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Evolution of Indexing

There's a joke that if you can't find the idiot in the room, it's probably you. I had a somewhat similar feeling on my trip to the Super Bowl of Indexing in Phoenix.

The featured event was a celebrity death match between Wharton professor Jeremy Siegel and Princeton professor Burton Malkiel.

Siegel believes that indexing has evolved so that the biases of cap-weighting (i.e., a tilt to larger growth) can be mitigated with fundamental indexing. Professor Malkiel believes that while fundamental indexing has been a hotspot in the past few years, he is concerned that it cannot continue to outperform; he noted that fundamental indexing has a bias to smaller value. Malkiel also cited some research that points to growth rotating back into favor.

My first meeting was with WisdomTree, which wants to be a big player in the industry, and I believe it will be. It's interested in exploring fixed income in a meaningful way, and we discussed the idea of an equity exchange-traded fund that covered the Nordics, including Iceland. We also talked about the logic of the N-11 (Mexico, Korea, Bangladesh, Egypt, Indonesia, Iran, Nigeria, Pakistan, the Philippines, Turkey and Vietnam) as a logical place for a future product, but a frontier ETF is probably a while away.

I spent quite a bit of time with the folks from Claymore. The Oil Up (UCR) and Oil Down (DCR) Macroshares are interesting. They capture the movement of oil without having to manage any oil contracts.

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