Structure Matters Series: Know the Factors that drive performance

The goal of this next Structure Matters series is to provide practical guidelines with how factor based investing should be monitored, measured and used.  In this series, we will interview ETF portfolio managers and key decision makers who are involved in the ETF construction and the factor weightings that drive index and “real money” performance. Although the label “smart beta” is at the core of the factor question, investors in passively managed funds need to recognize that a “do nothing strategy” arguably results in the automatic acceptance of certain risks.  For example, market weighted indexes overweight winners and arguably can make performance axiomatic while also potentially increasing risk. There is no free lunch!

Our belief at Access ETF Solutions is that investors need to study the factors that drive the index construction within any ETF so they understand how the engine works or run the risk of driving off course. As a tactical investor we believe that curves in the road will affect factor outcomes and portfolios need to be reviewed in the context of changes in the investment environment. Ignorance will not be forgiven if you get stuck in the mud in your new sports car when the road requires an off road vehicle.

Securities and investment advice offered through Investment Planners, Inc. (Member FINRA  /SIPC) and IPI Wealth Management, Inc., 226 W. Eldorado St., Decatur, IL 62522. 217-425-6340. Access ETF Solutions is not affiliated with either Investment Planners, Inc. or IPI Wealth Management, Inc.

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Interview Date: August 10, 2015

Interview: Factors that matter – Insider sentiment

In this interview David Brown of Sabrient Systems LLC discusses how his firm works as the  index provider for both Guggenheim’s Defensive Equity ETF (DEF) and Insider Sentiment ETF (NFO) as well as  Direxion’s All Cap Insider Sentiment ETF  (KNOW). David’s brings an interesting background to the the ETF space. Previously to founding Sabrient he was a NASA scientist on the lunar landing project and then the CEO of two public companies, including Telescan, a financial information firm that he ultimately took public.

We believe readers will find this interview constructive in how it presents the case for what an index provider does in terms of developing the Intellectual Process (IP) that runs the methodology, how certain driving factors work together to screen for qualitative and or quantitative outcomes and insights. See attached details:David Brown – Sabrient Systems – interview-Final



Interview Date: July 27, 2015

Interview: Factors that matter when hedging the Korean Won

In May 2014, We met with Jeremy Schwartz, Director of WisdomTree, about hedging the Japanese Yen. (JeremySchwartz Structure Matters – Currency hedges Japan – Edited 5-4-14A)  Jeremy has led WisdomTree’s pioneering effort towards currency hedging with many constructive whitepapers that outline the strategic benefits of such alternative solutions. In this latest piece we asked Jeremy about what factors should investors look to when they are addressing the currency question for South Korean and the Won. Again, we believe that having access to a currency hedge can be a constructive tool and are encouraged by such innovation in the ETF industry, but only if it is in the hands of a user who appreciates the factors that drive the decision making process. See attached link for details:   JSchwartz -Factors that matter on hedging the WON for South Korean exposure


Interview Date: July 13, 2015

Title: Factors helping to drive gold mining stocks

Joe Foster is relatively unknown in the ETF market as his focus is that of a gold strategist and portfolio manager at Van Eck®  Global, which is the firm behind the large-cap gold mining ETF (GDX) and small-cap miner ETF (GDXJ). However, given Joe’s expertise as the firm’s active gold mining mutual fund portfolio manager, we thought it would be constructive to sit down with him regarding what factors might be a catalyst to drive gold mining stocks. See Link for details:Joe Foster-Factor Interview FINAL713


Interview Date: June 15, 2015

Title: Factors driving todays record M&A Activity

With announced M&A activity set to eclipse $875 billion halfway into 2015  we thought it appropriate to check in with Salvatore Bruno, the Chief Investment Officer of IndexIQ. Sal is responsible for research and product development at IndexIQ’s alternative investment strategies. As the developer of the first US based family of hedge fund replication strategy indices,  Sal was early to recognize the benefits of the ETF wrapper and define the IndexIQ investment methodologies by specific factors and rules. His work at IndexIQ has been leading edge in the ETF market given the challenges in defining the factors that affect portfolio performance under various circumstances especially in defining the rules based strategies in the alternative market. See Link for details: BrunoSalvatore IndexIQ626


Interview Date: May 29, 2015

Title: GDP as a key factor for investing

In this interview  Brendan Ahern, the Chief Investment Officer of Kraneshares speaks about GDP as a factor for investing. Index methodologies in emerging markets equities are highly differentiated with meaningful results that are driven by factors that result in varying allocations to countries, market cap size, industries and fiscal policies. We hope that readers appreciate, if only for educational purposes,  that exploring alternative allocation methodologies should be constructive for any investor as it leads to a deeper understanding of what drives returns. See Link for details BrendanAhern-factor Interview


Interview Date: May 20, 2015

Title: Factor: The Emerging Market Consumer

Robert Holderith, President and  Founder of EGShares is the President and Founder of EG Shares which as a firm was launched in 2008 under the premise that investors needed a different approach to investing in the emerging  markets than the traditional market weighted strategies. The focus of this interview is on the consumer factor and demographics. See link: Robert Holderith – factor interview


Interview Date: April 18, 2015

Title: Factors to monitor in the MLP sector

In this first interview I am pleased to be speaking to a relatively new member of the ETF marketplace, Jay Hatfield, the Portfolio Manager of Infrastructure Capital Advisors (ICA). Jay and his firm are the sub-advisors for  the only active managed MLP ETF (AMZA) and brings backgound to the ETF market as both an operator and as a portfolio manager. He is both a Co-founder and general partner of NGL Energy Partners, a NYSE-listed MLP (NGL). Prior to forming ICA, he was portfolio manager at SAC (Now Point 72 Asset Management).

We believe readers will find this interview particularly insightful given Jay’s expertise and background in the MLP space and hope his comments about factors that drive the MLP space helpful in how they view the sector. See link Jay Hatfield-factor Interview