As I looked through the list of ETFs in registration and read some about some new funds that just came out I get a Jeff Spicoli sensation; dude, that was my skull.
This is not so much of a rant that there are too many ETFs or some silly idea that they will wag the dog but more about how unlikely it is that some of these funds will ever gain any traction.
One group of funds in registration is from VTL Associates. They want to bring revenue weighted ETFs for large cap, mid cap and small cap stocks. I doubt these funds will be radically different than other ETFs that weight stocks by market cap in pursuit of capturing their intended effect.
The funds might be outstanding, this is not to question the method employed. It is not clear to me what the catalyst is for someone who is really on top of the ETF space to switch into a fund that they might reasonably view as a slightly different mix of the same stocks and further I am not sure what the tipping point would be for someone who is not that familiar with ETFs to buy a fund from some new company they probably know nothing about.
I would expect me too funds from the bigger players to have trouble attracting assets too. I have written many times about trying to learn about new ETFs that come to see if they could be better mousetraps but it just about at a point where I will not be able to keep up with all of them.
I tend to think of ETFs as a way to simplify but 25 choices for a small cap growth ETF doesn't seem so simple to me.
2 comments:
Roger, aren't those revenue-weighted more along the lines of the Research Affiliates stuff of Rob Arnett?
Something akin to the FTSE RAFI index - in other words, a fundamental index that severs the link between valuation (a cap-weighted index) and fundamental position in the economy?
Jay Walker
The Confused Capitalist
a revenue weighted product is a type of fundamentally weighted ETFs, you are right.
i'm sure their back test is great too , I just doubt it will gain any traction
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