Index Publications, Conference Opening

Indexing Strategies Asia 2007

Hong Kong– 27 November, 2007 Jim Wiandt - Publisher

Hong Kong– 27 November, 2007


Jim Wiandt, Editor

New Frontiers, Growing ChallengesNew Frontiers, Growing ChallengesThe Latest Developments in IndexingThe Latest Developments in Indexing

Jim Wiandt, PublisherJim Wiandt, Publisher

IndexUniverse.com, Journal of Indexes, ETFRIndexUniverse.com, Journal of Indexes, ETFR

IQPC Indexing Asia 2007IQPC Indexing Asia 2007

Hong KongHong Kong–– November 27, 2007November 27, 2007



The Core Of My CommentsThe Core Of My Comments

�� New Product Developments New Product Developments

�� Increased access to wider array of asset classesIncreased access to wider array of asset classes

�� Alternative weighting and the move to activeAlternative weighting and the move to active

�� The Separation of Alpha and Beta (core/satellite)The Separation of Alpha and Beta (core/satellite)

�� Alternative structures shift the landscapeAlternative structures shift the landscape



Asset Class Expanders Asset Class Expanders –– Phase IPhase I

�� MicrocapMicrocap

�� DividendsDividends

�� Increased style and size optionsIncreased style and size options

�� More InternationalMore International

�� Fixed Income finds some competitionFixed Income finds some competition

�� Hello GoldHello Gold



Asset Class Expanders Phase IIAsset Class Expanders Phase II

�� GLD and IAU bring us bullionGLD and IAU bring us bullion

�� Oil ETFs(?) hit the marketOil ETFs(?) hit the market

�� Commodities products start to roll outCommodities products start to roll out

�� Levered and inverse productsLevered and inverse products

�� International Real EstateInternational Real Estate

�� Specialized microsectorsSpecialized microsectors

�� Much More regional and international options Much More regional and international options

including size and style funds.including size and style funds.



Assets Still in Core ETFsAssets Still in Core ETFs



Separation of Alpha and Core/ Satellite Separation of Alpha and Core/ Satellite

�� ItIt’’s all about alpha and risk controls all about alpha and risk control

�� Traditional Core/SatelliteTraditional Core/Satellite

�� Active Management looks more like IndexingActive Management looks more like Indexing

�� Indexing Looks more like Active ManagementIndexing Looks more like Active Management



Indexing on the RiseIndexing on the Rise



Expenses TooExpenses Too



Alternative Weighting and the Move To ActiveAlternative Weighting and the Move To Active

�� It all started with the Rydex S&P 500 Equal Weighted (RSP).It all started with the Rydex S&P 500 Equal Weighted (RSP).

�� Moves up the continuum feeling more active down the line.Moves up the continuum feeling more active down the line.

�� Rydex S&P Pure StyleRydex S&P Pure Style

�� FTSE RAFI PowerSharesFTSE RAFI PowerShares

�� WisdomTree dividend and revenue weightedWisdomTree dividend and revenue weighted

�� PowerShares Dynamic (Intellidexes)PowerShares Dynamic (Intellidexes)

�� Alpha SharesAlpha Shares

�� SPA MarketGraderSPA MarketGrader

�� Straight (not fully transparent) activeStraight (not fully transparent) active



A Look At a A Look At a ““FundamentalFundamental”” ControversyControversy

�� History of Cap WeightingHistory of Cap Weighting

�� Value InvestingValue Investing

�� Nothing is a Sure Thing (Q3, 2007)Nothing is a Sure Thing (Q3, 2007)



Why Fundamental Indexation?Why Fundamental Indexation?

Source: Morgan Stanley Investmetnt Strategies



Alternative Product StructuresAlternative Product Structures

�� Regulation necessitates changeRegulation necessitates change�� Gold bullion could not be a fund.Gold bullion could not be a fund.

�� Oil can not be held in a vault.Oil can not be held in a vault.

�� ETF structure in certain asset classes not tax efficient or easyETF structure in certain asset classes not tax efficient or easy to track.to track.

�� Implications for the FutureImplications for the Future�� IRS looking at ETN structureIRS looking at ETN structure

�� Alternative structures here to stayAlternative structures here to stay

�� Really with notes, futures, swaps etc., anything is possibleReally with notes, futures, swaps etc., anything is possible



Exchange Traded Products Driving ChangeExchange Traded Products Driving Change

�� Innovative new structures make changes possible.Innovative new structures make changes possible.

�� Does change sometimes outpace reason.Does change sometimes outpace reason.

�� Is 1,000 products enough/too many? 2,000? 8,000?Is 1,000 products enough/too many? 2,000? 8,000?

�� A quick review of the ETF market for perspectiveA quick review of the ETF market for perspective



Eensy Weensy SPDREensy Weensy SPDR

Source: Morgan Stanley Investmetnt Strategies



Rocket ShipRocket Ship

World 2005 USA 2005

World Now Japan

Source: Morgan Stanley Investment Strategies

World 2007 USA 2007



ETF Research Resources ETF Research Resources

Fund Managers

Media

Index Providers

Databases

Books and

Publications

Calls, Emails

Brokerages Exchanges



Jim Wiandt Favorite ETF SourcesJim Wiandt Favorite ETF Sources10. Books & Magazines (Gastineau, Lerner, Wiandt, etc.)10. Books & Magazines (Gastineau, Lerner, Wiandt, etc.)

9. 9. Reuters Newswire, Yahoo data and news wiresReuters Newswire, Yahoo data and news wires

8. 8. Deutsche BoerseDeutsche Boerse

7. 7. Nasdaq.comNasdaq.com

6. 6. iShares.comiShares.com

5. 5. LipperLipper

4. 4. Morningstar (Web sites and Principia Pro)Morningstar (Web sites and Principia Pro)

3.3. State Street Global Advisors (P. SanchezState Street Global Advisors (P. Sanchez--Marin)Marin)

2. 2. Amex.com, Amextrader.com, emails (O. Flemming)Amex.com, Amextrader.com, emails (O. Flemming)

1.1. Morgan Stanley (D. Fuhr, P. Mazzilli) Morgan Stanley (D. Fuhr, P. Mazzilli)



Hong Kong– 27 November, 2007


Jim Wiandt, Editor

Index Publications, Conference Opening

Business

product developments

structures

including

alternative

asset classes

style funds

outpace reason

tax efficient