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.”

Here is what I learned:

  • 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.

You can follow Eric via the following channels:

Session 2: Long Term Factor Investing Research — The Definitive Study

Prof. Guido Baltussen presented their paper, “Global Factor Premiums.”

Here is what I learned:

  • 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.

You can follow Prof. Guido via the following channels:

Dr. Liqian Ren served as the discussant to this paper and she provided some great insights and can be followed via the following channels:

Session 3: Thematic ETFs

Prof. Francesco Franzoni presented their paper, “Competition for Attention in the ETF Space.”

Here is what I learned:

  • 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.

You can follow Prof. Francesco via the following channels:

Jay Jacobs served as the discussant to this paper and provided a compelling argument that not all thematic ETFs are created equal. He also highlighted the potential behavioral benefits of thematic ETFs vs. “stock-picking.”

You can follow Jay via the following channels:

Conclusions and How to Follow the Conference

We are hopeful that next year we can host the live event in collaboration with our friends at Villanova University and continue a tradition of providing authentic investor education and debate around academic research concepts that are relevant to practitioners.

You can get notifications for the next Democratize Quant Conference via the following:

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About the Author: Wesley Gray, PhD

Wesley Gray, PhD
After serving as a Captain in the United States Marine Corps, Dr. Gray earned an MBA and a PhD in finance from the University of Chicago where he studied under Nobel Prize Winner Eugene Fama. Next, Wes took an academic job in his wife’s hometown of Philadelphia and worked as a finance professor at Drexel University. Dr. Gray’s interest in bridging the research gap between academia and industry led him to found Alpha Architect, an asset management firm dedicated to an impact mission of empowering investors through education. He is a contributor to multiple industry publications and regularly speaks to professional investor groups across the country. Wes has published multiple academic papers and four books, including Embedded (Naval Institute Press, 2009), Quantitative Value (Wiley, 2012), DIY Financial Advisor (Wiley, 2015), and Quantitative Momentum (Wiley, 2016). Dr. Gray currently resides in Palmas Del Mar Puerto Rico with his wife and three children. He recently finished the Leadville 100 ultramarathon race and promises to make better life decisions in the future.

Important Disclosures

For informational and educational purposes only and should not be construed as specific investment, accounting, legal, or tax advice. Certain information is deemed to be reliable, but its accuracy and completeness cannot be guaranteed. Third party information may become outdated or otherwise superseded without notice.  Neither the Securities and Exchange Commission (SEC) nor any other federal or state agency has approved, determined the accuracy, or confirmed the adequacy of this article.

The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Alpha Architect, its affiliates or its employees. Our full disclosures are available here. Definitions of common statistics used in our analysis are available here (towards the bottom).

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