The Effects of ETF Turnover
(Oct 2012)
Lately there has been a lot of turnover in exchange-traded funds (ETFs), as we noted back in August. InvestmentNews has a great summary of what has happened this year, with 86 funds having closed so far in 2012. They note the important consequences of an ETF closing for investors and advisers:
Even though they are more routine, ETF closings still can create ripple effects that reach financial advisers and their clients. "For an adviser, the worst thing that can happen is, you recommend an ETF...
Do ETF Flows Move the Market?
(Oct 2012)
As exchange-traded fund (ETF) flows have grown over the past few years, the question of whether those fund flows influence the prices of ETF holdings has become a perennial issue. Matt Jarzemsky and Chris Dieterich of the Wall Street Journal recently posted what is perhaps the highest profile discussion of this issue to date, in which they provide interesting evidence that the ETF 'tail' might be wagging the market 'dog.'
They note that in early October, mid-cap indexes saw...
Hedge Fund "Side Pockets" Explained
(Jul 2012)
Hedge funds can be extremely complicated investments, and one of the features that contributes to their lack of transparency is their so called 'side pocket' accounts. Side pockets have drawn scrutiny from the SEC and have been the subject of high profile investigations (see also) due to their potential for abuse from hedge fund managers eager to hide losses from investors.
Side pockets are essentially separate accounts that a hedge fund may use to separate illiquid or thinly traded assets...
Buffered and Capped Closed-End Funds
(Jul 2012)
Last Friday the Wall Street Journal reported on a new product which combines features of both structured notes and closed-end funds. The eUnit 2 Year US Market Participation Trust IIwas first issued by Boston-based investment company Eaton Vance on May 30. This was the second offering by Eaton Vance of such a product: the first trust with identical name debuted on Jan 26.
Inessence, the eUnit Trust is like a structured note with capped upside potential and buffered downside loss. At the end...
Big Wall Street Firms Pressure Their Salesmen to Favor House-Brands
(Jul 2012)
Financial advisors and brokers are bound by ethical guidelines to analyze and recommend investment products that are suitable and appropriate for their clients' investment objectives and tolerance for risk. In general, they are obliged to put their clients' best interests ahead of their own.
The New York Times reported Monday on the recent admission from a former JPMorgan mutual fund advisor that he sold JPMorgan funds over similar offerings from outside JPMorgan for no other reason than to...
The "New" Non-Traded REITs Look a Lot Like the Old Ones
(May 2012)
Yesterday's Wall Street Journal had an article describing the "new versions" of non-traded real estate investment trusts (REITs), which purport to solve some of the transparency issues which have made non-traded REITs the subject of regulatory scrutiny. In particular, several non-traded REITs are now offering daily updated net asset values (NAV) in an attempt to calm concerns regarding the lack of transparency in the pricing of non-traded REITs.
However, a review of the prospectus for...
Bill Luby on VIX-Related Exchange-Traded Products
(Apr 2012)
Bill Luby, who writes at the VIX and More blog and Expiring Monthly: The Options Traders Journal, is one of the most respected voices on all things related to the CBOE S&P 500 Volatility Index, also known as the VIX. We highly recommend anyone interested in the VIX and volatility-related derivates check out his blog, which has a variety of useful analysis and commentary.
Recently there has been a lot of coverage related to TVIX and otherexchange-traded products linked to the VIX. Here at...
TVIX Explodes...Then Implodes
(Mar 2012)
The Wall Street Journal has an article about the rollercoaster ride that TVIX, a volatility-related ETN, has been on recently. [UPDATE 3/31/12: there is now a second WSJ article]
TVIX is a leveraged ETN issued by VelocityShares, which is Credit Suisse's ETF/ETN brand. Contrary to popular belief, TVIX and other volatility products do not track the CBOE S&P 500 Volatility Index (the VIX); instead, TVIX tracks a daily rolling portfolio of first and second month VIX futures with an average...
Problems Surrounding the Complexity of Annuity Products
(Mar 2012)
On Sunday, The Wall Street Journal reported the felony-theft conviction of Glenn Neasham who had sold a complex annuity to an elderly woman. The conviction -- which comes with a 90-day sentence -- was handed down by a state-court jury in Lake County, CA. From the article:
The case underlines authorities' continuing discomfort with "indexed" annuities, savings products that pay interest tied to the performance of stock- and bond-market indexes. Insurers guarantee that buyers won't lose any of...
Abuse of Municipal Finance in Wisconsin
(Mar 2012)
The Wall Street Journal is reporting that Stifel Financial has settled with five Wisconsin school districts on charges that they misled these municipal investors with their sale of several complex CDOs. This is just another example of the situation outlined in a previous postwherein a municipality or institutional investor was taken advantage of through the sale of inappropriate investments. The settlement involves $22.5 million in cash, plus $154 million in debt forgiveness. SLCG has been...
