A Particularly Good Year for the Insider ETF
Thursday, December 31st, 2009Michael Johnston submits:
In the beginning of the ETF industry, there was SPY. From there, the initial wave of expansion included primarily “plain vanilla” equity funds offering exposure to widely-followed benchmarks, such as the Dow, Nasdaq, and even sector-specific indexes. But innovation and product development in the ETF world didn’t stop there. The last five years have seen ETFs expand from a closet industry to a mainstream investment option. And as the popularity of these funds has increased, so too have the available product lines. ETFs now provide access to nearly every corner of the investable universe, from fixed income to commodities to hedge fund strategies.
One area of the ETF industry that has seen considerable growth is the “quantitative indexing” space, a concept that begins to blur the line between active and passive management. Many indexes (and therefore ETFs) utilize market capitalization to determine which companies will be included and the allocation afforded to each. Others lean on other fundamental metrics such as revenue, earnings, or dividends in determining components and weightings.
