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Informa

Focus on ETFs - Online Academy

Five weeks - two hours per week

Five week online course, starts March 27th 2019

Distance Learning

Focus on ETFs - Online Academy Programme

Module 1: The Exchange Traded Product Landscape

Historical Development of Exchange Traded Products

  • Focus on the SPDR Trust ™ created by State Street in 1993
  • Review of other collective investment vehicles (CIVs)
  • Fee structure and execution benefits of ETFs
  • Use of ETFs as part of a reaction to active management strategies
  • Behaviour of ETFs during market stress periods – e.g. the Flash Crash of 2010

CASE STUDY: The original ETF – State Street’s SPY

Footprint of ETPs in Global Capital Markets

  • Compare availability and range of ETFs traded on US, European and Asian platforms
  • Number of funds, assets under management, growth trajectories
  • Regulatory issues for ETF sponsors and investors
  • Role of ETFs in institutional investment strategies
  • Access to emerging and frontier markets

CASE STUDY: Compare the performance and AUM of ETF’s with hedge funds

ETFs as Structured Products

  • Contrast features of ETFs to mutual funds and investment trusts
  • Primary and secondary market activities
  • Contrast funds which hold “physicals” versus those which are synthetic
  • Nature of counter party risk regarding synthetic ETFs
  • Regulatory issues concerning structured products e.g. MiFID II

Module 2: Mechanics of ETFs

Organisational Structure of ETFs

  • Nature of open ended investment vehicles
  • Fiduciary/trust architectures
  • Role of sponsors and trustees
  • Function of Authorised Participants (APs) in the primary market
  • Creation and redemption units – role of APs

CASE STUDY: Detailed analysis of the creation and redemption Process

Secondary Market Features of ETFs

  • Market micro-structure issues for ETF trading
  • Secondary market characteristics – liquidity issues
  • Does the ETF trade at a premium or discount to NAV?
  • Treatment of dividends and other income generated in the underlying securities
  • Second order trading of ETFs - e.g. contracts for difference (CFDs) that reference ETFs

CASE STUDY: Importance of fees earned from Securities Borrowing and Lending Intermediaries (SBLI’s)

Key Investment Metrics of ETFs

  • Expense ratio – the fee structure and how collected
  • Market performance – total returns, volatility, correlations
  • Replication strategies – stratified sampling vs. full replication
  • Tracking Error – deviation from the performance of the underlying
  • Issues connected with leveraged ETFs

Module 3: Equity-Based ETFs

Global Equity Indices

  • Explanation of the logic and classification of equity indices
  • MSCI equity index products
  • Review the key US and European index products
  • Review of the key ETFs that track emerging market indices
  • Review of the key ETFs that track frontier market indices

CASE STUDY: Examine the significance of SPY as the most widely traded financial instrument in US equity markets

Sector Index Products

  • Overall framework for sector-based products – industry, style, geography
  • Benefits to investors for targeted access to specific sectors

Leveraged and Inverse Equity ETF Products

  • The rationale for inverse ETFs – facilitates shorting of securities
  • Claims made by ETF sponsors regarding such products
  • Leveraging mechanics for equity-based ETFs
  • The constant leverage trap – how does this impact tracking?
  • Review of the major inverse and leveraged ETFs available to equity investors

CASE STUDY: Review the tracking behaviour of some of the main inverse and leveraged ETFs base on US equity markets

Equity Investment Style ETFs

  • Review of asset allocation strategies that are widely used by asset managers
  • Value style versus growth style
  • Diversification styles – geographical and sector diversity
  • Essentials of performance attribution analysis
  • ETFs which are based on smart beta strategies

CASE STUDY: Examination of ETFs that implement short volatility strategies including a detailed analysis of the demise of the Credit Suisse fund – XIV.

Module 4: Fixed Income and Miscellaneous ETFs

Total Return Fixed Income Products

  • Nature of the yield curve – term structure of interest rates
  • Total return characteristics – coupon plus capital gain/loss
  • Review of US Treasury ETFs
  • Special case of zero coupon fixed income instruments
  • Explanation of how bond-based ETFs have different behaviour to actual bonds

CASE STUDY: Using US Treasury based ETFs to trade the US government bond yield curve

Credit Quality Products

  • Distinguish between investment grade and sub-investment grade debt instruments
  • Explanation of credit quality and credit risk within the fixed income universe
  • Contrast between sovereign based bond ETFs and corporate based bond ETFs
  • Review of ETFs which track investment grade corporate bond indices
  • Review of ETFs which track high yield corporate bond indices

CASE STUDY: Liquidity issues with ETFs that are based on underlying high yield debt instruments
Examination of the features and performance of HYG and JNK

Commodity and Currency ETFs

  • Overview of the nature of FX markets and different investment vehicles
  • Overview of the nature of the commodity futures market
  • Review of ETFs which track foreign currencies – how they are constructed
  • Review of ETFs which track commodities – synthetic replication

CASE STUDY: Use case for forex hedging with an ETF that tracks a G10 currency

Module 5: Uses and Risks of ETFs in Portfolio Management

Active Vs Passive Investment

  • Distinguish between active and passive investment management
  • Examine the philosophy advocated by index tracking e.g. Vanguard’s Bogle
  • Contrast the fees typically applied for active management
  • Using ETFs for diversification within an actively managed portfolio
  • Redemption gates and liquidity constraints within hedge funds

CASE STUDY: Review of historical performance statistics for returns from active and passive fund managers

Smart Beta Strategies

  • Explanation of fundamentals of CAPM, risk and reward and beta
  • Review of the logic behind smart beta – risk factor asset allocation models
  • Examination of the performance of various widely used smart beta ETFs
  • Crowding and herding issues with smart beta strategies
  • Are the promises provided by smart beta ETF sponsors warranted?

CASE STUDY: Examination of the model and performance of Vanguard Dividend Appreciation ETF - VIG

Implementing Global Macro Strategies With ETFs

  • ETFs which implement hedge fund strategies
  • Merger arbitrage strategies
  • Long/Short strategies
  • Beta neutral strategies
  • Managed futures

Special Risks With ETFs

  • Market capacity issues – especially the underlying liquidity of ETF constituents
  • Liquidity risks with assets in emerging and frontier markets
  • Regulatory risk as policy makers focus on liquidity risk of structed products
  • Transparency risk with structured products e.g. MiFID 2
  • Capital controls in frontier markets

CASE STUDY: Examination of the model and performance of iShares MSCI Frontier 100 ETF - FM

 

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