Shiffer (cont'd.): The opposite of that is the death watch, looking at some of these ETFs that come to market. As a consumer of that ETF product, we want to find a happy balance that indicates that ETF will be there for the long term, because our exposure changes.
We want to be able to put it on the shelf and take it off the shelf as many times as we want, not just take it off when the market’s going in that direction and then have it disappear for the next time it comes back around, because the markets tend to be very cyclical.
ETF.com: So basically, you’re looking for a proven track record?
Shiffer: A proven track record, a commitment to the product, an acceptance in the marketplace, a very liquid secondary and tertiary marketplace so that we can continue to have that exposure at size, without having to worry about float.
ETF.com: What do you consider to be an acceptable amount of assets or liquidity?
Shiffer: It’s really specific. It changes a little bit with regard to whatever the asset class may be and the type of exposure. Certainly, anything in the domestic equities space, we’re going to want to see a significant amount of assets with maybe a year of trading in it so you can see the action of the marketplace.
In a small commodities piece, that’s not necessarily needed—we’re not going to put the same size of allocation behind these trades. It just needs to be proportional to what you want to enact, and you want to make sure you’re having an efficient cost of execution or participation.
ETF.com: Are there asset classes for which you think ETFs are inappropriate—like certain areas of the commodities space or types of alternative investments?
Shiffer: I certainly think the alternatives market is very underserved because of the cost of execution or the cost to roll out a strategy within an ETF. Frankly, I don’t know that there is necessarily a “wrong spot” for an ETF.
It’s a very efficient vehicle; it’s really nothing more than a wrapper for a lot of intents and purposes. If you could execute or offer that same kind of strategy or that same exposure through that wrapper, there’s really no reason I don’t think you should.
ETF.com: Do you think that actively managed ETFs are likely to gain traction?
Shiffer: I think that’s a very different marketplace. I don’t want to make a prediction as to whether they will or won’t, but it’s certainly a very specific marketplace and the two types of investors that would invest in one or the other are often very different.
There are tremendous assets in the ’40 Act space, and they continue to garner assets across the board—there’s no reason to say that something in an active ETF won’t be able to garner those same kinds of assets over the long run.
ETF.com: Is Curian looking primarily at the index-based ETF space?
Shiffer: We’re really equal opportunity—we just look at ETFs across the board. We really want to make sure it’s a pure expression of our desire to have that exposure. It becomes a secondary or tertiary consideration as to whether we’re looking at an active or beta or other version of an ETF other than index.