Trader Talk

What's Hot at the Largest ETF Conference


I'm in Hollywood, Florida for the 5th Annual Inside ETF Conference, the largest exchange-trade funds (ETFs) conference in the world, with a record 1,200 attendees.

The hot topics:

1) Hot sectors? Forget emerging markets. Indonesia was the only emerging market that was up last year. Hot this year: International debt and low volatility strategies, which can be as simple as buying low beta stocks. Academic research has begun to reject the style box. Rather than small, mid, and large cap, or growth versus value, traders are slicing the pie by momentum and volatility.

2) No slowdown in new products: 306 ETFs introduced in 2011, more than 900 in registration, but is the industry starting to mature? The best year for inflows was 2008 with $175 billion — since then ETFs have continued to attract money, but at a lower rate: $119 billion in 2009; $118 billion in 2010; and the same in 2011. Still its better than mutual funds. Equity mutual funds continued to lose assets in 2011, while ETFs continued to gain. There's now $1.05 trillion in assets in ETFs, a roughly 5 percent gain from 2011. And the big keep getting bigger: On Friday, SPDR S&P 500 passed $100 billion in assets, the largest ETF in the world. SPDR Gold  second with about $62 billion.

3) Risk is still an issue: At the “ETF 101” panel, there were lots of questions on hidden risks. Questions on leveraged and inverse ETFs, and whether ETFs could collapse. Matt Hougan, managing director of ETF analytics for Index Publications, publisher of, countered by noting that investors should be more worried about what the markets are doing, and whether it is giving ETF investors the returns they want.

4) While assets under management are not increasing as fast as prior years, big players are still coming in. Fidelity Investments, which has only one ETF, is planning to launch a series in 2012. Bond giant Pimco is launching a Total Return ETF in March, the ETF equivalent of it's legendary Total Return Bond Fund. The ETF world is still dominated by the Big Three of iShares, State Street, and Vanguard, but in 2011 Vanguard attracted the most inflows. In fact, Vanguard saw more inflows into it's ETF business than it did into it's mutual fund business!

5) Price sensitivity: Cheaper the better. As the industry has begun to mature, investors have become more price sensitive. Example: the SPDR Gold charges 40 basis points per year, but iShares Gold Trust has been attracting assets because it charges only 25 basis points.

6) Trader ETFs. Velocity Shares, which have leveraged and inverse exchange traded notes (ETNs) have become more popular among sophisticated traders but are not appropriate for average investors.

The tentative rundown of guests:

Monday, 10:30 a.m.: Gus Sauter, Vanguard chief investment officer, “Return to U.S. Investments”

Monday, Noon: Bob Pisani

Monday, 2:30 p.m.: Michael Iachini, Charles Schwab managing director of ETF research, “2012 ETF Outlook”

Monday, 3:15 p.m.: Ben Fulton, Invesco PowerShares managing director of global ETFs, “New ETF Products/Lov Volatility Investing”

Monday, 5 p.m.: Nick Cherney, VelocityShares chief investment officer, “Trading Volatility Using ETPs”

Tuesday, 10 a.m.: Tyler Mordy, Hahn Investment chief investment officer, “Investing in Currency ETFs”

Tuesday, 12 p.m.: Tony Rochte, State Street Global Advisors senior managing director, “2012 ETF Strategies/Where Investors Should Look to Put Their Money”

Tuesday, 1:30 p.m.: Matt Tucker, BlackRock head of fixed income strategy, “Investing in Bond ETFs/Income in a Low Interest Rate Environment”

Tuesday, 2 p.m.: Will Rhind, ETF Securities managing director, “Investing in Commodity ETFs”

Tuesday, 5 p.m.: Matt Hougan, global head of editorial, “ETFs Under Scrutiny”

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