Richard Kang

http://www.thebetabrief.com

42 Comments

    • ON: Sat May 31st 20:01 PM
      Commented on:
      ETFs, Commodities and Dubai
      JKC/PT/JSE: I think we agree that what's happening in Dubai seems to be the similar success story of Hong Kong and Singapore. Doesn't happen too often but like Singapore, there's often a heavy handed ruler in the background. The trick is (as a local) hoping you get a benevolent ruler who's thinking about the survival and long-term success of the nation. Who knows if Kim Jong Il really thinks in his heart that what he's doing is for the best of his country/people. The way I think about it, Abu Dhabi is building their success more through its sovereign wealth fund(s), thus thinking externally, while Dubai is focused more on investing internally. Singapore has a good balance of both having built a truly diversified and cosmopolitan city in addition to its own successful SWFs. The key now is to have more of the Mideast nations follow the Dubai/HK/Singapore model of what is essentially Milton Friedman to the extreme (to your point JKC). I think that the current trend of importing skilled talent with the hopes of developing their own homegrown workforce is key in getting that younger demographic thinking less about jihad and more about real individual, social and national progress. In any case, I agree with PT that the region will regain its former glory. But in my opinion, it won't be for the whole but for the few pockets that follow the Dubai model. And generally, I sense that that will be a small number. But who knows, it took some time but China is getting to be a lot closer to Japan and Korea while holding on to its old, hardline ways of governing.
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    • ON: Fri May 30th 15:00 PM
      Commented on:
      ETFs, Commodities and Dubai
      DW: Mutual funds just aren't a part of what I do but I'm sure there are also CEFs and other instruments that have adequate coverage of the region with a variety of performance histories. I'm not sure if I see the dress on ETFs to be as sexy and posh as you see them ... I've always thought of them as boring power tools for building a sturdy deck. Mutual funds are the ones with managers saying stuff like "I buy good stocks and sell shit stocks". Yeah, that's posh. But if you think the region is relatively inefficient with relatively few market participants and with a wider array of opportunities, why not go full blown hedge fund?
      Still, DW, I tend to lean a bit more towards your comments over JL's over Dubai. The region is a hodgepodge of basket cases with a few success stories hidden within. The diversification of Dubai beyond oil seems to be well into place and should lead down a path similar to Hong Kong and Singapore. My guess is that by the time oil tanks in a serious, long-term manner, Dubai and its masterplan will be fine. The comments above regarding the treatment of labor are certainly disconcerting and the images I saw won't be soon forgotten.
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    • ON: Mon Mar 10th 17:59 PM
      Commented on:
      Talking Investment Principles and ETF Strategies with Richard Kang
      Thanks Smart ETF and bjrad! I'm sure I am not the only one interested in seeing that Active 50 report so please send URL if possible. Thanks again.
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    • ON: Mon Feb 18th 16:06 PM
      Commented on:
      SocGen and the Perception of Risk
      All true SE. But how many people know what EVT-VaR is all about? Can't blame them. Risk measurement/management is at the very earliest stages. What's taught beyond the "normal distribution" stats courses you outline above is only at a few niche M.Fin, M.Math, financial engineering-type programs at a few schools ... well I know that it's not a few anymore as they've grown exponentially since the first ones roughly 12 years ago. But it's not part of the MBA or CFA (or even GARP/PRMIA) programs because most people don't have the underlying math background to tackle this. What can you do?

      But that only discusses the math/measurement problem. I wrote a blog entry quite a while ago about the shuttle disasters and how NASA put together some sort of risk management process to review what went wrong and how they can minimize similar problems in the future. I think it came down to taking a look at each step of the process (each step being further broken down into its own process) until every mechanical piece of equipment, every decision, every "everything" was dissected. You'd probably call that micromanagement to the extreme. But I suppose that's what had to happen because a shuttle blowup costs lives ... not to mention the enormous man-hours of work that went into the preparation for the mission. Will banks and hedge funds ever go to that extreme? I don't know if the pension fund overlords can twist the arms of the hedgies to make that happen. But on the banking side, you have to think of all the different parties (shareholders, regulators, politicians, etc.) who are wringing the necks of the brass at SocGen ... there I see greater potential for change. We'll see.
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    • ON: Thu Jun 21st 10:01 AM
      Commented on:
      The Defensive Investor's Tool; New Canadian ETFs; Inverse Exposure to Emerging Markets
      RS: First, the unfortunate fact is that we Canadians seem to be unconcerned about the fact that fees overall in the financial services industry are higher here than elsewhere in the world. Evidence of this in the fund industry specifically can be found in this paper: papers.ssrn.com/sol3/p...

