This article is part of a regular series of thought leadership pieces from some of the more influential ETF strategists in the money management industry. Today’s article features Tyler Mordy, president and co-chief investment strategist of Toronto-based Hahn Investment Stewards.
Socrates once declared that “the unexamined life is not worth living.” As the ETF strategist industry—that still-small cohort of asset managers that specialize in managing global ETF portfolios—takes shape, it’s important to continually assess our own motivations.
Introspection is needed.
Why were these firms started? After all, many ETF strategists left lucrative careers, decamping from the cozy comforts of large organizations.
What problem are we solving?
To be sure, the ETF industry has been a veritable hotbed of financial innovation, teeming with ideas that challenge conventional practices.
Up From Ashes
The economic backdrop of this evolution is not a coincidence. Post-financial crisis periods, where growth is sluggish and the economy fragile like it is today, tend to be important eras of innovation. Consider the 1870s (the original “Great Depression”) and the 1930s—both slow-growth decades following credit crunches.
Each crisis spurred a period of incredible inventiveness, both in terms of new technologies and the ability to make use of them in productive systems. A perfect example of this was the huge spike in patented technologies that manifested during the 1870s and 1930s.
Of course, the ETF vehicle arrived long before the global financial crisis. But a focus on the actual investment processes used to build ETF portfolios only began in earnest after the 2008 crisis.
This is also not a coincidence.