18. February 2010 by Dan Walkow, CFA, CMT.

Its called tracking error. Tracking error is any deviation (positive or negative) from the return of a fund’s benchmark index. Viewed through this lens, investors should always expect some tracking error in their funds, as the drag of expenses will cause most ETFs to lag their benchmarks over time.

Morgan Stanley attributed the increase in tracking error to many factors, read more here.

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24. November 2009 by Dan Walkow, CFA, CMT.

For many investors the drubbing of 2008 wears deep and there is a developing view that “Alternative Investments” such as long-short funds, where downside protection is added to a portfolio to stabilize volatility and take advantage of cyclical downdrafts in the marketplace is gaining popularity.

Timing is everything when it  comes to investing and we are advocates of utilizing Inverse-geared Exchange Traded Funds to “immunize” portfolio volility.

Here is a clip from Bloomberg –

Bloomberg) — JPMorgan Chase & Co. and Pacific Investment Management Co. are inundated with money from individuals attempting to mimic the performance of hedge funds speculating that the stock-market rally is over.

So-called bear-market and long-short mutual funds, designed to protect against falling stock prices, attracted a record $10 billion this year through October, more than double the previous high in 2006, according to Morningstar Inc. Asset managers have opened 19 long-short funds, the most in one year.

The funds’ rising popularity shows how skeptical small investors remain even after the Standard & Poor’s 500 Indexrecouped almost half the 57 percent loss incurred from October 2007 to the March 2009 low. Conventional mutual funds that only buy U.S. stocks posted $4.6 billion of redemptions in the first 10 months of the year, while bond funds added $280 billion.  Read more here.

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27. August 2009 by Dan Walkow, CFA, CMT.

Some ETFs have gotten so big regulators are looking to cap them as ETFs like the US Natural Gas Fund is so big that they having trouble executing on the futures market and have to go to the shady swap market to trade. On the other hand there are more than 500 new ETFs on the launch pad with minimal seed funding.

Read the article here at the WSJ.

I have been a long time investor and advisor on ETFs but with these latest developments I am wary of them at this juncture. Not all but certainly the levered ones as well as he commodity ones.

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