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Tuesday, January 12, 2010

Blogging From The Inside Exchange Traded Funds(ETFS) Conference




I'm attending the large exchange traded funds conference in freezing (in the thirtes at nightnight)BocaRaton. Some of the stuff being presened was a bit scary to me: market timing systems with exponential moving averages making use of option selling,leveraged etfs and etfs that are devoted
to tiny slices of the market. Funny how the eternal "search for alpha" through market timing or security selection has spread to a part of the investing universe that was originally touted as a low cost, tax efficient way to gain exposure to broad asset classes for long term investors.

To the credit of my financial advisor colleagues I think most of them weren't buying what some of the presenters and vendors were selling. The majority raised their hands at the "is buy and hold dead" presentation indicating that they did not at all agree with that proposition. The presentations with elaborate trading systems seemed to get a skeptical response. And the session on gold was sparsely attended (but maybe that was because it was from 5 -6 pm and the cocktail party opened up around 6).

The areas where advisors seemed to have the most interest in adding to their allocations were in commodities and emerging markets, areas where I have had a good sized investment allocating for several years.

As I walked down the aisles of booths of the various etf providers I remarked that the only thing that seemed to be missing from the etf universe was an etf devoted entirely to the stocks of a single state. Reviewing some of the materials I received at the conference, I discovered that I was wrong...such an etf already exists. The OOK Oklahoma exchange traded fund:

The Fund invests in a portfolio of securities that represents a benchmark index of publicly traded Oklahoma-based companies that have their headquarters or principal place of business in Oklahoma. For more information, see our literature. The expense ratio is .20%.

While I am certainly skeptical that this constitutes an asset class, I do give them credit for keeping the expense ration low. The only possible purpose I could see for this type of instrument (and actually a quite valid one) would be for pension funds or endowments domiciled in the state that wanted to concentrate a portion of their assets exclusively to home state company stocks.