Short video excerpt from 13 January 2021 appearance on ausbiz tv talking about ETF performance in 2020. The highlights were ATEC, ACDC, ASIA and FANG which had the best total returns according to data from the ASX and Chi-X. Check out the video below or on YouTube where we'll be posting more content.

In the last 2 History of ETF articles (History of ETFs - Part 1 and History of ETFs - Part 2) we looked at how ETFs got started out of the 1987 stock market crash and reporting on the fallout from the SEC. We also looked at the journey (took 6 years for SPY to go from application to approval) and rivals that ETFs had until they became the household name they are today. In today's session we look at the innovation that started coming out in the ETF markets. We continue to track "The ETF Story" podcast from Bloomberg. One of those new innovations was a move away from just ETFs for equities but also for fixed income, LQD. This was the first ETF in the fixed income space and created by iShares. Knowing how long it took tot get approval for a run of the mill market product like SPY, an ETF for a non-transparent market in fixed income might also take a while to get going. However the benefit of a security which could be a reference point for that market was seen as a positive. For these new products it took a while to get customers to use them. But the advantages could be seen once customers got in. The benefits were seen immediately. Instead of trying to assemble all your own corporate bonds in the case of LQD, you could simply buy that single instrument. Making corporate bonds an easier thing to buy was a benefit they saw for LQD and it's something we would see ETFs take advantage of over the next couple of decades. Another launch at the time was the Vanguard Index Participation Receipts (VIPERs). Going back to episode 1, we saw that Vanguard founder Jack Bogle inspired the creation of the first ETFs but did not necessarily like them. Whilst Bogle did not like VIPRs necessarily, he could see the reason for it as it would create new revenue streams. Vanguard giving the tick of approval to ETFs was seen as the door opening for a huge rush into ETFs by other brands. We also see PowerShares (by Invesco) launching and smart beta strategies being born. This was an ETF that instead of passively following an index, used a rules-based system to create a similar type of index but focused on certain factors like value. This led to more creative ETF strategies coming to market and it also is the era where we saw the first ETF evangelist, Rob Arnaut. His Invesco FTSE-RAFI 1000 fund or PRF (NYSEARCA:PRF) launched in 2005 and whilst important in and of itself, was more important as it brought Rob to the public eye. He was the person you could put on radio and stick in front of a TV camera to talk about smart beta ETFs. Now investors started to see a wider range of choices to come to market for investors. Before that it was just index tracking funds and some sector funds but not much else. Additionally, they mention that the development of new ETFs also meant something new for investors. Instead of just buying a couple of stocks, they now get access to real asset allocation indexes and the advantages that come through that type of money management. Arnott mentions though that ETFs today are like too much choices at the grocery store. In terms of the future there are talks that the term "smart beta" may even be abandoned (especially as some are not really smart beta strategies under the hood). Instead, the idea would be to call them "quant active" or "quant" funds. We will see. The story talks about projections as to where the markets could go to. For example $30trillion by 2030 globally. As of 2019 it was $6.2trillion (see Worldwide ETF Assets Under Management 2003-2019). In Australia, we saw ETF's grow to $94.4bn by the end of 2020 (see here: 2020 Year in Review for Aussie ETFs). The market has certainly grown globally and locally and we can look back at how far its come since the original ideas from Nate Most and Steve Bloom. Most passed away in 2004 at the age of 90 but a great quote that sums all of this up was from Bloom who said, "we tried to create a great product but it turned into an industry". And what an industry it has become! More Insights - Smart Beta According to Investopedia, a Smart Beta ETF "is a type of exchange-traded fund (ETF) that uses a rules-based system for selecting investments to be included in the fund portfolio. An exchange-traded fund or ETF is a type of fund that tracks an index such as the S&P 500. Smart beta ETFs build on traditional ETFs and tailor the components of the fund's holdings based on predetermined financial metrics." There are various type of these ETFs including: Equally weighted: Instead of weighting the fund based on stock price and market capitalization, this strategy equally weights the factors and each holding. Fundamentally weighted: Companies are selected and weighted by such factors as total earnings, profits, revenue, or financially driven fundamentals and metrics. Factor-based: Stocks are weighted based on specific factors such as balance sheet components, underpriced valuations, or smaller companies that are growing. Low volatility: This method focuses on stocks and indexes with low volatility or small price fluctuations over a historical period. For more insights into Smart Beta ETFs check out Investopedia's article on them here: - https://www.investopedia.com/terms/s/smart-beta-etf.asp More Insights - Institutional Investor on the 20th Birthday of ETFs in 2013 Check out this article from Institutional Investor back in 2013 where they looked at SPDR and do a dive into the ETF story: https://www.institutionalinvestor.com/article/b14zb9jjc7wzv1/happy-20th-birthday-etfs-a-look-back-at-nate-most-and-his-novel-idea Stay tuned for more educational ETF articles coming soon!

