Why no "ETF of ETFs" yet?

[Olav23]

I'm just wondering, has anyone heard whether there are any etf of etf's on the horizon in the near future? I was thinking, it would probably not be very complex to put together a simple ETF that purchased other ETFs to give you basically something similar to a fund of funds.

Why hasn't anyone brought this to market yet? It seems like you could create something like the target retirement funds or, if not something that changed structure through time, something like an aggressive growth ETF, conservative ETF, etc. And each just has a different makeup, broken into the various ETF counterparts.

The etf could hold a standard allocation of stock and bond etfs allocated. Even if it charged a bit on top of the underlying ETFs, it would be very convenient so we don't have to pay commissions to rebalance quarterly/yearly and on top of that, having to remember to rebalance

Just wondered since the fund world seems headed that way, and with more and more slice and dices appearing in the ETF world, sounds like a natural fit.

Has anyone heard anything?

 

[bssc]

I agree that it is a matter of time. I was surprised when they rolled out EFTs that moved inversely to the market since it allows you to sell short in an IRA.

 

[Spanky]

I do not see a need as there are endless offerings of ETFs for almost any kind of asset classes. They are designed for slice and dice.

 

[Olav23]

They are designed for slice-and-dice, but also (arguably) are designed for tax efficiency and strategic asset allocation. Vanguard index funds are designed for the same purposes, and they created target retirement funds encompassing the index funds, so why is this any different?

Let them do the work of tax loss selling and rebalancing, bid/ask spread issues, commissions, etc. They have better access to economies of scale than us.

 

[FIRE'd@51]

I was surprised when they rolled out EFTs that moved inversely to the market since it allows you to sell short in an IRA.

Maybe that's why they did it.

 

[bosco]

I agree that it is a matter of time. I was surprised when they rolled out EFTs that moved inversely to the market since it allows you to sell short in an IRA.

you've been able to do that for years using Rydex or Profunds, even at double-volatility. Only difference is intra-day trading is possible with ETFs.

 

[Olav23]

I never really understood the no selling short in an IRA either. I mean, they generally let you trade options, so can't you create synthetic short positions anyway? Must be the work of politicians, not economists/finance people...

 

[CCdaCE]

Supposedly they're available.

Target Maturity ETF

Tactical ETF

... as one example. The one I clicked on has only been around since Oct. '06.

I know nothing of the company offering them.

I gleaned this info from the Feb. 15th blog at thekirkreport.com.

-CC

 

[eridanus]

I don't think any brokers allow a short call in an IRA.

 

[bosco]

I don't think any brokers allow a short call in an IRA.

technically you are correct, but if you buy a bear fund, you are not selling anything short you are buying a fund. But it is designed to move inversly to the market it is tracking, so essentially it is the same thing.

Now, evidently, ETFs are forming with reverse tracking as well.

So basically, as long as what you want to short is an index or market segment, you can do it. Check out all Rydex and Profund's offering.

All that being said, I gave it up years ago...

 

[Olav23]

From smartmoney:

http://www.smartmoney.com/ask/index.cfm?story=20000307

"It is legal to buy and sell options in a Roth IRA, but that does not mean you will be able to easily do it," says Tom Ochsenschlager, a partner at accounting firm Grant Thornton in Washington, D.C.

The IRS places some restrictions on how you can invest IRA savings — outlawing such things as collectibles and life insurance policies. But when it comes to options, the real question is whether you'll be able to find a company willing to handle such trades within your IRA. Roth IRAs and traditional IRAs have to be administered through a qualified custodian — generally a broker, mutual fund company, bank, savings & loan or credit union. It might be tough to find one willing to let you trade something as speculative as options, since custodians tend to fret about the possibility of litigation should an investment go sour.

It might help to explain your situation to your custodian — that you stash the maximum in your 401(k) and can afford to be more aggressive in the Roth. Shop around, advises Martin Nissenbaum, national director of personal income tax planning at Ernst & Young. A full-service brokerage firm might be receptive to the idea, he says. Nissenbaum sympathizes with your desire to be a little more creative in your Roth. "Why not invest in something highly leveraged like options if you think you can do well?"

But anyway, to get back to the point, it looks like XTF is a company that invests in ETFs not a specific ETF you can purchase on the open market. But I am sure it is coming soon.

Thanks all!

 

[CCdaCE]

Yeah, XTF never really says if they're "funds of ETFs" or ETFs of ETFs. Maybe they're not quite there, but close.

Uses obscure words like ETF Tactical portfolios.

Not simple enough for me. Doesn't give a ticker name, etc.

Sorry to lead you on.

-CC

 

[Spanky]

They also says that the equity exposure can vary by 20%. I wonder what the fee/expenses might be if they ever decided to offer XTF funds.

 

[CCdaCE]

They also says that the equity exposure can vary by 20%. I wonder what the fee/expenses might be if they ever decided to offer XTF funds.

Probably the typical... XTF uses "big words", so they feel the necessity to charge big fees, even though ETFs have generally low ERs. (Based only on what I know of Vanguard's ETF offerings having lower expenses than some of their funds.)

-CC

 

[LOL!]

Your question was only a couple of weeks early.
http://online.wsj.com/public/article/SB117357777453833362.html?mod=sunday_journal_primary_hs

 

[Anansi]

Actually Cohen & Steers has had a fund of closed-end funds since November 2006. (NYSE: FOF). They claim it was the first.

 

[haha]

I never really understood the no selling short in an IRA either. I mean, they generally let you trade options, so can't you create synthetic short positions anyway? Must be the work of politicians, not economists/finance people...

The reason you can't sell short in an IRA has nothing to do with the short position per se, but to the fact that an IRA cannot have liabilities. To sell short, you must borrow stock. Therefore that stock is a liability in the IRA account. Short selling must be done in a margin account; an IRA cannot be a margin account.

The synthetic shorts, Rydex Contras, inverse ETFs and puts that you mentioned could conceivably let your account go to zero; but could not create a balance owed to the broker.

Ha