What Sets ETFs Apart?
On last week’s “Behind the Markets” podcast, my co-host, Wesley Gray, CEO of Alpha Architect, and I had the opportunity to speak with ETF guru and ETF-IQ TV host Eric Balchunas. Balchunas discussed his transition at Bloomberg from the data team, where he had been for 16 years, to the research team and the TV anchor chair. He does an amazing job of explaining ETFs in very clear language spiced with metaphors to connect ideas for people.
Balchunas is a passionate advocate for the industry—describing how the ETF structure itself has five enhancements that set it apart from other asset management structures.
Balchunas’ role in research and TV anchoring at Bloomberg entails writing and talking about ETFs, where he clearly has superior communication skills. Some highlights of his style from our conversation:
If You Can Make It on Twitter, You Can Make It Anywhere
How Balchunas views Twitter as a communication engine to hone your craft: Balchunas said Twitter posts and debates are like Eminem’s rap battle in the movie Eight Mile, whereas LinkedIn is like a country club. Twitter is where you take the toughest heat in a conversation, and if your argument can withstand Twitter, Balchunas believes you can hang anywhere on that topic.
“Some Worry” Articles
Balchunas pointed to an article with the headline “ETFs Are Weapons of Mass Destruction,” but the story was planted by an active manager who had been underperforming a passive benchmark. Balchunas said this article’s headline should have read, “Disgruntled and Poorly Performing Active Manager Underperforms ETFs.” This is something he sees over and over, and he labeled this category “Some worry,” as that is the headline planted by disgruntled people being hurt by the success of ETFs.
One subset of these “Some worry” articles is how many people say ETFs are driving the stock market. Balchunas said, “Blaming ETFs for the rise of the stock market is like blaming Nickelback for the rise of MP3s.”
The conversation was wide-ranging, touching on many of the media’s misconceptions about ETFs, how ETFs compete with active managers, the age-old question on how much passive investing the market can absorb, and how ETFs are like vampires, gremlins and many other classic Balchunas metaphors.
Enjoy this week’s conversation with Eric Balchunas.
Jeremy Schwartz has served as our Global Chief Investment Officer since November 2021 and leads WisdomTree’s investment strategy team in the construction of WisdomTree’s equity Indexes, quantitative active strategies and multi-asset Model Portfolios. Jeremy joined WisdomTree in May 2005 as a Senior Analyst, adding Deputy Director of Research to his responsibilities in February 2007. He served as Director of Research from October 2008 to October 2018 and as Global Head of Research from November 2018 to November 2021. Before joining WisdomTree, he was a head research assistant for Professor Jeremy Siegel and, in 2022, became his co-author on the sixth edition of the book Stocks for the Long Run. Jeremy is also co-author of the Financial Analysts Journal paper “What Happened to the Original Stocks in the S&P 500?” He received his B.S. in economics from The Wharton School of the University of Pennsylvania and hosts the Wharton Business Radio program Behind the Markets on SiriusXM 132. Jeremy is a member of the CFA Society of Philadelphia.