In the summer of 1992, Eugene Fama and Kenneth French published “The Cross-Section of Expected Stock Returns” in The Journal of Finance, a groundbreaking analysis that prompted financial presses to run headlines declaring “beta is dead.” While the death sentence may have been a bit severe, it struck a significant blow to a widely-accepted and longstanding financial concept, causing academics and investors to reconsider tenets they once took for granted.
In recent decades, a collection of academic studies, disillusioned investors, and financial innovations have contributed to a similar prognosis for beta’s Greek neighbor, alpha. The idea that was hatched by Brinson and Hood and supported by the likes of Ibbotson and Kaplan and Barras and Scaillet was fueled by years of investor frustration. Following the introduction and rapid rise in the popularity of indexing and ETFs, it seemed that what started out as a scholarly whisper had grown into a deafening roar. The proclamation didn’t come from a single voice or article, but was the collective result of years of research and investor sentiment that has seemingly led to a fatal promulgation: alpha is dead.
Or is it?
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Over the past several years, exchange-traded funds have enjoyed a tremendous surge in popularity, passing many major milestones as they were embraced by retail and institutional investors alike. Once comprised solely of “plain vanilla” products tracking well-known equity indexes, the ETF industry has evolved at an incredible pace in recent years, and now offers investors [...]
Pacific Investment Management Co. (Pimco), the world’s largest bond manager, is making a run at the actively-managed ETF business, less than two months after launching its first passively-indexed fund. According to a filing with the SEC, Pimco plans to launch five new actively-managed ETFs, three of which will focus on bonds maturing in less than [...]
A study performed by New York-based research and consulting firm Novarica makes some bold predictions about the investment industry, painting a dismal picture for the future of traditional actively-managed mutual funds. The study predicts that nearly half of mutual funds will disappear by 2015, being replaced by low-cost ETF alternatives. Among the highlights of the [...]
Although ETFs and mutual funds seem in many ways to be natural rivals, one of the most closely-watched trends in the “active vs. passive” debate has been the development of a hybrid type of investment option: actively-managed ETFs. While the space has mostly taken “baby steps” to this point, it appears to be poised for [...]
Claymore Advisors, sponsor of 35 passively-managed ETFs, has filed for exemptive relief with the SEC to launch three actively-managed ETFs, the latest indication that these “hybrid” funds could fuel the next wave of the ETF industry boom. The three proposed funds are:
Claymore Advisors has filed a request with the SEC to introduce three new ETFs, each of which would be actively managed. Among the proposed funds is the Claymore Delta Global Hard Assets ETF, which would be the first actively-managed commodity ETF.
Last week, Grail Advisors launched the Grail American Beacon Large Cap Value ETF (GVT), the first true actively-managed ETF to hit the market. Prior to the launch of the fund, there was rampant skepticism regarding the ability of GVT to solve the dilemma posed by the stringent disclosure rules placed on ETFs. Although it has [...]
For those of you interested in taking a look at the holdings of the Grail American Beacon Large Cap Value ETF (GVT), which launched yesterday, the information is available here. As of May 5, GVT held about 150 different stocks, with JPM (1.59%), CVX (1.45%), COP (1.45%), DVN (1.43%), and PM (1.41%) accounting for the [...]
Had Jerry Seinfeld pursued a career in finance, I imagine he’d be having a field day around the water cooler with the launch of the Grail American Beacon Large Cap Value ETF (GVT) yesterday: “What’s the deal with actively managed ETFs…isn’t the whole point of an ETF that is isn’t actively managed?” Since one of [...]
The Grail American Beacon Large Cap Value ETF (GVT), the first actively-managed ETF whose managers actually select its stocks, began trading on the NYSE today. While other ETF sponsors (most notably PowerShares) have been offering actively-managed ETFs for over a year, GVT is different from these “first generation” actively-managed funds in many ways. Most significantly, existing [...]
