COVID is killing conference mojo overall, but we were able to host a short and sweet “Democratize Quant” conference this morning. The speakers were terrific and I personally learned a lot from them. This post is a recap of what we heard and some resources we can make available to the public.
Session 1: State of the Asset Management Industry (with a focus on the ETF aspect)We started the day with Eric Balchunas who gave the group his “hot ETF takes.”
- ETFs are continuing to vacuum up assets at an increasing pace.
- Direct indexing has a lot of hype, but not a lot of bite (in terms of actual assets vs. ETFs). At least not yet…
- Mutual funds are alive because of market beta. Organic growth is a train wreck.
- ESG is growing but Eric doesn’t predict it will be as big as market commentators suggest.
Session 2: Long Term Factor Investing Research — The Definitive StudyProf. Guido Baltussen presented their paper, “Global Factor Premiums.”
- Factor premiums are extremely robust out of sample.
- Trend/Momentum are the strongest factors in the market.
- If you feel yourself thinking, “Maybe this time is different?”…You should read this research.
- The relationship between interest rates and the value premium is non-existent.
Session 3: Thematic ETFsProf. Francesco Franzoni presented their paper, “Competition for Attention in the ETF Space.”
- The ETF market is segmenting into two channels: low-cost commodity (i.e., Walmart) and higher-cost high-quality (i.e., Starbucks)
- Thematic ETFs have historically been launched around past performance and media hype. They tend to hold stocks with high valuations.
- Thematic ETFs have historically underperformed by large margins (~6% per year). Buyer beware.