Inside ETFs Conference: ETF Industry Rolls On (part 1)


Anyone who spent the last few days in Miami attending the world’s largest ETF conference witnessed a healthy industry bustling with new players, innovation and energy. Index Publications, parent of industry leading publications ETFR (Exchange Traded Funds Report), Journal of Indexing and ETF web portal IndexUniverse, held their annual U.S. ETF conference at the Western Diplomat Resort and Spa this past Sunday through Tuesday. Attendance was closeto 2,000, about double last year’s event. Like years past, around half the attendees were financial advisors, allowing for valuable interaction between ETF sponsors and advisors. There was a healthy amount of media present including conference partners CNBC and Financial Advisor magazine. A variety of developments/trends broke at the conference — here are  two important ones.

I have outlined before how the ETF vehicle is eerily similar to the iPad. Keeping that theme in mind, I believe IndexUniverse just designed the first must have app for ETF investors. The official unveiling of IndexUniverse’s ETP Analytic product was clearly the biggest ETF industry development coming out of this year’s conference. Finally the industry will get a analytic system and methodology specifically designed from the ground up for ETPs to evaluate the 1,000 plus choices available. This breakthrough product combines the cleanest ETP data in the business with insight from the best in class third party ETF research and information source, IndexUniverse. As Morningstar helped mainstream mutual funds by offering valuable insight and comparisons, IndexUniverse is poised to do the same. This service will make it easier for all types of investors to easily compare and contrast ETPs and thus is a great step forward for the ETP industry. Right on cue and in an acknowledgement of the market leadership Index Publications has taken, Morningstar announced they would be updating their ETF analytics to include more data points. While this is also a positive for the industry, it’s clear that Morningstar’s ETF analytic methodology is a modified mutual fund system. I expect IndexUniverse’s analytics to become the industry standard, which bodes well for the future of that franchise and the ETF industry as a whole.

The second largest development/trend at the conference had to be the widespread disgust and frustration publicly expressed about the SEC’s lack of responsiveness regarding new product initiatives. Whether on public panel discussions or in conversations in the exhibit hall, ETF sponsors consistently expressed the lack of communication or accountability coming from the SEC on product oriented initiatives. In their view, the SEC’s lack of timeliness, or even common courtesy of regular communication, is holding up the businesses of many ETF Sponsors, both large and small. Interestingly enough, some noted this method of operation at the SEC is allowing many outside counsel bills to continue to burgeon, a hidden tax on sponsors but a stimulus to the legal crowd. (at least someone is benefitting) Hopefully a breakthrough occurs as the ETP industry and the investment community is not being served well by this perceived black hole approach to new product initiatives.

I will be back with more observations from the 2011 Inside ETFs conference in the days ahead, including some sponsor specific observations from my time at the exhibition hall.