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Strategies & Market Trends : Value Investing

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To: Paul Senior who wrote (46738)	2/24/2012 11:33:30 AM
From: deeno	of 78717

probably OT This discussion of ETF's and Mutual funds is quite interesting and changing. They seemed pretty straight forward until you read a prospectus and decipher tracking errors. I was chatting with some "manager" at Ishares and I was told that they were bring out another 100 to 150 ETF's this year. I ask how in the world can there be that many indexes to copy? he told me that the companies that brand indexes slice and dice the world into 1000's of pieces. In fact he told me that there are over 20,000 indexs alone at one firm. Once you slice one up you back test them to see if they actually represent anything of substance and market that result and see if it sticks. Alternatively large insititions may see some aspect of the market they like, or would like some hedge against, and ask for ETF's to be designed. So it seems to me that ETF's will eventually be as diverse as mutuals. Infact there are ETFs that claim to match certian funds. The advantage being intraday trading and lower costs. There is a massive amount of profit in these babies. The marquee index creater gets a slice of the etf fee for creating the index. Any monkey can match the index rather than actually manage the assets and there may be opportunities for managers such as Bill Gross to take a nice slice of a monster pie to emulate exisiting funds. Its all very interesting. Since the ETF's are historically created the question becomes how long the formula for creation remains valid. Not unlike a formula that a portfolio manager might stake his reputation and track record on. So you get an active managment formula trading a stagnant supervised portfolio. Ive never seen you as a mutual fund type so I dont think that ETF's will garner much interest for you. I tend to use them for an intermidiate play. the last one was GRID when I though the smart meter industry would fare well. I Was really waiting for silver spring to come publicc, but wanted to be in the space if they had become a hot deal. Its just an arrow in the quiver.

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