Acknowledgments xiii
Introduction: Institutions and ETFs xv
Section I: The ETF Phenomenon
Chapter 1 Why are ETFs So Popular? 3
Low Cost 4
Liquidity 6
Tax Efficiency 8
Transparency 9
Diversification 11
Easy Asset Allocation 13
Standardization 14
Democratic 16
No Emotion 17
Passive Investing 17
Flexibility 19
Anonymity 20
Price Discovery 21
Fiduciary Vehicles 23
Battle Proven 24
Convenience 24
Notes 25
Chapter 2 ETF Growth 27
Asset Growth 27
ETF Assets in Perspective 29
Trading Growth 30
Product Growth 34
Notes 36
Chapter 3 ETF Mechanics 37
The Story of the ETF 38
The Creation/Redemption Process 42
AMEX Wasn’t Alone 44
Finally Ready for Launch 46
Notes 51
Chapter 4 Institutional Usages 53
Cash Equitization 55
Manager Transitions 60
Portfolio Rebalancing 63
Portfolio Completion 63
Liquidity Sleeves 64
Shorting/Hedging 66
Long and Lend 70
Tactical Moves 72
In-Kind Creation/Redemption 74
Bespoke ETFs 77
Tax-Loss Harvesting 82
Long-Term Allocation 83
Personal Usage 87
Notes 89
Chapter 5 ETF Due Diligence 91
Exposure 93
Cost 100
Liquidity 119
Risk 130
Regulatory Structure 133
ETF Issuers 136
ETF Ratings 138
Notes 140
Section II: The ETF Toolbox 143
Chapter 6 U.S. Stock ETFs 145
Large Caps 146
Mid Caps 155
Small Caps 156
Broad Market 159
IPOs 162
Sector and Industry ETFs 165
The Tech Sector 166
Industries 175
Thematic ETFs 180
Notes 189
Chapter 7 Smart Beta 191
Controversy 192
Smart Beta versus Active Management 193
Growth and Value 196
Fundamentally Weighted ETFs 197
Single Factors 199
Notes 204
Chapter 8 International/Global ETFs 205
International Developed Markets 206
Global 209
Emerging Markets 212
The First Movers 212
Second-Generation EM 217
Next-Generation EM ETFs 221
Currency-Hedged ETFs 225
Single-Country ETFs 233
China 241
Notes 248
Chapter 9 Fixed Income 251
Regulations 253
Aggregate Bond ETFs 258
Treasuries 261
Mortgage Backed Securities 267
Municipals 268
Corporate 270
Senior Loans 273
Interest Rate–Hedged ETFs 278
Multi-Asset Income ETFs 281
International Debt 282
Notes 284
Chapter 10 Alternatives 285
Hedge Fund Strategies (aka “Liquid Alts”) 286
Commodity ETFs 293
Physically Backed Commodity ETFs 293
Futures-Based Commodity ETFs 300
Notes 308
Chapter 11 Leveraged, Inverse, and VIX 309
Leveraged ETFs 309
The VIX 318
Notes 324
Chapter 12 Actively Managed ETFs 325
Fixed Income 327
Equity 329
Notes 334
Conclusion: Five Takeaways 335
Note 340
About the Author 341
Index 343