2020 was a great year for ESG investing in Australia. Whether you were on the side of Environment, Sustainability, Governance or other, there was something positive for you. ESG also goes by other names like ethical investing or socially responsible investing and it comes as investors are looking to better align their investments with their own personal values. More often than not, investments of this nature look to exclude certain sectors such as weapons, gambling, tobacco and other types that may go against a certain set of morals or values. There are some great arguments as to why companies that are more socially responsible tend to last longer as they look beyond just the immediate quarterly bottom line. It's a belief that even Larry Fink and the team at BlackRock believe in as per his latest CEO Letter (https://www.blackrock.com/au/individual/larry-fink-ceo-letter). They see purpose as the driver of long-term profitability and that sustainability should be at the heart of how they invest. Many others are getting onboard with ESG related investing as well and using data from the ASX and Chi-X, we can see the record levels of growth for these funds in 2020. Along with other metrics we can paint a picture that is quite positive for ESG ETFs. All data and images below come from the 2020 Year in Review app available in The Apps section or HERE. They are created by using the app and using either filters or clicking on bar charts to change how other charts can be seen. An example of this navigation from the main homepage to the user filtering on "ESG" on the bar charts or the available Thematic filters is as follows: Here are some of the results from our analysis for ESG related ETFs. Funds Under Management (FUM) In 2020, FUM for ESG related ETFs grew by AU$1.4bn to a total of AU$2.8bn as the year ended. Compared to other themes we categorise ETFs into, this was behind Multi-Sector, Fixed Income, Commodity and Technology related ETFs. Of those ESG related ETFS, the best came from ETHI (BetaShares Global Sustainability Leaders ETF) which had over half a billion in FUM in 2020 and just over AU$1bn in overall FUM. Net Inflows In terms of Net Inflows (takes into account outflows and inflows), ESG ranked 4th behind the Multi-Sector, Fixed Income and Commodity related thematics. It saw AU$1.3bn in 2020 net inflows which doubled the AU$561m in 2019 and triples the AU$349m of net inflows in 2018. ETHI leads the way again with nearly half a billion (AU$499.7m) of net inflows in 2020 compared with only having AU$150m in 2019. Transactions In terms of transactions, many more trades occured for ESG type ETFs in 2020 than in previous years as more options to trade have become available. However, in terms of the thematics we rank, this level of trades is only 7th on our list. Again, with no surprises, ETHI is the most traded ESG related ETF in 2020 with a fair margin between it and FAIR which came second. An total of 84.3k trades were executed for ETHI ETFs in 2020 compared with 14.7k in 2019 and only 5.4k in 2018. A decent improvement. Price Performance ESG related ETFs returned an average of 6.4% for investors in 2020. This is down on the 32.4% average in 2019 but it is above the average return for ETFs in 2020 of 5.7%. Whilst ETHI outperformed in other categories, IMPQ (eInvest Future Impact Small Caps Fund) outperformed all others (with close competition from INES and ETHI). It returned nearly 29% in terms of cumulative total price performance which takes into account dividend distributions. Stay tuned for more deep dives into other market updates and ETF articles on our blog.

