We have long written about the best practices for switch trades when it comes to buying and selling two ETFs, but what about when switching from mutual funds to ETFs and vice versa?
ETFs are built on a backbone of transparency, while mutual funds are opaque in nature. And although mutual funds trade at NAV, it doesn’t mean the execution cost is free. Michael Barrer explains.
August 24, 2015 marked an influential day in the marketplace when we awoke to extremely volatile global markets. Although not the cause of the issues on 8/24, many ETFs were affected by a collision between market volatility and market structure. One of the key factors in why market participants had difficulty pricing ETFs during the opening minutes of 8/24 centered on a little-known and antiquated rule by the NYSE, called Rule 48.
Fixed income ETFs provide the investing world with transparency in an otherwise opaque asset class. However, because of the over-the-counter nature of the fixed income market and the fact that ETFs with fixed income underlying securities were adopted later than their equity-based relatives, there are still myths around the trading and liquidity profiles of these funds.
Jeremy J Siegel
Senior Investment Strategy Advisor
CEO of WisdomTree
Jeremy Schwartz, CFA
Executive Vice President, Global Head of Research
Christopher Gannatti, CFA
Head of Research, Europe
Christopher Gannatti began at WisdomTree as a Research Analyst in December 2010, working directly with Jeremy Schwartz, CFA®, Director of Research. In January of 2014, he was promoted to Associate Director of Research where he was responsible to lead different groups of analysts and strategists within the broader Research team at WisdomTree. In February of 2018, Christopher was promoted to Head of Research, Europe, where he will be based out of WisdomTree’s London office and will be responsible for the full WisdomTree research effort within the European market, as well as supporting the UCITs platform globally. Christopher came to WisdomTree from Lord Abbett, where he worked for four and a half years as a Regional Consultant. He received his MBA in Quantitative Finance, Accounting, and Economics from NYU’s Stern School of Business in 2010, and he received his bachelor’s degree from Colgate University in Economics in 2006. Christopher is a holder of the Chartered Financial Analyst designation.
Head of Fixed Income Strategy
Tripp Zimmerman, CFA
Head of Fixed Income & Currency
Associate Director, Asset Allocation and Modern Alpha
Head of Capital Markets
Associate Director of Capital Markets
Head of Europe
Joseph Tenaglia, CFA
Associate Director, Asset Allocation
Kara Marciscano, CFA
Jianing Wu joined WisdomTree as a Research Analyst in October 2018. She is responsible for analyzing market trends and helping support WisdomTree’s research efforts. Previously, Jianing completed internships and projects at Geode Capital, Starwint Capital, and Invesco Great Wall Fund Management with a focus in quantitative research. Jianing received her M.S in Finance from the Massachusetts Institute of Technology. She graduated with honors from Boston College with degrees in Mathematics and Philosophy.
Jeff Weniger, CFA
Director, Asset Allocation
Alejandro Saltiel, CFA
Associate Director of Modern Alpha
Alejandro Saltiel joined WisdomTree as a Quantitative Research Analyst in May 2017. He is responsible for quantitative research on WisdomTree’s products and global equity markets. Prior to joining WisdomTree, Alejandro worked at HSBC Asset Management’s Mexico City office as Portfolio Manager for multi-asset mutual funds. He started his career working at a boutique hedge fund that specialized on trading options on sector-levered ETFs. Alejandro received his Master’s in Financial Engineering degree from Columbia University in 2017 and a Bachelor’s in Engineering degree from the Instituto Tecnológico Autónomo de México (ITAM) in 2010. He is a holder of the Chartered Financial Analyst designation.
Matt Wagner, CFA
Modern Alpha Analyst
Matt Wagner joined WisdomTree in May 2017 as a member of the Research team. He is responsible for research on WisdomTree’s products and communicating the firm’s views on the markets. Matt started his career at Morgan Stanley, working as an analyst in Treasury Capital Markets from 2015 to 2017 where he focused on unsecured funding planning, execution and risk management. Matt graduated from Boston College in 2015 with a B.A. in International Studies with a concentration in Economics. Matt is a holder of the Chartered Financial Analyst designation.
When I see headlines along the lines of “Fixed income exchange-traded funds (ETFs) are not liquid and pose a risk to the system!” I can’t help but think, Stop the madness! Fixed income ETFs can actually add liquidity to the overall ecosystem and could potentially protect investors better than traditional investment structures.
What if I told you that a large $500 million order and a smaller $1.2 million order traded in the same ETF, but one executed around the bid/ask spread and the other drove up the ETF price 84 cents, or almost 5%. Could you guess which trade was responsible for each outcome? The answer may surprise you.