Canada’s second largest pension fund, OMERS, made some big moves in its equities portfolio, according to a 13F filing with the Securities and Exchange Commission. While OMERS dumped shares in a host of well-known companies, it bulked up some of its exchange-traded fund holdings, a sign that these products are playing a bigger role in their equity portfolios.
Coverage of the 2013 Risk Management Conference.
While exchange-traded funds (ETFs) are a big part of the pension scene in places like Europe and the U.S., ETF providers complain that the UK lags far behind largely due to consultants that don’t take them seriously.
Over the summer, investors have been showing themselves willing to toss aside post-crisis security blankets as economic fundamentals improve in the U.S. and as the Fed sends signals that it’s prepared to pull back on its historic stimulus efforts. What all this means for markets is becoming clearer as the summer progresses. Last week’s report from BlackRock on quarterly inflows and outflows from exchange-traded products contains a few important signposts for investors trying to figure out where to go next.
Apparently, monkeys can generate better performance than market capitalization-weighted indexes. At least that was the main finding of research done recently at London’s Cass Business School where it was found that equity indexes constructed randomly by a computer (or a pointing primate) produced higher risk-adjusted returns than an equivalent market capitalization-weighted index. And it isn’t just over the last year…or the last decade. It’s over the last 40 years—from 1968 to 2011.
Exchange-traded funds have been especially compelling for their ability to get investors in and out of less liquid areas of the world, such as emerging markets. The thing is, liquidity can come at a price when markets go nuts, which is exactly what happened in the wake of Federal Reserve Chairman Ben Bernanke’s now-infamous May 22 remarks about pulling back stimulus in the U.S. His remarks sent shock waves through global markets, with emerging markets bearing the brunt of the sell-off.
Disillusioned with active management, more and more plan sponsors are running the other way. They’re taking a passive stance in their portfolios as they ride out the vagaries of equity and fixed income markets. Probably the boldest move of late has come from officials with the US$460-million Montgomery County Pennsylvania pension fund, which announced plans to shift 90% of its assets to index funds bought from Vanguard. Why? It’s about the costs.
Active exchange-traded funds (ETFs) are critical to the future of the industry. However, Knight Capital’s Reginald Browne says, when it comes to institutional trades, active ETFs are a bit more challenging for a market-maker.
At a Toronto roundtable, experts discuss how exchange-traded funds are moving markets and whether or not investors need to worry.
Investors are now running away from just about everything fixed income—high-yield bonds, treasuries, etc. But there is one area of the beleaguered fixed income universe where money continues to flow the right way: target-maturity bond exchange-traded funds.