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ETF Express newsletter 02.09.22

This week we brought you three US stories with quite different subject matter. Texas-based Sage Advisory is in the throes of publishing its fourth iteration of its stewardship survey, where it examines how US ETF sponsors perform their fiduciary duties on behalf of ETF investors.

Bob Smith, Sage Advisory president and CIO and ESG researcher Emma Harper have discovered this year that latest regulation in the ESG space is having an unexpected negative impact on transparency from ETF providers.

Harper says: “The level of transparency and overall verbosity of the responses was tighter this year, stemming from regulation and crackdowns on greenwashing.”

ETF providers fear ‘getting themselves into hot water,” she says. Another problem has arisen as a result of the Index Act which encourages each shareholder to vote for his or her opinion. 

Harper says: “Voting is a crucial piece of the stewardship puzzle. It showcases what the provider believes is best for the strategy of portfolio companies. Votes have the power to help steer portfolio companies in directions that will hopefully be positive for shareholder value in the long term.

“Every vote matters and we are looking to see that providers are voting in line with what they say they believe…The index act says every fund investor should be able to vote as they want which sounds good in theory but could be an extremely messy process in reality. It could lead to issues with quorums at annual meetings and lack of clarity in the voting process.” Harper says, commenting that the largest asset managers are thinking of having platforms for investors to express their views, but that is currently largely at the institutional level.

Also from Texas, Dimensional Fund Advisors spoke with ETF Express this week as well, with Dimensional Fund Advisors conducting research into single-stock ETFs, describing them as ‘yet another shiny object to distract from proven, long-term fundamentals.’

Wes Crill, Head of Investment Strategists at Dimensional Fund Advisors, comments that Dimensional’s research reveals that single stocks show a wide range of returns and only about a fifth of stocks survive and outperform the market over 20-year periods.

Finally, we moved over to Nashville, Tennessee, to revisit an interview with Robert Cantwell of Upholdings,a  former hedge fund manager who converted his hedge fund and launched his actively managed compounder ETF KNGS two years ago. Cantwell says that the whole process has been something of a learning curve. The firm launched with friends and family investors and saw assets and investor numbers increase over the first two years from 10 investors to 600, and USD2 million to USD10 million. However, it has faced a challenging year in terms of performance but is now recovering. Cantwell has also had to reposition the fund for financial advisers.

Service provider nominations close today for the ETF Express US Awards 2022 and voting opens on Monday 5th September for both the top listed service providers and ETF issuers, with data provided by Trackinsight. Get your votes in fast.

Beverly Chandler, managing editor, ETF Express

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Companies in this issue

Dimensional Fund Advisors
Sage Advisory
NEOS Investments
Trackinsight
Upholdings

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