Investicione metode za široke narodne mase

Dr Drago IndjicEtfm.eu

Ekonomski fakultet, Beograd, 13. V 2016

Exchange Traded Products(ETF-matically)

Dr Drago IndjicETFmatic

JBS Cambridge, 26 April 2016

Saradnja sa maticom

• Akademska

– Novi Sad: J. Njegić

– Kragujevac: M. Drenovak, V. Ranković

– Beograd: I. Janković, M. Božović

• Privredna

– Beograd: tp.rs

• Dobrotvorna

– Petnica

Sadržaj

• Kriza lične penzione štednje/akumulacije

– „Digitalno rođene“, male štediše

– „Suitability“ investicionih proizvoda

– Algoritmi vs faktori ljudskog rizika

• Primer digitalnog savetnika u praksi

– EDHEC/Indjic: https://etfmatic.com/whitepaper

Contents

• Demand: Investment management (6 slides)

– Delegated = contracted, but badly

– Products, services, market and economics;

• Packaging, costs and value (staple/luxury investments)

• Supply: Exchange Traded Products (7 slides)

– MiF level: case study + investment strategies

• Personalisation and segmentation

– Commoditisation. Millenials. Uber-isation.

ETF Gamification

• Q1. ETF• http://www.londonstockexchange.com/global/portfolio

/portfolio-and-trading-simulator.htm

• https://etfmatic.com/start-now

• Q2. Estimate required size of pension pot• Glide path, benefit insurability, cumulative cost:

• Please write down your Q’s for Q&A • How many more fund products do we need?! At what

cost? How about 1/30th of the current cost?

Retail Investments

• Advisory gap: suitability

– Customisation: profiling

– Product or service

• Not professional clients or funds

– Protection: fiduciary; client money, depositary …

• Not wealthy but inclusive clientele

– Preferences: path, utility, subjective probabilities

– Terminal wealth; goal (ranking); liability driven

– Small (vulnerable): portfolio funding problem

Delegated Management

• Fund Management: Labour, inputs, brands …

– Clients: beneficiary? Preferences? Horizon? Free capital? Counterparty? Trust? Costs?

– Protection: De-accumulation stage

• Selection vs rebalancing problem: “awards”

• Objective ≠ Investment View ≠ Goal Driven

– “Hands-free”: self-driving or not. Destination.

• Fung: Asset class location, instrument, strategy, timing

• Pricing “Alpha”: pay only if it is rare (or unique)

Beta vs Alpha

Definition

• IOSCO (2013): ETFs are

– OECIS that trade throughout the day like a stockon the secondary market (i.e., through an exchange).

– Generally, ETFs seek to replicate the performance of a target index and are structured and operate in a similar way.

– Like operating companies, ETFs register offerings and sales of ETF shares and list their shares …

Definition …

– Investors may trade ETF shares continuously at market prices, but ETF shares purchased in secondary market transactions usually are not redeemable from the ETF except in large blocks called creation units.

– ETFs may be index based or actively managed, and may pursue their investment objectives using a physical or synthetic investment strategy …

ETF Vendors

• .

ETP Border

• Fund objective

– “Classification”

• Asset class location and strategy

– index vs (alternative) weighting

• “Passive” – not buy and hold

– Systematic. Transparent; risk manageable

• Leveraged (unfunded), inverse ..

– tracking error; derivatives on ETFs

“Smart” and Exotic ETF

• Bonds

– Bond index construction criteria in NIRP regime

• Commodities

– Plethora: volatility (iPath VIX)

• Convertible bonds: index as well as arbitrage

– S&P vs ECBD “TR Balanced Euro” ..

• ETF^2; strategy replication …• IQShares; managed futures (CTA): Active strategy index

replication (vs index fund)

Very, Very Good News

• „Living will“, not a moral hazard (nb. fund run)

• Huge choice.

Retail Platform

• FCA: competition + better outcome

• ETFm.eu

– USA: Betterment, WealthFront; UK: Nutmeg, MoneyFarm, Scalable Capital … “fintech”

• Investment fund platforms (“supermarkets”)

• Portfolio management

– Customisation; Efficient trading; cost, shortfall

– Client experience, share of wallet

etfm.eu

• Fully digital, totally transparent, total 0.5% pa

Current Research

• Mapping risk profiles to model portfolios

Practice (£)

• .

ETFm.eu Universe @ 6/5/16

Stefanova et al (2016)

Q & A

• Marketing vs pricing investment management

• Absolute or relative; “” as “undiscovered”

• Value for money (or time)

– Hedged, more agile strategies outperform; fully digital is downwards scalable

– “Use of digital, rise of customer-centricity and shift in end customer base combine to radically alter the fund management industry”, Redington

Student Projects

• EU client “localisation”; completion portfolios

• Tax losses harvesting

• Regulation-proof client risk profile & segments

• De-accumulation: (diversified) income

• Fractional share trading benefits

• Performance attribution and path storytelling

• Product performance fees

Appendices

• Additional research topics: MiF, PhD

• Investment management

– Business

– Hobby

• UK plc fintech terroir. Beats NY.