/ ETFs /
“broken” in the West, although
retail investors may find dollardenominated local markets a step
too far – products are available,
but local currency emerging
market debt is likely to scare the
horses.
BIG STRATEGIES
FOR LITTLE MONEY
Thinking about
oil & gold?
ETF Securities provides Europe’s most comprehensive range of commodity
ETPs, backed by our track record of successful innovation and bolstered by our
commitment to making regular and independent market insights driven-research
available to all investors. We are a global pioneer in ETPs having developed
the world’s first gold ETP in 2003 and the world’s first oil ETP in 2005.
Lane adds that these products are
based on the same strategies used
by institutional investors: “The
old institutional framework is
being democratised for affordable
management fees.”
Nowhere is this more apparent
than with smart beta products.
Smart beta is still relatively new
for many institutional investors,
but offers a little more comfort to
the index investor.
These products – also referred
to as smart trackers because they
are designed to track an index –
offer managers some discretion
about how they can change – be
smart about – asset allocation.
While Lane points out they
don’t guarantee returns, he says
they do offer a degree of potential
for intervention at the discretion
of the asset manager.
Lane also likes certain
commodity funds such as gold,
but tends to keep away from oil
and gas. Another theme he likes
the look of is cyber security.
Smart beta is
still relatively
new for many
institutional
investors, but
offers a little
more comfort
to the index
investor
“It invests at the company level
and may look like a good bet, as
each day cyber security becomes
one of the biggest threats facing
the West.”
KEEP IT SIMPLE, STUPID
Not everyone agrees, however.
Alan Miller, founding partner
and chief investment officer at
SCM Direct, says “one of the most
ridiculous” ETFs he has seen
specialises in internet security
stocks.
“That’s the classic launching
of something highly specialist,
very concentrated, fashionable
and prone to high levels of
disappointment,” he explained.
Miller says an investor’s
overarching general principle
should be to keep things simple
and that looking beyond plain
vanilla ETFs may carry more
risks. While this isn’t a reason to
reject these products, he says you
should ensure you are aware of
the risks.
“Often these products are built on
completely illusory back-testing,
which is done before the charges
have been deducted,” said Miller.
This is problematic when an
ETF uses high quality bonds, for
example, which yield little if
anything and skew the potential
performance.
Miller is also cautious about
some smart beta indices where
historic performance is driven
by the increasing valuation
and so the end performance is
determined by the price you pay
on the day you invest rather than
the performance of the stock.
“The best thing to do is to keep
things simple,” he continued,
“invest and don’t worry about
micromanagement”.
This doesn’t mean you can’t
invest outside of the UK or Europe,
but you may be better off holding
well-spread, low-cost market
cap weighted ETFs that are not
concentrated in one sector to
deliver the returns you are seeking
without keeping you awake at
night.
Speak to the original oil and gold ETP provider
etfsecurities.com/commodities
This financial promotion has been issued and approved for the purpose of section 21 of the Financial Services and Markets Act 2000 by ETF Securities (UK) Limited which is authorised and regulated by the United Kingdom Financial Conduct Authority.
Investments may go up or down in value and you may lose some or all of the amount invested. Past performance is not necessarily a guide to future performance. You should consult an independent
investment adviser prior to making any investment in order to determine its suitability to your circumstances.
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