Oscar Time for ETFs
Lawrence Carrel
05/01/07 - 11:11 AM EDT
It was "Oscar" time for the exchange-traded fund industry last week as ETF providers descended on New York to celebrate and honor themselves and recognize industry achievement.
The third annual Global ETF Awards provide a window into how the ETF industry views itself and its key players. In a confidential ballot, industry members voted in 18 categories for the people and companies they believe made the biggest contributions to the industry over the past year. They can vote for themselves, but many take it seriously and vote for competitors whom they find truly deserving.
ETFs are baskets of stocks that are similar to mutual funds but are traded during the day like stocks.
In a sign of the industry's growth, the number of votes from industry organizations have nearly tripled, from 114 in 2005 to 315 this year. In addition, this year the vote was opened up to academics, financial consultants and independent investment advisers, bringing the total to more than 400.
"There's not just one dominant player anymore. There are many players," says Arlene C. Reyes, the event's hostess and chief operating officer of
Exchangetradedfunds.com, an independent Web site that tracks the industry and co-created the awards. "This event allows the industry to recognize the various players and their achievements."
Reyes says that bringing together the industry players from around the globe gives them a chance to understand how their respective markets work. This allows them to see that they all have problems with getting their domestic regulatory bodies to get product released quickly.
Also, understanding how markets work in other countries will give companies a better chance for success in those markets. This will become more important in the near future, says Reyes, as the industry expands and creates more listing across exchanges.
As ETF issuers create new sector indices to track, a group of upstarts wants to change the basic foundation of indexing. Currently, most major indices, such as the
S&P 500 and all the Russell indices, are weighted by market capitalization, which is the number of a company's shares outstanding multiplied by the share price.
The greater the market cap, the greater a company's weighting in the index. But this band of rebels wants indexes based on fundamental metrics, such as revenue and dividends.
In accepting the award for "Most Innovative ETF Index Provider," Bruce Lavine, WisdomTree's president and chief operating officer, said, "I'd like to thank John Bogle for keeping us in the news all year." WisdomTree bases its ETFs on fundamental indexes. Bogle, the founder of mutual fund company Vanguard Group and a champion of the buy-and-hold strategy, has been vocal in his disapproval of many ETFs as investments.
Reyes says WisdomTree's win shows that industry players are "pushing the boundaries of what they consider traditional products. Last year, they went for real estate and currency, and while this year was about equities, this shows it's no longer based on traditional indexing or traditional types of products." She predicted that the industry will come out with more exotic products and that these products will find a market.
"Most Innovative ETF" went to the
China SME ETF in Asia and
Powershares FTSE RAFI 1000 (PRF) in the Americas. French issuer Lyxor won in Europe.
The winner of the "greatest overall contribution to the development of the global ETF industry" went to Deborah Fuhr, a managing director at Morgan Stanley. A strategist who started covering the industry in its infancy, Fuhr won for providing a high standard of "unrelenting support and insight to investors, sponsors, service providers and the media."
"This event is proof of the further evolution of the business, in terms of products and sponsors," says Joseph Keenan, managing director of investor services sales at Bank of New York, the event's main sponsor.
