Mix and match is often more suitable for light luxury.
But Wall Street recently released a financial product that is close to the people - hybrid ETF.
Have you ever heard of hybrid funds? Have you heard of hybrid ETFs?
Dear guests, are you confused when you see this mashup?
ETF As we all know, is exchange-traded open-end index fund , which combines the operational characteristics of closed-end funds and open-end funds. Customers can not only subscribe or redeem fund shares from the fund management company, but also ETF shares are bought and sold in the secondary market at market prices. What the hell is hybrid ETF in ?
Hybrid ETF:
combines actively managed mutual funds (i.e. actively managed funds) and passively managed ETFs. It can not only obtain excess returns by relying on the active stock selection of fund managers, but also has the low fees and high liquidity of ETFs. and other features. Please note that the "hybrid type" here has different meanings from the "stock-bond hybrid type" of domestic public funds.
, a hybrid ETF, has the following hard-core advantages. It has attracted great attention from the market even before it was born:
has the hard-core skills of ETFs - low fees and at the same time enjoys the tax advantages of ETFs.
Here, Fu Er would like to explain to our guests what tax advantages ETFs have in the United States:
TIPS:
✍ Background: The U.S. personal income tax adopts a comprehensive excess progressive tax rate structure, which allows taxpayers to pass various types of tax rates throughout the year. After adding up the income obtained through various channels and subtracting the eligible exemptions and deductions, different tax rates will be progressively levied according to different tax filing statuses and different adjusted total income levels.
✍ Purpose: In order to vigorously develop the second and third pillars of elderly care, the United States has launched a preferential tax reduction policy.
✍ Means: There are two tax exemption modes in , taxed-exempt-exempt (TEE) and exempt-exempt-taxed (EET). EET means tax exemption during the payment and investment process, and tax upon receipt. It is currently the most commonly used taxation model. TEE is taxable when paid, and tax-free when invested and withdrawn. What is the result of
? ETFs have also benefited from the surge in demand for pension investments, driven by tax incentives and qualified default investment regimes, which in turn has led to the growth of mutual funds.
is no longer "streaking" and does not need to announce its net worth every day. It only publishes its holdings and once a quarter. In doing so, it gives managers the freedom to pick stocks without requiring daily disclosures.
In short, it is such a new type of ETF that is "less transparent and actively traded".
The United States is the world's largest ETF market. After more than 30 years of development, ETFs have evolved into many types. According to the management model, they can be divided into passive index ETFs and actively managed ETFs. Passive type, as the name suggests, passively tracks the index; actively managed ETF, the fund manager can choose stocks independently, but needs to disclose positions every trading day in accordance with regulations. Moreover, passive index ETFs have significantly lower fees than actively managed ETFs.
And this time, a fund that combines the above-mentioned passive and active characteristics - Wall Street's first hybrid ETF - will be listed at the end of the year.
Fuer discovered that the exploration of hybrid ETFs began more than ten years ago. The product logic also requires trading at the ETF price while obtaining the tax benefits of the ETF.
Why did the first company to get a pass come from a company called Precidian in New Jersey, USA?
Because the early bird catches the worm! As early as 2009, Precidian submitted a draft confidentiality application for an actively traded stock ETF to the U.S. Securities and Exchange Commission. At present, SEC has approved the ETF without daily disclosure of positions. To customers, Precidian is little-known, but it does have a financial backer - Legg Mason, which owns a minority stake in Precidian.
What is Wall Street’s attitude towards this hybrid ETF? Mosaic, JPMorgan also plan to launch such a product.
Why are Wall Street hybrid ETFs “mixed”?
Currently, global ETFs are developing rapidly. ETFs, which combine financial derivatives with stock and index characteristics, have attracted a large amount of capital investment in the past 10 years. As of the end of 2018, there were a total of 1,988 ETFs in the U.S. market with an asset size of US$3.37 trillion. In the past 20 years, the size of ETFs has surged from US$34 billion to US$3.371 billion, an increase of nearly 100 times in 20 years.
Table 1: Changes in the net assets of various investment companies from 1999 to 2018 (unit: billion US dollars)
Source: ICI
Table 2: ETF scale growth and changes in the proportion of investment assets
Source: ICI and SIS
However , compared with the surge in the scale of ETFs, the development of actively managed equity ETFs is relatively lagging behind. As of the end of 2018, there were only 257 actively managed ETFs in the U.S. market, with a total size of US$69.5 billion, accounting for 2.06% of the total ETF market size. In the past 10 years, the management share of passive ETF funds has increased year by year, and by 2018 it has begun to approach and surpass the scale of active funds. (Data source: ICI)
Actively managed ETFs lag behind because their flaws are obvious.
➤ From an investor's perspective, compared to the low rates of passive ETFs, actively managed ETFs usually have higher rates. Although there is no shortage of demand for such diversified strategy products with active management advantages in the market, in recent years The performance of actively managed equity ETFs has been relatively average. Even if there is the possibility of obtaining higher returns, investors prefer passive ETFs when faced with the low fees and stable returns of passive index ETFs.
➤ From the perspective of fund managers, compared to active funds, the high transparency of actively managed ETFs hurts fund managers. In the U.S. market, according to SEC rules, all ETFs must publicly disclose all holding information every day. For fund managers, they certainly don’t want their investment strategies to “run naked”.
Is there a product that not only has the tax advantages and trading flexibility of ETFs, but also can be like traditional funds? Fund managers only rely on professional investment research capabilities for active management, and only need to disclose positions every quarter, so that the investment strategy is not More transparency?
"The emergence of this hybrid ETF on Wall Street may solve this problem."
Since 2018, my country has entered the fast lane of ETF development, and its share and scale have surged. Wind data shows that there are 28 new ETFs (excluding currency ETFs, the same below) this year. As of July 18, the total size of ETFs in my country’s entire market reached 477.016 billion yuan, a significant increase of 96.651 billion yuan from the beginning of the year, an increase of more than 20 %. However, compared with the development of ETFs in the United States, there is still a lot of room for development in the number and scale of my country's ETF products. The emergence of
hybrid ETFs has pointed out a new investment direction for investors. It turns out that investing in ETFs can also include "innovative operations that organically combine the advantages of actively managed funds with the characteristics of passively managed ETFs." It remains to be seen whether such products can successfully break the bottleneck in the development of actively managed ETFs in the future, and whether Wall Street's west wind can take over the world.
Of course, our pace of ETF innovation has not stopped. At present, in addition to mainstream broad-based passive index ETF products, ETFs in many subdivisions are constantly emerging. Thematic ETFs, industry ETFs, strategy ETFs, and customized ETFs have all appeared on the investment list. The stage provides investors with more diverse choices.
