A variation on the age-old chicken vs. the egg debate has emerged with exchange traded funds (ETFs). What’s more important: transparency or performance?
Panelists clashed over this very question at the World Cup of Investment Management Conference in Paris, reports Carolyn Bandel for IPE.
On Team Transparency was Thorsten Michalik, a managing director of the ETF team at Deutsche Bank. He contends that so many products flooding the market have confused investors to the point that they need consultants to help them sort it all out. He believes that keeping ETFs as simple and transparent as possible is the best route to take.
On Team Performance was Daniel Freedman of Spa ETF. He argued that performance is the most important aspect for institutional investors. His stance is that institutional investors are the predominant users of ETFs and that improving returns is number one on their list. Performance is priority and outperformance adds value in their eyes.
We here look for performance above all before investing in an ETF. Maybe it’s because we take the transparency of ETFs for granted, especially when compared with the lack of transparency in mutual funds. As actively managed ETFs begin to roll out, it will be interesting to see how their lack of transparency affects investors’ decisions.
Where do you fall on the spectrum?
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.