      The portfolio advisor to the Horizon BetaPro products in Canada (both mutual funds and ETFs) is ProFunds out of the US, the same manager of the ProShares family of levered and inverse ETFs.

      Yes, the fees for levered/inverse ETFs both in Canada and US are high in relative terms versus other more vanilla, non-levered ETFs for a number of reasons. I would only wonder if investors really care about fees in these cases if it's fair to assume that most investors who use levered/inverse ETFs are only in them for the very short-term. Would investors hold the levered long S&P 500 ETF when they can use something like SPY or a similarly cheap Vanguard fund/ETF? Only the somewhat sophisticated investor who wanted to free up cash for some "portable alpha"-type strategy would consider the levered long fund approach. Perhaps there are a few other similar reasons but not too many I think.

      Despite what anyone might think about the relatively high fees, you can't deny that both BetaPro in Canada and ProShares in the US have been successful when you consider their assets under management growth from the inception of their ETF operations. These products are for active investors, not the low-cost, efficient market, Bogle/Malkiel followers. The success of these products, I think, proves that in the ETF space but especially with levered/inverse products, fee sensitivity is not the major issue.
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    • ON: Fri Jun 1st 13:04 PM
      Commented on:
      Good Time to Buy VIX Call Options
      Info on trading VIX options and futures can be found here: www.cboe.com/micro/vix...

      If you run a google search, you'll likely find many more sites/blogs that cover VIX. Any brokerage firm, online discount or otherwise should be able to help you out with margin accounts to trade options.
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    • ON: Fri May 18th 08:42 AM
      Commented on:
      Converting Closed-End Funds to ETFs: Has the Trend Begun?
      FL: Speculation on the markets is fine but speculation on future CEF-ETF conversions is beyond difficult and in my opinion a rather pointless exercise. Unless you have idea of some form of arbitrage strategy where you take a position in the CEF and a simultaneous offsetting position in the underlyilng basket (or other strategy) but I don't see how this conversion can be used for an opportunistic trader.
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    • ON: Fri May 18th 08:32 AM
      Commented on:
      Are Derivatives For Risk Management or is Risk Management For Derivatives?
      Thanks SR.
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    • ON: Sat Apr 28th 09:33 AM
      Commented on:
      Why I'm Against Fixed Income ETFs
      DJ & DS: Quick note here. Just had a baby girl late Thursday and got back home now. By chance, checked out SA site. But to make things simple, please put comments/questions on my blog at thebetabrief.com so I can have all inquiries at one place. Sorry for quick get away but there's literally a scream beside me. Thanks.
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    • ON: Sun Apr 22nd 16:58 PM
      Commented on:
      ETF Industry Continues to Grow - Quietly
      DR: Your closing brings up a question that suggests the marketing of ETFs is purposefully convoluted. No, not everything can be blamed on mutual funds and Wall Street in general ... a LOT, but not everything. The blame is squarely on the ETF industry. From the few ETF related conferences I've attended in the last few months, I know that the industry understands this perfectly well. With further, well publicized, confusion related to products from firms like MacroShares and even some of the larger, more established ETF providers, it's clear ... the level of education and succinct communication to investors will have to be significantly improved. Expect greater involvement from venture capital firms (and other "advisors") especially with smaller new entrants as the product development is not the issue, it's the effective marketing and of course, distribution.
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    • ON: Wed Apr 18th 00:16 AM
      Commented on:
      In Search of an Actively Managed ETF: Does it Already Exist?
      Ikariagirl: I don't know the answer to question 1 and I don't know what's your point in question 2. I believe your question 3 has some false premises but I think the main point is that I don't want to get into a discussion that basically leads down a path pitting one exchange versus another. I'm actually not sure if the issue you are talking about is with the exchanges or with the regulators. I think you have come to the correct conclusion that the Canadian ETF industry has been built by American firms (BGI mainly and now Claymore and PowerShares/BetaPro). I don't see the immediate significance if the innovation is coming from US or Canadian brains. The industry is young so I think there's time for new entrants to stake a claim in this industry. You and "your story" might be one of these new entrants. I appreciate your thanks for the article but I read a certain negative tone in your comment, not necessarily to me but to the Canadian industry and it's inability to provide real, as you say "made in Canada" innovation. When I say innovation is coming out of Canada, it is. First ETF, first bond ETF, first BRIC ETF, first actively managed ETF. All first available in Canada. Your point seems to be that, although my point is true, the real source of this innovation is from US based providers operating in Canada. Think of other industries with US based participants here in Canada. Not a big difference. If you want to deal with real innovation in the ETF space, I think you should be talking with parties in the US and UK. It's in this arena where I spend the vast majority of my efforts. You should be talking with many of the newer or startup ETF shops as well as the VC firms that advise/capitalize them. They will be better able to value your story.
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    • ON: Fri Apr 13th 09:31 AM
      Commented on:
      Vanguard Offers Four New Bond ETFs
      AH: Agreed, the income earned from fixed income ETFs would hurt foreign investors more with the withholding tax. Most equity based ETFs are highly tax efficient so it's another argument against the bond ETFs ... and could be significant one depending on investor. I'll be interested to see if the new Vanguard bond ETFs rise to a decent level of AUM and even take some from BGI. Fixed income is one of the areas where BGI will have to consider pricing more carefully and soon. Maybe not their newer bond ETFs but certainly the original treasury ETFs and perhaps AGG and TIP.

