The loom band market appears to be in the doldrums with the latest TradeMe auction closing out with no buyer on an $8 reserve. Photo / Thinkstock
The loom band market appears to be in the doldrums with the latest TradeMe auction closing out with no buyer on an $8 reserve. Photo / Thinkstock
Opinion by
I thought it was loom bands but legendary investor, Jack (aka John) Bogle has named exchange-traded funds (ETFs) as "the greatest marketing innovation of the 21st century".
"It is a great marketing device, the ETF," told the FT. "... but it remains to be seen whether it is the greatest investment innovation. I do not believe it is; I think it will hurt returns for investors."
Bogle, who developed the benchmark model for index investing with Vanguard, isn't necessarily talking his own book here.
As the latest BlackRock 'ETP [exchange-traded product] Landscape' report shows, Vanguard is the second-largest ETF manufacturer in the world. (With US$452 billion of assets under management, Vanguard ETF business is only overshadowed by BlackRock's own iShares brand, which reported assets of more than US$1 trillion.)
The apparent discrepancy between Bogle's sceptical view of ETFs and his firm's massive presence in that market can be partly explained away.
"[Vanguard] has a modest portfolio of funds tracking broad asset classes and an investor base that skews towards those of a buy-and-hold mentality," the FT story says.
Bogle's problem is with those other ETFs; the 5,000 or more products that, according to the BlackRock Landscape report, span a dizzying array of asset classes, sub-indices and countries.
Bogle's problem is that ETFs turn his cherished vision of buy-and-hold passive investing into an active game - a fact which the BlackRock report bears out.
"... 2015 began with surging demand for non-US developed markets equities, which gathered $18.2bn. Fixed income added $13.0bn along with $5.2bn for commodities," the BlackRock report says, beside a graphic highlighting 'trending, ongoing and fading' ETP flows.
But the "greatest marketing innovation of the 21st century" has generally failed to spark in New Zealand. The NZX-owned Smartshares is trying to remedy that with its renamed suite of five ETFs and a couple of new ones launched in January targeting the Australian dividend and listed property stocks.
According to the latest market data, Smartshares managed about $500 million, of which just over $90 million is in the two new funds. Smartshares may release more ETFs next year and will hope to fill up the NZ demand gap with its newly-purchased Superlife funds.
