Let's Talk ETFs

Rushed to market just 6 months into the COVID-19 pandemic, the Pacer BioThreat Strategy ETF (VIRS) takes a unique approach to picking potential pandemic winners. The LifeSci BioThreat Strategy Index underlying VIRS selects holdings based on seven different criteria - everything from potential vaccine makers to companies powering the transition to a work-from-home economy. Pacer ETFs President Sean O’Hara joins Let's Talk ETFs to explain why his firm's new ETF is designed to protect investor portfolios from both the current - and future - pandemics.
Show Notes

3:00 - Was VIRS planned in advance, or rushed to market in response to COVID-19?

4:30 - Have you had to make adjustments to the fund's composition in response to ongoing developments?

7:00 - What are other elements of the index aside from the medical side of the pandemic (i.e. vaccines and treatment)?

13:15 - How "pure play" does a company have to be to be included in the index?

17:30 - How does VIRS' weighting methodology work?

24:30 - How can you be certain that the index will be able to profit from vaccines given the large number of companies developing them and the relatively small number of companies in the index?

Composition of VIRS by sectors and themes:

28:00 - Therapeutic drug companies

29:00 - Biological warfare plays

33:00 - What's the underlying strategy of Pacer's Alternator ETF series? (ALTL) (PALC) (PAMC)

42:30 - Potential tax implications of the Alternator funds


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2020 has already seen the quickest bear market sell-off and counter-rally in history. With one of the most consequential elections in U.S. history just six weeks away and another virus wave likely this fall, volatility will remain the key investing story in 2020. So much fear and greed can make even the most seasoned investor abandon well thought out plans, leading to potentially catastrophic results to their portfolio's bottom line. EPB Macro Research's Eric Basmajian rejoins the podcast to walk listeners through his unique approach to portfolio construction, which blends mean-variance analysis and his own financial forecasting models to produce risk-adjusted outperformance.
Show Notes

4:00 - 2020 has been a crazy year for markets - and it's not even over

7:30 - What is Modern Portfolio Theory - and why does it work?

12:30 - Balancing risk through mean variance analysis

17:30 - Eric's approach to portfolio construction within EPB Macro Research

23:00 - Frequency of portfolio rebalancing

29:45 - Current valuations and future expected returns in asset class allocations and position sizing 

33:30 - How overvalued are equities right now?

37:30 - Valuations continued: U.S. vs. Foreign equities

42:30 - Expected bond returns in a flat yield curve environment

56:00 - Disconnect between Wall Street and Main Street: How efficient are markets?

62:00 - Too much debt is bad for future growth

72:00 - Labor force vs. productivity growth

76:00 - Given the current interest rate environment, how does one get a real rate of return in bonds?


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With his ATAC Rotation Fund (ATACX) up 58% YTD, Michael Gayed explains how he uses historically proven leading indicators of volatility to generate outsized returns. ATAC Rotation employs a tactical risk-on, risk-off strategy that alternates weekly between a mix of stock and bond ETFs based on projections of short-term volatility. With the VIX jumping from 22 to 32 in a little over a week and markets flailing, investors would do well to heed Gayed's central message: Ignore gathering storm clouds at your own peril.
Show Notes

3:30 - How does the strategy underlying the ATAC Rotation Fund work and how did Michael come up with it?

10:45 - What has driven the impressive returns so far in 2020?

20:00 - Effect of the COVID-19 pandemic on investor sentiment

23:00 - The 2020 effect: Making sense of one of the craziest years for investors in recent memory

29:00 - Diagnosing the problem: The disease plaguing American capitalism?

41:00 - Fund basics: Why hold 4 different small-cap ETFs? What does the ETF selection process look like?

48:30 - 2,000% turnover: How do you tax manage a fund like this?

53:00 - The Lead-Lag Report: Michael's outlook for equities?

55:00 - Dos and Don'ts of the ETF screening process


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Larry Swedroe has established himself as a voice of financial reason and one of the world's foremost proponents of evidence-based investing over nearly five decades managing money. His recently updated and expanded best-seller, The Incredible Shrinking Alpha: How to be a successful investor without picking winners, is a well-timed continuation of the argument he's been making for decades: Investors need not do anything spectacular to succeed. Rather than search for alpha, that ever-elusive holy grail of investing, investors are better off seeking beta, creating risk-adjusted return streams that offer the best chance at reaching their goals.
Show Notes

3:30 - What would you say to investors who think the high volatility of February and March is behind us?

7:45 - Where has all the alpha gone?

11:00 - Other reasons alpha is harder and harder to find

14:30 - An increasingly tough competitive environment

21:30 - What about Warren Buffett? Confusing beta for alpha

31:30 - Alpha vs. beta: More than semantics?

34:30 - What do Larry mean by "passive management"?

42:00 - Price discovery impeded: Is there such a thing as too much index investing?

55:00 - Why do so many investors continue to put their money into more expensive actively-managed strategies, despite the lack of evidence of persistent outperformance?

