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Smart beta roundtable: where next for exchange traded funds?

by Emma Dunkley on Jul 06, 2012 at 11:53

Draper: If you look at the historical period of time, the broad-based commodity index that uses futures is really used for passive allocation purposes and diversifying. Normally, you do have backwardation in a broad-based commodity index.

Generally, most broad-based commodity indexes are positively correlated with equities. But, I think in the longer terms they go back to historical relationships and provide the hedges to either inflation or, on the other side, deflation.

Parker: What innovation do people want in the ETF market?

Anna Sofat, Addidi Wealth: One of the areas I’m interested in, from an ETF perspective, is actually the ethical one. A lot of my clients would rather have ethically responsible portfolios if they had the choice. But the investment world tells us this is not popular.

I do think the world has changed over the last few years, and I think it’s good to see more products coming into this space of low cost funds. And that’s an interesting area.

Parker: Isabelle, which of your products are you seeing as popular at the moment?

Bourcier: The strategy that has attracted a lot of feedback from clients in response to the systematic rise in volatility across global asset classes and the need for liquid investment tools is the Ossiam Minimum Variance.

For the ETF and the indices we have initiated, their volatility is reduced by an average of 30% compared to the S&P 500, S&P IFCI index (for emerging markets), Stoxx Europe 600 and the FTSE 100, with a significant reduction in drawdowns.

So, we’ve seen a lot of interest in this type of strategy due to the big swings in the market, because it minimises risks. 

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