Podcast: Play in new window | Download
Subscribe:
Today I have the pleasure to be joined today by Laurent Kssis MD of CEC Capital who has worked in the ETF industry for 14years. We’ve spent a few episodes recently in the heady heights of the super-big picture so let’s get back to the coalface and dive in depth into an important area of FS.
ETFs – Exchange Traded Funds – have been many times on the London Fintech Podcast, always in passing, so I thought it was more than overdue to attack them head on.
Like Banquo’s ghost in Macbeth ETFs are the thing that haunt the whole Investment Management Fintech scene … if, in essence, you can gain exposure to equity markets in a balanced way via a vehicle with minimal fees what exactly is there for Investment Management Fintech to disrupt?
Laurent certainly has feet in both #oldFS and #newFS camps being the non-exec chairman of the Blockchain investment company Coinsilium. So he is the ideal expert to talk to us about this sector today.
Conceptually ETFs started life as traded funds – if you like index-tracker investment trusts – although why they weren’t just called investment trusts is a question for Laurent. According to wikipedia since 1993 in the US where they were first created an unbelievable $3trn have been invested in them. They have also moved a long way from their origin as index-trackers with (quoting wiki) “By the end of 2015 ETFs offered 1,800 different products covering almost every conceivable market sector, niche and trading strategy”.
So that’s ETFs per se. But like everywhere in FS the wave of innovation that is Fintech is lapping on many shores. If ETFs have inhibited the growth of one area of Fintech what is Fintech doing to them? Listeners will certainly get their money’s worth today as we range from a tutorial on the basics of ETFs through Bitcoin ETFs to blockchain – a huge waterfront.
Topics discussed include:
– how Laurent’s career led him to being an expert on ETFs and progressing that into hot areas like Bitcoin and Blockchain
– the relevance of the “transition management” world [what happens when one fund manager takes over eg a pension fund from another]
– an ETF is a “marketable investment vehicle that allows you to buy and sell during trading hours of the Exchange a basket of stock/bonds/commodities through a single share”
– comparing and contrasting investment trusts and ETFs; management fees, transparency, NAV calculation, premia/discount ranges
– the multiplicity of ETFs eg there are around 50 different ones on the Euro Stoxx 50; different exchanges, currencies, market timezones leading for challenges for market makers in setting prices, hedging themselves etc
– “trading channel” effectively the arbitrage channel is the range in which ETFs trade compared to their underlying components; over a decade ago this could have been as much as 10%/+5% to -5% (“quite extortionate”) but then illiquid, hard to hedge against;
– this changed rapidly when institutions started to get involved in larger size
– management fees (“TER” – total expense ratio) typically, on ETFs such as Euro Stoxx 50, have gone from ~0.65% a decade ago to ~0.12% today
– ETFs are allowed in ISAs, SIPPs, 401k
– in 401k’s over 50% of the investments are in ETFS (!)
– ETFs are UCITS compliant (which allows passporting into Europe), registered mostly in Ireland and “tax-advantageous” locations (Jersey/Guernsey/Luxembourg)
– ETFs are open-ended they can increase in size at any point (depending on demand:supply); how this is done
– ETFs are undergoing a huge explosion in diversity – you can buy almost anything via ETFs – gold silver, precious metals, industrial metals, agricultural products
– the huge opportunity for Fintech in providing a more up-to-date angle to investing in these; the tendency of the first wave of Investment Management Fintech to just replicate investing in the same boring old stuff as existing I.M. firms (core equity markets and bonds for example)
– a whole interesting tale about Bitcoin ETFs and what Laurent learned on that journey – you’ll have to listen to hear that tale 😉 …
– the difference between ETFs and ETNs (Exchange Traded Notes)
– the recent Bitcoin hacking through BitFinex and how it differs from last years MT Gox; a high quality exchange, the role of regulation in re; hot wallets and cold wallets – a painful tale all round 🙁
– blockchain versus bitcoin
– ETFs were new once and have been a great success – what can Fintech learn from that (you’ll have to listen ;-)) …
– ETFs have had a rough ride too – from journalists to scandals…
– an overview of Coinsilium – the world’s first listed blockchain publically listed investment company
And much much more 🙂
Share and enjoy!
Jay is a great guy to cover both of these topics – not only is he a successful serial entrepreneur having previously created Hailo (sold to Daimler) and eCourier (sold to the Royal Mail) but Thimble has already done $175bn of coverage (which sounds like a lot to me). They were recently named as Fast Company’s 2021 #1 Most Innovative “Small and Mighty” Company. Which is impressive.