61:00 - Practical portfolio construction: How do you narrow down the vast universe of available passively managed funds?

78:30 - How important is it to stick with a single fund family across an entire portfolio?

83:30 - Recommendations regarding rebalancing and taxes?


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Among the search for non-correlated strategies in the current risk-laden environment, The Quadratic Interest Rate Volatility and Inflation Hedge ETF (IVOL) has stood out from its fixed income ETF peers, gathering nearly half a billion dollars in assets under management and winning the 2019 ETF.com award for Best New U.S. Fixed Income ETF. As the first fund to place a bond convexity strategy within an ETF wrapper, IVOL seeks to hedge relative interest rate movements while providing the potential for enhanced, inflation-protected income. Quadratic Capital founder and Managing Partner Nancy Davis joins Let's Talk ETFs to make sense of the current interest rate environment and explain why her firm's flagship fund belongs in intelligently constructed portfolios.
Show notes

4:30 - Why leave the comfort of the "big Wall Street firms" to launch your own firm and ETF?

6:45 - Is the strategy underlying IVOL similar to what you are doing for private clients at Quadratic?

8:30 - Nancy's broad outlook for fixed income in the present environment

12:00 - When does the risk of inflation become real and how long will it take to get there?

14:00 - A way to play a widening yield curve?

17:15 - Breaking down IVOL's risk profile

21:30 - Understanding IVOL's component parts: Long options tied to the shape of the U.S. interest rate swap curve

24:00 - Is there a benchmark with which to measure the fund's performance?

25:30 - IVOL: As non-correlated to common asset classes as an ETF strategy gets 

32:30 - Understanding IVOL's component parts: Why go with The Schwab U.S. TIPS ETF (SCHP) for the TIPS component?

34:45 - The current outlook: Between the pandemic and the U.S. election, how much rate volatility should investors be pricing in for the rest of the year?

40:00 - Next steps: Nancy's future plans in the ETF space


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The economic carnage wrought by COVID-19 has forced many long-time dividend paying stocks to slash their yields, with many more favored dividend paying names at risk of having to follow suit. Reality Shares Co-Founder and CEO Eric Ervin rejoins Let's Talk ETFs and walks listeners through the proprietary DIVCON "dividend safety" rating system that powers his firm's DIVCON Leaders Dividend ETF (LEAD) and DIVCON Dividend Defender ETF (DFND). The objective is simple: Help yield-focused investors stay one step ahead of the dividend curve by either completely avoiding those dividend payers that are most likely to cut their dividends, as in the case of LEAD - or by outright shorting those companies, as is the case with 25% of DFND's portfolio (the fund goes long the dividend paying stocks least likely to cut their dividends with the remaining 75% of its holdings).

How's the strategy playing out for investors? So far in 2020, these ETFs' performance speaks for itself, with outperformance of between 8% (LEAD) and 11% (DFND) versus the S&P 500.
Show Notes

4:00 - How has Eric's work life changed as a result of COVID-19? What's the situation in San Diego?

7:30 - How does the DIVCON methodology work?

11:30 - Choosing companies likely to grow their dividends

18:00 - Uncovering the "riskiest" dividend stocks: "DIVCON 1"

20:00 - How do the current DIVCON rankings break down in terms of sector and market cap?

24:00 - How often does DIVCON re-rank the universe of dividend paying stocks? How often are these funds' underlying components changed?

29:30 - Fund holdings: "DIVCON 5" standouts

37:00 - DFND: Is there less risk by being long and short at the same time?

42:30 - Why are DFND's expenses so high?

46:45 - What can investors expect from dividend stocks - and interest rates in general - in the current environment?


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The COVID-19 pandemic has created a massive divergence in performance among thematic ETFs. Among the most pioneering of the thematic ETF issuers, Global X's CEO Luis Berruga joins Let's Talk ETFs to discuss where he sees the greatest opportunities in the current landscape. Some of the themes we discuss - e-commerce (EBIZ), video games (HERO) - will come as no surprise to listeners. Others will. There's an idea here for nearly every type of ETF investor.
Show Notes

2:45 - A most elegant piece of financial engineering: Luis' move from investment banking to Global X ETFs

7:00 - A global footprint: Mirae Asset enters the picture

12:30 - How many exchanges are Global X ETFs currently listed on?

17:15 - Masters at work: Global X's approach to thematic investing

24:00 - The birthing process: How Global X brings thematic products to market

28:00 - Matchmaker, Matchmaker: Carefully choosing the perfect indexer for each ETF

30:00 - Are institutional investors using thematic ETFs differently than individuals?

34:30 - How has COVID-19 affected trends in the thematic space?

