Financial industry experts and insiders were immersed among plenty of hot button ETF topics at the 2017 Morningstar ETF Conference Sept. 6-8 in Chicago.
Ben Johnson, Morningstar’s Director of Global ETF Research, told ETF Trends this year’s eighth-annual conference had more than 800 attendees.
“In my biased opinion, it was our best yet,” Johnson told ETF Trends.
When asked what were some of the biggest takeaways and highlights, Johnson said it was hard to pick.
“We had a number of important conversations about factor investing and the pitfalls investors facing when choosing and using factor-focused funds,” he said. “Investor behavior was another important topic. Our luncheon keynote, a conversation between Ritholtz Wealth Management’s Barry Ritholtz and behavioral economics pioneer Professor Richard Thaler, was a wide-ranging look at all the myriad ways in which we shoot ourselves in the foot when it comes to managing our finances and investments.”
Among the most talked about topics at the conference was the smart beta space, as more investors are looking to ESG or environmental, social and governance linked investments. However, there is no single industry-wide definition for the ESG theme, and with no consensus on the investment category, many ETF providers have come out with their own interpretation of ESG-related investments. Nevertheless, some view ESG ETFs as a way for investors to invest in line with their values without sacrificing returns.
Some were also eyeing the fixed-income segment as the next frontier for smart beta ETFs. Many smart beta ETFs cover the equity side, but the fixed-income segment has been mostly left to the side. However, smart beta bond ETFs could grow as investors look to alternative investment strategies in an environment when the three-decade-long bull run in the bond market ends and interest rates begin to rise.
As the ETF industry has continued to grow, Johnson said it’s grown ever-more complex.
“Investors are looking for a venue to seek out the answers to a growing list of questions they have about ETFs and the strategies that are being brought to market on the ETF chassis,” he said.
International equities in both developed and emerging markets have also attracted a lot of attention and are expected to continue to gather greater inflows as investors look to relatively more attractive markets in light of an ongoing bull rally in U.S. equities that has pushed valuations to historical highs. More advisors and money managers have turned to international stocks as a way to diversify away from domestic markets and potentially capture greater returns in foreign markets.
For instance, we are witnessing an escalating ETF fee war that has pushed expense ratios closer and closer to zero, which ultimately helps the end investor. The rising popularity of the ETF investment vehicle has helped many fund providers accumulate greater assets under management to the point where it has become economical to utilize larger scale and cut fees to attract even more investment interest.
Related: 5 ETFs Hauled in a Lot of Cash in August
Joe Davis, Vanguard’s global chief economist and head of the Investment Strategy Group (pictured above), discussed economic and investment trends and the implications for the economy and the markets.
He spoke about how U.S. and global economies will undergo a dramatic transformation as several large global forces take hold.
Johnson said he personally enjoyed Joe Davis’ opening keynote.
“He painted a very optimistic picture of our future and the progress we can make towards greater and more widespread prosperity by learning to love and leverage technology and the process of lifelong learning,” Johnson said.
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