The One-Man, $1.2B ETF Shop | Hacker News Reader

The One-Man, $1.2B ETF Shop

bloomberg.com

49 pointsqCOVET21 comments

Here were the takeaways from a discussion I had with a friend about this.

  Initial setup is likely cumbersome but straightforward.
  Marketing is where all the effort is.
  The sector you choose has to outperform, which you have little control over.

Sounds like every startup.

Not to mention:

That’s the dirty secret of the ETF industry. All of the innovation has led to a lot of failure... The bottom line: Most ETFs live in oblivion.

Like many other areas, you tend to only hear about the success stories, and are unaware of the scale of the non-successes.

From the article

> 81% of funds account for 2.4% of dollar volume.

So the top 20% see 97.6% of all trading, probably with the top 10% seeing 90% or so. The ETF industry is a bit more brutal than the 80/20 rule of thumb.

This guy is awesome. We should have more that kind of funds. 0.75% yearly expense ratio: http://www.etf.com/HACK

The whole finance could be disrupted if funds will charge less and less for commission. I believe anything over 1%/year is ridiculous high. Fundamentally there is little reason why we couldn't have active funds for the price of ETFs.

Self index ETF seems to me like low cost active funds with open-source public investment thesis.

0.75% TER is still far too high (like, charging at least three or four times too much) for something that is a passive index.

Many indexes are 0.15% and under.

Is it a passive index though? Seems like ISE specifically maintain the index for this fund and fees of the fund also go to the guys in charge of the index (ISE).

Not to mention that ETF is more expensive _and_ less diversified than broader market index funds. And the index it follows isn't even doing anything fancy like Dimensional Fund Advisors (they don't use a market-cap weighted index, they have their own formulas to calculate weights).

Yes, too expensive.

This article was posted a few hours earlier, and I pointed out that ETFs like SPY and VOO are much cheaper, 0.09% and 0.05% respectively. https://news.ycombinator.com/item?id=10123060

Buying HACK is to invest in a particular industry. SPY and VOO don't track an industry, they track large us companies.

An active fund at 1% or less per year doesn't make sense. Most mutual funds essentially act like ETFs as a lot of them are focused on relative performance and not absolute performance. You should read the beginning chapters of Margin of Safety (if you can find the book) as it really helps to explain the mindset of a MF. To reduce expenses for active funds further will only exacerbate this.

If you want to outperform the market, however, you need to find a GREAT hedge fund that charges 1% management fee (at most) and an incentive fee...otherwise it doesn't make sense to pay a flat fee to a MF and get just average performance. (There are exceptions as some MFs do consistently outperform the market but these are few and FAR between).

> If you want to outperform the market, however, you need to find a GREAT hedge fund that charges 1% management fee (at most) and an incentive fee...otherwise it doesn't make sense to pay a flat fee to a MF and get just average performance. (There are exceptions as some MFs do consistently outperform the market but these are few and FAR between).

You'll have difficulty finding even a good hedge fund at 1% management fee. Most charge what's known as Two and Twenty -- 2% of assets under management and 20% of profits. Point72 charges as high as 3% and 50%.

I work in the industry. You are right on a general basis but there are plenty of funds that don't get a lot of press and kill it year in and year out AND charge less than 2 and 20. Most hedge funds are, at best, average because they don't know what they're doing. Don't blindly give 2 and 20 to an avg. hedge fund.

Do the math and giving even 2 and 20 to a superstar will allow you to compound at a much faster rate than the S&P500.

... because ETF shares are created and redeemed in kind and thus almost never produce capital gains for shareholders.

Could someone explain this to me? What kind of 'kind' are we talking about?

Here's a good explanation: http://www.etf.com/etf-education-center/7540-what-is-the-etf...

Looks like active managers are finally figuring out what to do: behave like passive managers. Pick a bucket of stocks, publish it, invest in it, calm down.

That is exactly it. After reading the story, I have been thinking about this and how easy it is to create weighted-buckets of different companies, give it a cool name and launch.

Cripto-currency ETF would be awesome .. when a few of these bitcoin companies start to trade publicaly.

I see a parallel here between tickers, which are extremely important given a fledgling ETF's reliance on marketing, and domain names.

Could an ETF company hypothetically squat on valuable tickers such as HACK, DATA, BDAT, GEMS, etc.? Not sure it would be worth the costs to do so, but I'm curious nonetheless.

There was just recently a Business Insider post on a one-man billion dollar startup.[1] Here it is!

[1] http://www.businessinsider.com/is-a-one-man-billion-dollar-s...

Except it's really a $9M startup since it's only seeing 0.75% of that $1.2B. Still very good for a single person business but not media worthy.

WTF !!!

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