Winning With ETF Strategies — Top Asset Managers
Share Their Methods For Beating the Market
By Max Isaacman
Pearson Education, Inc., 2012
$29.99, 211 pages
“Winning With ETF Strategies” is essentially two volumes for the price of one. Isaacman begins the book by reviewing the evolution of ETFs and some general discussions of market behavior, along with how ETFs can be used to exploit various market tendencies and movements. The subsequent chapters are a must-read for any serious ETF investor. With sufficient detail, Isaacman discusses the various weighting methods employed by indexes and ETFs. These include cap weighting, fundamental weighting and equal weighting, among others. Isaacman then delves more deeply into specific ETF offerings by the heavyweights of the industry: PowerShares, iShares and Rydex|SGI. Because of the ever-evolving nature of ETFs, some information in these sections already is out of date, but the fundamental underpinnings that he describes still are intact and relevant for today’s ETF investor.
The majority of the book consists of short (2-3 pages) interview-like passages on more than 20 investment advisors (IAs). These IAs run the gamut from $10M under management to more than $5 billion. While this part of the book, at times, seems like merely an extended advertisement for the money managers in question, there is much to be learned from their experiences. Isaacman essentially summarizes each manager’s investment philosophy and trading strategies. Naturally, they all use ETFs in one way or another. To Isaacman’s credit, he seems to have chosen the highlighted managers based on their diverse use of ETFs. One manager prefers ETFs over stocks and mutual funds for their ease in implementing an asset allocation and portfolio rebalancing program, which would otherwise be tricky without their versatility. Yet another manager prefers ETFs because of the wide variety of sector plays available. A few of the advisors I would classify as “market timers,” so naturally the flexibility of ETFs, in terms of liquidity and lack of redemption fees, or loads, make them the ideal candidate for such strategies. Still others expound upon the virtues of ETFs related to international and commodity coverage, the ability to enhance returns using inverse and leveraged ETFs and cost of trading issues.
The book does suffer a bit because of the inherent repetition when interviewing more than 20 advisors, (all of whom use ETFs in a mostly systematic fashion); however, there remains enough diversity in their approaches to render the material useful to a wide variety of readers. In fact, individual investors could adapt some of the approaches covered in the book quite easily. Though, to be fair to Isaacman, he does not give away proprietary information, and in many cases stays at a very high-level when discussing the individual manager’s strategies. Nevertheless, the multitude of approaches covered in this section will give all investors something to think about regarding their own management techniques.
ETFs have been in the marketplace for nearly 20 years now, with assets more than $1 trillion and, at last count, more than 1,200 available choices. Investors, both professional and individual, will have beneficial (and hopefully profitable) takeaways from Isaacman’s book. For the more sophisticated advisors who already very well may be using many of the products covered in this book, there are enough unique ideas and tidbits to warrant a closer inspection of their current trading strategies. For individual investors who may not be using ETFs at all, “Winning With ETF Strategies” may convince them that these investment vehicles can, and should, have a place in their portfolios, whether they trade them themselves or enlist the help of a professional.
Bruce C. Greig, CFA, CAIA, CMT, is the portfolio manager for Altin Holdings, LLC. Greig has Bachelor’s degrees in statistics and mathematics, and a Master’s degree in finance, all from the University of Michigan.