      I'm sticking to my guns on this one though. For most retail investors = Equity core and explore: ETFs core, stock selection satellite. Fixed income core and explore: Laddered bond portfolio core, fixed income ETFs as satellites.
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    • ON: Wed Apr 11th 15:48 PM
      Commented on:
      Vanguard Offers Four New Bond ETFs
      Like all ETFs or any sort of fund, not every offering is good for every investor. To me the biggest negatives about bond ETFs are the relatively high fees and the lack of diversification provided within the various components in the ETF. Vanguard's offerings significantly take away my first point but because of a lack of competition in this area, it's been a long time coming. Furthermore, in the current economic environment and resulting low total returns, the expenses in bond ETFs hurt even more. The diversification problem still exists however. You really have to agree that within the S&P 500 or other broad market indices, the benefit is that with so many different sectors as well as mix of value and growth oriented stocks, the benefits of diversification are self-evident. The same can not be said to the same degree with bond ETFs.

      Of course, DJ and AB, your comments are correct although AB I'm not so sure about the benefits of bond indexing for many retail investors. It's also interesting that despite the fact that, as you say, there's been an "inabliity of the industry to generate significant alpha" in the bond fund space, we're starting to hear of fund offerings that focus on some active management in this area. This includes Sage Advisors working with Ryan ALM on a bond index plus program as well as the well publicized Bear Stearns filing with the SEC for an actively managed ETF. I agree that, at least on the mutual fund front, we have little evidence of alpha generation, but the industry seems to want to go for it in the ETF arena. With preferred share ETFs, dividend focused ETFs and other yield focused fund offerings, perhaps this is another example of the market attempting to provide more than the relatively poor returns found in bond markets in recent years. With the demographic shift (retirement of baby boomers), yield will continue to be a significant objective for many investors. I see it as a parallel to the search for alpha. Product offerings will continue in the ETF space to deal with demand.
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    • ON: Tue Apr 10th 12:04 PM
      Commented on:
      Interactive Q&A: Jeffrey L. Feldman, Creator of HealthShares and Founder and Chairman of XShares Group LLC
      Like David, I am also very interested in knowing more about your expansion to the carbon credit market. How will your ETF offering differ from direct exposure to this market? From what I know, the carbon trading market started out in the UK. Are you building your offering based on an existing template out of the UK ... in other words, is there plans for another ETF-like offering in the UK or elsewhere that you are using as a blueprint? When I first heard news of plans for this product, I assumed it was to be a US domiciled product and would be "first to market" globally (and thus, you're truly building this from scratch, not from an existing template). So, again, like David I'm interested in the structure and any unique tweaks found in what I think will be a most interesting offering.

      With regard to ETFs that provide exposure to specific states in the union ... I wonder who the market for this type of investment is. From an asset allocation and portfolio construction perspective, it doesn't seem like a family of ETFs that easily fits within most investors' existing framework. My first guess would be going after various types of institutional investors (more of the smaller ones, I think). I suppose if you go to a number of California (as an example) pensions, endowments, government related organization, etc. they might have some sort of guideline that promotes local investment and then they might go for a California ETF. But in today's environment, institutions are looking globally for diversification so I don't know how much interest they would have for this ... and this is especially true for the bigger pensions like CalPERS or CalSTRS. Just curious on how you plan on marketing these.

      Thanks for your time on this.
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    • ON: Tue Apr 3rd 08:23 AM
      Commented on:
      Market Concern: Hedge Funds, Bonds and ETFs
      ETFW: Could be a market there but I really don't know. I still say the vast majority are happy with laddered portfolio of bonds. Bond mutual funds (index or not) probably rank just as high. Bonds are more conservative by nature (or at least perceived to be so), thus I just don't know if it's worthwhile for providers to spend much of their resources in this area. And iShares seems to have the area covered so with Vanguard coming in with lower costs, the area may already be tight for new entrants. Anyone contemplating entering better have something pretty innovative so your idea of leverage could be the right approach. Just not sure if significant AUM would follow. My opinion.
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