The Primary Market Process for Fixed Income Exchange-Traded Funds Under Market Stress

2021 ◽  
pp. jfi.2021.1.126
Author(s):  
Samara Cohen ◽  
Stephen Laipply ◽  
Ananth Madhavan ◽  
James Mauro
Keyword(s):  
Market Process ◽  
Exchange Traded Funds ◽  
Fixed Income

Do ETFs outperform CEFs in fixed income investing?

2015 ◽  
Vol 30 (4) ◽  
pp. 231-246 ◽  
Author(s):  
C. Edward Chang ◽  
Thomas M. Krueger ◽  
H. Doug Witte
Keyword(s):  
Performance Measures ◽  
Tracking Error ◽  
Exchange Traded Funds ◽  
Fixed Income ◽  
Turnover Rates ◽  
Operating Characteristics ◽  
Content Type ◽  
Market Values ◽  
Significant Difference ◽  
And Performance

Purpose – For a number of reasons ranging from their more recent introduction to their perceived lesser excitement relative to stock-based peers, there have been few studies of fixed income (mainly bond) exchange-traded funds (ETFs). The purpose of this paper is to fill the void by comparing performance measures of fixed income ETFs to fixed income closed-end funds (CEFs). Design/methodology/approach – This paper examines operating characteristics as well as risk and performance measures of all available fixed income ETFs and CEFs in the USA over the last five and ten years ending on December 31, 2014. Operating characteristics include expense ratios, annual turnover rates, tax cost ratios, and tracking error ratios. Performance measures include average annual returns, risks (measured by standard deviations), and risk-adjusted returns (measured by Sharpe ratios and Sortino ratios). Findings – This study finds material and significant difference in a variety of expenses, return measures, and risk measures. Sharpe and Sortino ratio significance is highly dependent on whether net asset values or market values serve as the dependent variable. ETFs would be the preferred choice of fixed income investors who are presumed to be focussing on market-based return measures. Originality/value – This paper empirically compares operating characteristics as well as risk and performance measures of US fixed income ETFs and fixed income CEFs in the same Morningstar categories over the last five and ten years.

Factor-based optimisation and the creation/redemption mechanism of fixed income exchange-traded funds

2018 ◽  
Vol 2 (4) ◽  
pp. 335 ◽  
Author(s):  
Bennett W. Golub ◽  
Maurizio Ferconi ◽  
Ananth Madhavan ◽  
Alex Ulitsky
Keyword(s):  
Exchange Traded Funds ◽  
Fixed Income ◽  
The Creation

On the Performance of Fixed-Income Exchange-Traded Funds

2012 ◽  
Vol 3 (1) ◽  
pp. 39-44 ◽  
Author(s):  
Patrick Houweling
Keyword(s):  
Exchange Traded Funds ◽  
Fixed Income

Actively managed ETFs vs actively managed mutual funds

2018 ◽  
Vol 44 (3) ◽  
pp. 303-325 ◽  
Author(s):  
D. Eli Sherrill ◽  
Kate Upton
Keyword(s):  
Mutual Funds ◽  
Design Methodology ◽  
Exchange Traded Funds ◽  
Fixed Income ◽  
Content Type ◽  
Weak Evidence ◽  
Retail Investors ◽  
Tax Clientele ◽  
Clientele Effects ◽  
Clientele Effect

Purpose The purpose of this paper is to study if actively managed exchange-traded funds (AMETFs) and actively managed mutual funds (AMMFs) are complements or substitutes. It also tests if there are tax or liquidity clientele effects. Design/methodology/approach The study investigates the relation between individual AMMF flows and aggregate AMETF flows as well as individual AMETF flows and aggregate AMMF flows. A 2013 tax change is used to analyze if a tax clientele effect exists between the AMETF and AMMF markets. The authors use differences in investor groups for institutional vs retail fund share classes to test for liquidity clientele effects. Findings The authors find that equity and mixed AMETFs and AMMFs are substitutes, although not perfect substitutes. Taxation-related differences between the two products create a clientele effect for fixed income and mixed funds where tax-sensitive investors are more likely to substitute AMETFs for AMMFs surrounding tax increases. There is weak evidence that institutional investors may prefer AMETFs more than retail investors because of their enhanced liquidity. Originality/value This is the first study to investigate the flow relation between AMETFs and AMMFs. The fast-paced growth of the AMETF area coupled with the substitutability between the two products and tax advantages of AMETFs has the capability to gain significant market share from AMMFs in the future.

Factor-based optimisation and the creation/redemption mechanism of fixed income exchange-traded funds

2018 ◽  
Vol 2 (4) ◽  
pp. 335
Author(s):  
Alex Ulitsky ◽  
Maurizio Ferconi ◽  
Ananth Madhavan ◽  
Bennett W. Golub
Keyword(s):  
Exchange Traded Funds ◽  
Fixed Income ◽  
The Creation

Toward Greater Transparency and Efficiency in Trading Fixed-Income ETF Portfolios

2018 ◽  
Keyword(s):  
Bond Market ◽  
Corporate Bond ◽  
Exchange Traded Funds ◽  
Fixed Income ◽  
Over The Counter ◽  
Corporate Bond Market ◽  
Bond Portfolio ◽  
Individual Bond ◽  
Fixed Income Portfolio ◽  
Rapid Transformation

The over-the-counter global corporate bond market, characterized by opacity and illiquidity, is undergoing a rapid transformation driven by new regulations and technology. Bond exchange-traded funds (ETFs) offer one vision of the possible future of the market, trading on organized exchanges with typically narrow spreads and high liquidity. The success of bond ETFs relies critically on the efficient functioning of arbitrage. In recent years, improved real-time technology combined with greater post-trade transparency (e.g., through TRACE) has made it possible to generate intraday estimates for a fixed-income portfolio based on individual bond data and macro-market parameters. In this article, the authors describe one possible approach to developing and implementing such an intraday estimate. From a practical perspective, they illustrate how investors and traders can use these estimates as a complement to existing data (such as end-of-day NAV) to better understand the underlying bond portfolio value during the trading day and for transaction cost analysis. More generally, the article illustrates the potential for new analytics to increase transparency and further accelerate the ongoing evolution of fixed-income markets.

RPI’s James Fund: ETFs, decision making, & manager transitions

2019 ◽  
Vol 46 (5) ◽  
pp. 662-674
Author(s):  
Thomas Shohfi
Keyword(s):  
Asset Allocation ◽  
Individual Student ◽  
Portfolio Performance ◽  
Policy Statement ◽  
Exchange Traded Funds ◽  
Investment Fund ◽  
Fixed Income ◽  
Dormant Period ◽  
Content Type ◽  
Managed Funds

Purpose The James Fund at Rensselaer Polytechnic Institute’s Lally School of Management is a small, recently established, course-driven student-managed investment fund (SMIF). The purpose of this paper is to provide insight to new and existing funds in improving individual fund operation and structure. Design/methodology/approach The James Fund seeks to outperform an 80/20 equity/fixed income benchmark by investing exclusively in exchange traded funds and to move primary emphasis away from idiosyncratic risk and individual equity valuation back toward asset allocation, the most significant driver of portfolio performance. Buy and sell decisions must receive a three-fifths majority in voting among students and adhere with the investment policy statement. Findings Groupthink, a common problem in student-managed funds, is observed in trade proposal and manager voting patterns. Originality/value Groupthink is partially addressed through the use of instructor feedback on individual student trade diaries. Student managers transition each semester; therefore, the portfolio must meet dormant period criteria limited to a specific list of broadly diversified ETFs, mitigating potential problems from knowledge transfer between management teams that are largely unexamined in the context of SMIFs.

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