75 Basis Points, Maybe More

July 31, 2007

You're getting microscopic with your portfolio now.  Next thing you know you'll have someone running their 1 BP Calpers fund for you. I've got other ideas today, though.

CNBC asked me the most dreadful question in advance of a possible appearance tomorrow or Thursday (2-3).  I'll post in advance when I know.  Oh yeah, great one.  All my industry friends are going to LOVE whatever I come up with on that.

And I have come up with them already.

I was going through those and I got to thinking how far the ETF business and product line has moved away from some of the core ideas I have as an asset allocator.  And that's OK.  It used to just be all down-the-middle funds to plug this or that hole in your allocation.

Now the THEM has been admitted into the ETF world.  Leverage, alternative assets, highly volatile micro sectors, ACTIVE funds.  It's Troy all over again. And it was the SEC supposedly guarding the gates.  We're ALREADY active.  All the way.  It's just all quantitatively driven.

Anyone who knows me knows I'm an INDEXER, so not me on all that.  But I DO actually think alpha is possible, and I DO think you've got a better chance of actually benefiting from some of it if you lower the fees and improve the tax efficiency of the fund structure. And ETFs have done that.

So call 75 bps expensive if you want, but it beats the heck out of almost everything else out there.  Welcome to the club active, micro, leveraged guys! 




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