News Mentions & Press Releases
The chief of a Midwestern ETF strategist with about $8.9 billion in AUM is expanding his C-suite by two.
Ryan Beach, CEO of CLS Investments, confirms that Chad Boyer recently joined the Omaha, Nebraska-based firm as chief technology officer and that Nick Arreola will join soon as chief behavioral scientist. Both positions are newly created and will report to Beach.
Since January 2017, Boyer has served as applications architect and founder of NEWA Enterprises, also in the Omaha area. Arreola serves as director of data engineering at Creighton University, a Jesuit Catholic school in the Omaha area.
“We’ve made a pretty big push in the behavioral finance area recently,” Beach tells MFWire.
CLS already has “a great reputation in the marketplace” for managing financial risk, Beach says, and he sees a lot of value in “managing behavioral and psychological risk,” too.
The exchange traded fund (ETF) industry has experienced rampant growth, expansion, and innovation since the launch of SPY (SPDR S&P 500 ETF Trust) by State Street Global Advisors in 1993. In just 25 years, they have become the most disruptive and popular vehicle in the investment industry. As a result of this popularity, the ETF market for U.S. – listed funds has amassed $3.5 trillion in assets with a total of roughly 2,200 funds available for retail and institutional investors. Globally, to include funds listed on exchanges outside the U.S., total ETF assets have reached $4.6 trillion.
Driven by relatively low fees, convenience, and transparency, the pace of growth in the ETF industry has been extraordinary. In the last 10 years alone, assets have grown by a compound annual growth rate of 23% per year, or 547% cumulatively. Net flows in 2017 reached their highest point at $466 billion, according to data from Morningstar. While SPY remains the industry’s largest ETF with $255 billion in assets under management, its share of the ETF market continues to shrink. In 2006, this ETF accounted for 16% of the entire space. Today, that number is just 7%. With no immediate hindrance to the pace of growth in sight, it’s not inconceivable that 7% will be cut in half sometime in the next three to five years, maybe even sooner.
There has been a surge of interest in multifactor ETFs during the past few years. These funds, which promise to provide smoother returns and greater upside than the broader market, sound like a fund marketer’s dream.
And investors have embraced them. The assets under management in this emerging niche have swelled from around $2 billion in 2015 to roughly $15 billion this year, according to research firm XTF.com. That mirrors the growth in the number of such funds on offer, which has risen from 39 in 2015 to roughly 120 today.
Yet it’s fair to ask if these funds can really deliver on their promise. And if so, which approaches are working best? Let’s take a closer look.
Active management has had a bad rap in recent years, but I expect the winds are beginning to change and a period of improved relative performance lies ahead. There are five winds to note: Two are heavy headwinds lessening in strength, and three are seasonal headwinds set to become tailwinds.
First, what exactly is active management? And, what is all the fuss about “passive versus active” management that generates so many headlines and articles?
In my opinion, there is too much chatter and ink spilled on the “active versus passive” debate and thus a lot of confusion among investors. There are a few topics here rolled into one — the most significant being the move from actively managed mutual funds to ETFs. It’s a complex subject, and I believe understanding can be clearer if we are all on the same page, first regarding how the terms are defined.
As I suggested in a previous post, active mutual fund managers, in aggregate, do show some ability to outperform — gross of fees — and if these same managers moved to ETFs and lowered their fees, they would improve their outperformance odds. While active ETFs are relatively new and limited in size and scope, we can still draw from the experience thus far to get a sense of how managers have performed in the ETF structure.
From the already-limited universe of active options, I excluded funds launched within a year to get a somewhat fairer comparison. I then looked at each fund’s performance versus its stated prospectus benchmark and Morningstar-assigned category index (this is not the category average, but a standard index used to measure performance of funds in the category). That left us with a measly 142 ETFs.
An unlikely superstar is emerging in the battle for ETF supremacy: the professor.
It’s easy to see why. With the three largest ETF issuers controlling 83% of the assets, others must go above and beyond to stand out. That means pioneering higher IQ products, like smart-beta, which shun traditional indexes in favor of weighting by other factors. It also means innovating wherever possible, setting an attractive price, coming up with a memorable ticker — and now, getting backing from an array of big thinkers.
“Academics always bring credibility to the table,” said Rusty Vanneman, chief investment officer at CLS Investments, which manages $9 billion from Omaha, Neb. “They have always been important but probably even more so in recent years.”
Bond markets have been front and center for investors this year.
A new Fed chairman, 10-year Treasury yields near 3%, and rising inflation are just three of the factors fixed-income investors have had to grapple with so far in 2018.
With the market in flux, ETF.com sat down with five fixed-income experts to get their take on where things are headed from here and how investors should position themselves in these turbulent times.
How should investors position themselves in the current rising interest rate environment?
Josh Jenkins, portfolio manager; Omaha-based CLS Investments
We think it’s important to remember bond investors are better off with higher rates. The current yield is a strong predictor of future bond returns, so higher yields today should improve returns tomorrow.
The fifth annual ETF.com Awards Thursday night in New York City honored products, people and companies that made a difference in the ETF industry in 2017. The more than 30 categories recognize everything from new funds to established products, as well as the issuers, service providers and end users who make the industry go round.
This year, the Lifetime Achievement Award went to WisdomTree executive vice president and head of WisdomTree Europe David Abner, who joined the firm in 2008 from Bear Stearns and has been a driving force for investor education on ETFs and how to trade them.
“Not long after I joined WisdomTree, I realized that investors—mostly institutions and advisors—were starting to use the products more, but really didn’t understand how the products were priced, why spreads had a particular width and where ETF liquidity came from,” Abner said. And from that realization grew his book, “The ETF Handbook,” which is currently entering its third edition.
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NEW YORK — A long rally in technology stocks has left investors thirsting for more, but that could be a mistake as the strengthening U.S. economy points to better value in other stocks.
Heavyweights like Apple, Alphabet and Facebook have especially helped growth indexes in the past year rise more than value indexes, which right now are heavily weighted in financials.
Tech so far in 2018 is the best-performing sector too, leading the recovery from the market’s steep selloff in early February, with the Nasdaq hitting record highs again in recent sessions.
Among this year’s crop of notable fund managers, a couple of key themes emerge: the importance of acclimating to rapidly shifting economic conditions and the challenges faced by active managers at a time when low-cost passive products are favored by many investors.