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Question: What's the difference between an ETF and an XTF? Answer: Talented marketing people employed by PowerShares. Fluff aside, these offerings, which "track" the company's dynamic Intellidex-branded indexes, make it clear that ETFs no longer need to even bother pretending to be passive. These XTFs, as well as competing ETFs that have since come along, openly aspire to beat conventional market benchmarks. Early results have been uneven, but do provide reason to anticipate better performance gong forward. Full Article »
Thu Mar 05, 2009 By Marc Gerstein 0 comments
For more than a generation, market-capitalization weighting has been the holy grail of benchmarking and generally speaking, this has carried over into the weighting of stocks in the portfolios of equity ETFs, even those that are based on newer, more customized indexes. But lately, there's been a prominent strand of thought citing deficiencies in market cap weighting. And regardless of how any of us feel about theoretical debates, we need to be aware of this one, since alternative weighting protocols now form the basis of three ETF groups, two of which have been getting quite a bit of press. Full Article »
Sat Mar 07, 2009 By Marc Gerstein 0 comments
One of the traditional hallmarks of fund investing is that you're taking cash-based long positions. That's now changing. Mutual funds have, in the past, made modest use of leverage and more recently, we've been starting to see some that seek to emulate hedge-fund strategies. Also, investors have been able to use margin, and to some extent, options, in connection with purchases of closed-end fund shares and ETFs. Then came the ProShares revolution, which starting in 2006, makes it easy and convenient for ETF investors to pursue even aggressive leveraged and/or short strategies. Full Article »
Fri Mar 13, 2009 By Marc Gerstein 0 comments
Judging by trading volume, the ProShares leveraged ETFs have attracted a large following, and so too have rivals, the more noteworthy, thus far, being the triple leveraged ETFs just launched by Direxion. Judging from the financial media, however, these funds have also attracted much, and sometimes shrill, criticism. In the last blog, we saw why these products are not as tax efficient as ETFs are traditionally assumed to be. This blog will continue our effort to cut through the noise and see exactly what leveraged ETFs can and cannot do by considering "tracking error," the extent to which an ETF misses the performance target it is supposed to hit. Full Article »
Tue Mar 17, 2009 By Marc Gerstein 0 comments
With all the negative press surrounding leveraged ETFs, I embarked on this examination of intraday trading patterns fully expecting to see challenging issues for leveraged ETFs. Initial anecdotal evidence certainly supported that notion. While tracking error on leveraged ETFs seems manageable when looking at closing prices, it did appear that daily open prices were considerably more erratic. But as I examined the data more systematically, it became apparent that I'd have to change my views. Open, high, and low prices can get erratic, but this seems to have nothing to do with leverage. I saw similar patterns for SPY, the penultimate traditional ETF. Full Article »
Fri Mar 20, 2009 By Marc Gerstein 0 comments
