.  Is that so bad?  Is it?

Wow, who knew what was written in all that small print?

photo courtesy of somegeekintn

New tactical ETF products coming to market

new tactical etfs launchingBit late to this, but Kudos to Mebane Faber and Cambria Investments for beginning the launch phase of new tactical ETFs with AdvisorShares.

From the press release:

AdvisorShares Investments, LLC, a developer of and investment adviser to actively managed Exchange Traded Funds, announced today a partnership with Cambria Investment Management, Inc., a Los Angeles based investment manager, to create a GTAA strategy in an actively managed ETF. The proposed ETF would join AdvisorShares‘ growing stable of innovative actively managed ETFs

Meb Faber is author of the Ivy Portfolio and the portfolio manager of Cambria Investment Management.  His paper, A Quantitative Approach to Tactical Asset Allocation, has been dowloaded over 50,000 times and is one of the top 5 most downloaded papers on the SSRN.  These ETFs seem to productize many of the concepts Faber has built in his research.

Source: AdvisorShares Announces Partnership with Cambria Investment Management to Develop a Global Tactical Asset Allocation (GTAA) – Marketwire

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Photo credit: Drab Makyo

Crowdsourcing investments: it’s all about chosing the ‘right crowd’

We’ve spoken a lot about piggyback investing (mimicking the moves of top fund managers) and crowdsourcing ideas (using crowd sentiment to generate trading ideas) as two ‘new ways’ investors can devise profitable strategies.  The Internet is producing tons of information – the tradestream – that investors can plug into to get at this type of data.

But investors keep asking me, “Well, who do we follow?”  And they’re right – the Web continues to provide more and more insight into the daily trading activities of some of the brightest performers but with this onslaught of informational smog, we’re still left with the decision of who to track, who to follow, which crowd to source.  In Surowiecki’s book, in fact, he delves into the difference between smart crowds and not-so-smart crowds. 

TrimTab is one of the leading providers of capital flow information around which it creates trading strategies.  Last week the firm published a whitepaper (.pdf) outlining a contrarian ETF strategy that makes use of this aggregate data and actually bets against the dumb-money — in this case, the average retail investor.

In “Using Equity ETF Flows as a Contrary Leading Indicator” (.pdf), TrimTabs found the following:

  • Monthly  equity  ETF  flows  (as  a  percentage  of  assets)  and  the  returns  of  the  S&P  500  one  month  later  are negatively correlated to the tune of 21.4%. 
  • The  negative  correlation  rises  to  45.6%  for  a  two-month  period,  and  to  52.4%  for  a  three-month  period.  

With this in hand, the research firm created a system that goes long the S&P when money is flowing out of ETFs and sells it when money is moving in.  The results are amazing:

trimtabsperformance

The researchers suspect 2 reasons behind this performance:

  1. they believe that ETFs are typically really liquid and used primarily by retail investors whom TrimTabs believes are the least-well informed investors out there. Or better put, the ETF liquidity “allows investors to make poor decisions any time of day.” Or, as MarketWatch put it, “Simply put, ETF investors are impressively wrong in both directions.”
  2. hedge funds trade ETFs when liquidity dries up in individual stocks. 

Whether this works or not or is just backtested data (it works until it doesn’t), I don’t  know.  But it does drive home the importance of following the ‘right’ crowd or the right guru.  Otherwise, we are just part of the investing noise, not rising above it.