38:30 - COVID-19 thematic ETF lightning round


39:00 - The race for the cure: The Global X Genomics & Biotechnology ETF (GNOM)

43:00 - The evolving business of aging: The Global X Longevity Thematic ETF (LNGR)

46:00 - Body-mind connection 2.0: The Global X Robotics & Artificial Intelligence ETF (BOTZ) 

50:00 - The new shop-from-home economy: The Global X E-commerce ETF (EBIZ) (AMZN)

55:45 - The new socially distant entertainment ecosystem: The Global X Video Games & Esports ETF (HERO)

62:00 - Looking for yield in a yield-less world: Global X SuperDividend ETFs (SDIV) (DIV)

71:45 - What are Luis' favorite sectors right now?


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With 97% of U.S. ETF assets in funds that track an index, and overall assets continuing to grow rapidly, indexing has never been more central to the overall investing landscape. Perhaps nowhere is this more apparent than in the months immediately leading up to and following the annual "Russell Recon" - where companies are added and removed from key benchmarks. Catherine Yoshimoto, Director of Product Management at FTSE Russell, joins Let's Talk ETFs to discuss 2020's top trends - and what they mean for investors' ETF portfolios.
Show notes

3:00 - How has the pandemic affected Catherine's day to day work flow?

6:00 - Why indexing?

7:30 - What does being director of product management at a major indexer entail?

9:00 - On the centrality of indexes to the ETF investing ecosystem

10:30 - What's the process of creating a new index look like?

15:00 - A bird's eye view of the FTSE Russell indexing universe

16:30 - A walk through Russell's annual recon

20:30 - 2020 Recon lessons: Divergence between large and small cap US stocks

23:45 - What changes were most notable in terms of sector compositions?

26:15 - Has the "flight to quality" Catherine first noted back in April continued, or have other factors taken the lead in recent months?

32:00 - ESG investing: Why the focus on sustainable investing specifically?


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Many investors are surprised to learn that a typical 60/40 stock-bond mix has 85% of its underlying risk concentrated in the 60% of the portfolio allocated to equities. Taking inspiration from the All Weather Portfolio popularized by Bridegwater Capital's Ray Dalio, the RPAR Risk Parity ETF (RPAR) spreads risk evenly across a portfolio comprised of four different asset classes. The objective is simple: deliver risk-adjusted outperformance across an entire market cycle and through all market environments. So far, RPAR has gathered assets at an impressive clip - no doubt a result of its impressive performance throughout the current market turmoil. The managers behind one of the most successful ETF launches of the past year (RPAR) join Let's Talk ETFs to explain exactly what makes their fund tick.
Show notes

5:00 - RPAR Risk Parity ETF (RPAR): A bird's eye view of the strategy underlying the fund

6:30 - What is the history of this type of strategy's performance?

8:00 - How is your fund different from the All Weather Portfolio popularized by Bridgewater Capital's Ray Dalio?

10:00 - RPAR: A "True" risk parity strategy

15:00 - Why is this not exactly an index fund?

20:45 - On duration risk: Why the strategy always invests in longer duration treasuries?

25:00 - Dealing with a rising rate environment

26:15 - Relative to a 60/40 mix what would the standard deviation of RPAR be?

27:00 - What's the maximum drawdown an investor in the fund could expect?

31:30 - Specific holdings: (BAR) versus (GLD) for physical gold exposure

35:00 - Why individual companies versus an ETF for commodity producers exposure? 

40:00 - What are the top equity positions?

42:00 - Is the fund meant to be a core or a satellite portfolio holding?

45:30 - Who is buying RPAR? Retail versus institutional investors

50:00 - The current macro outlook - and why risk parity makes sense no matter your point of view


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The ETF space tends to innovate in waves. First came plain vanilla cap-weighted index funds. Next came factor investing, utilizing academic research to create indexes with much more pinpointed exposures. After nearly three decades, the revolution in actively-managed equity ETFs is finally here. From its Magellan Fund of Peter Lynch fame in the 1980s to the Will Danoff-run Contrafund today, Fidelity has been a pioneer of active fund management on a grand scale. Among the first to roll out alpha-seeking active equity ETFs, Fidelity head of ETF Strategy Greg Friedman joins Let's Talk ETFs and gives investors a crash course in exactly what to expect from these new, yet familiar, products.

2:45: Fidelity’s new active, semi-transparent ETFs: The next chapter in the natural evolution of ETF development

6:30: Fidelity’s unique research process

8:30: Fidelity’s success as a brokerage platform

11:00: Why isn’t front-running a concern in the active fixed income space?

13:30: What does factor investing look like in the fixed income space to Fidelity?

17:45: How does Fidelity think about factor investing when it comes to equity investing?

20:30: Active, semi-transparent ETFs: The “Fidelity model” explained

29:00: Relative to mutual funds, can investors expect lower expenses on Fidelity's new active, semi-transparent equity ETFs?

31:00: Can investors expect these products to be more tax efficient than traditional mutual funds?

33:15: Fidelity Blue Chip Value ETF (FBCV) and Fidelity Blue Chip Growth ETF (FBCG)

35:30: Fidelity New Millennium ETF (FMIL)

36:30: What's Fidelity’s larger strategy in the active, semi-transparent equity ETF space?




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