Exchange-Traded Confusion: How Industry Practices Undermine Product Comparisons in Exchange Traded Funds

Despite their popularity[1] and growing importance in U.S. capital markets,[2] exchange traded funds (ETFs) are incredibly difficult (at times even impossible) to accurately compare side-by-side.  In a new article, I show how a variety of discretionary industry practices undermine simple “apples to apples” comparisons in ETFs. Comparative challenges are compounded by the limitations of disclosure and the ability of investors to understand the information disclosed.

For instance, there is significant diversity in the number of indices, and wide discretion in how an index is replicated. My article illustrates how similarly named ETFs often perform (and are constructed) … Read more

Are ETFs Making Some Asset Managers Too Interconnected to Fail?

Exchange traded funds (ETFs) sit at the center of the COVID-19 crisis selloff.[1]  This isn’t surprising, since ETFs are a low-cost highly liquid vehicle for trading entire sectors, asset classes, and even global economies.  Yet the use of ETFs as a preferred crisis trading tool, and the Federal Reserve’s unprecedented mid-crisis purchasing of bond ETFs,[2] reinvigorates a long-standing debate on the systemic importance of ETF sponsors.

In a new article, I argue that the largest ETF sponsors are becoming systemically important due to interconnectedness – a material factor in the 2008 global financial crisis (GFC).  Although large … Read more