ETFs are a great way to invest and gain exposure to thematics. That is, exposure to companies that all play to a certain theme or sector. This could be companies exposed more to ESG type values or that have heavy involvement in healthcare or technology. Investors could create these sorts of baskets of stocks themselves in their own portfolios but it takes time to build and requires hard work to maintain. ETFs offer a better way with a lower risk and more easy access to such exposure. The ASX has a great set of videos on their YouTube site from market updates to CEO conferences. One of their videos is on the area of Thematic investing with ETFs and comes from their Investment Products team (Oran D'arcy representing) and BlackRock iShares (Blair Hannon). In this video Blair talks about thematic investing and how investors can do this with ETFs. Some of the topics covered are as follows: They talk about how investors can play themes that they believe in and the advantages that ETFs can offer investors such as through their transparency and strong liquidity. The difference between long term and short term trends - the megatrends being more than just a quarter but more about being a quarter century kind of move They also chat some themes around rapid urbanisation and smart cities, climate change and resource scarcity, emerging global wealth and other trends The advantages of accessing a broader theme like healthcare through an ETF and the advantages of this rather than trying to pick the specific right play in that space Check out these topics and the rest of their conversaation below:

In the last article (History of ETFs - Part 1) we looked at how Black Monday (the stock market crash of 1987) was instrumental in ETFs getting started. The idea came out of 2 AMEX (American Stock Exchange) product development gurus seeing an SEC report on the event and the steps they had to go through to create the beloved product we have today. In today's session we look at what happened after that initial approval to create the first ETF (which was SPY) in 1993. As a reminder, the details in this article mainly come from the great work done by Bloomberg in their special podcast, "The ETF Story" available here: https://open.spotify.com/show/0j03M8cOnnsI1nNfOTqPya The Competition We start with how The Palo Alto Research Center (PARC), who Steve Jobs visited and gained ideas to create the first Apple Mac, resonates with the story of ETFs. In this case, the 1987 Market Break report was instrumental in the creation of the ETF by Nate Most and Steve Bloom. Others also tried to come up with collective investments that traded like stocks. There were products like SuperShares and TIPs which all could have turned into the main way of trading baskets of stocks we now know as ETFs. There were firms like Leland, O'Brien and Rubinstein that held portfolio insurance products (which were credited with contributing to Black Monday). They had, what they say, was the initial idea for ETFs in the form of SuperShares. They then took that idea to the AMEX under a handshake agrement of not having AMEX compete but said that the latter didn't hold up their end of the bargain. Whilst SPY was waiting for approval - the TIPS product (Toronto Index Participation Shares) was launched in 1990 (before SPY approval). With a more liberal regulatory body in Canada, the approval process only took a year. This ran with no MER (management expense ratio) as it was a way to give retail investors access to the market at a low cost (a feature that is an advantage of ETFs to this day). However, the biggest influence for TIPS was the Philadelphia Exchange launching CIPS (cash index participation securities) and who struggled to get this through to the SEC. They ended up trying this in Canada instead and we got TIPS. Regardless of all this, one thing that is unarguable, is that AMEX drove the initial push of ETFs to the wider market. These other products had trouble getting out to a wider audience whether through regulatory or popularity issues so SPY enduring what the others couldn't, they deserve to be considered the grandfather of ETFs. If anything, there is a lesson in execution here. Others had great ideas but it was SPY that was built to be a better product, despite taking longer to get to market. It tracked a more well-known index (full replication of the S&P 500), went through more regulatory hoops to get over the line and was a very simple product which all added towards making it a stronger product than the competition. SPY is now the largest ETF in the world with over $270 billion in assets (at the time of the podcast). What a journey! The Sleeper In this episode we jump straight back into how SPY launched to much fanfare. But, after the initial trades it went quiet. Volume went down to only 18k trades a day over the next 6 months and rumours it would close were high. Adoption was the key to improvement. The key to improving usage was done by word of mouth and having people see how they could get a good value product at a lower rate than the usual 100bps (basis points) as SPY traded at 25bps. Brokers weren't rewarded in other means for this so the only way to popularise this was through word of mouth. Guerilla marketing helped but it neede more. With the economy improving in 1994/95 this also helped push things along from just the initial advocates to the other non-believers. The typical adoption curve would be apt here. There was skepticism of having this work on a more widespread basis by all market participants. So it needed to have more than just 1 type of trade at a time, it needed more instruments to trade, more ETFs. The next ETF to come aboard after the SPDR SPY was another arachnid named one called WEBS (World Equity Benchmark Shares) created by Morgan Stanley. It was through the WEBS prospectus that we first see the name ETF or exchange traded fund. WEBS was also driven by client demand and not just innovation like the SPY ETF was. WEBS was unique in that it didn'f follow the same wrapper and UIT (unit investment trust) process as SPY and had tracked the various MSCI foreign stock market indice. They instead used mutual funds which were less restrictive than UITs were when working with international markets. WEBS was eventually sold to Barclays for the princely sum of $1. Barclays looked for where the trap was for this but found none. Morgan Stanley just did not find the product that valuable. WEBS rebranded as iShares which we still see today. The new owners saw that these products could be used to solve many market problems including asset allocation and the investment needs for clients. This would include giving retail clients access to market exposures that they would not get from just buying stocks on their own. iShares, through good marketing and being a useful product solving many market problems has become a well known household name (now under the BlackRock group) but it was SPY that started it all. Additional insights More on PARC The New Yorker has a great article on the PARC / Apple visit which is largely credited with giving Steve Jobs the idea for what became the Apple Macintosh. It's called Creation Myth and is available here: https://www.newyorker.com/magazine/2011/05/16/creation-myth More on TIPS One of the competitors to ETFs was the TIPS product out of Canada and you can read more about the history of that product on Investopedia ((which you can read more about here: https://www.investopedia.com/articles/exchangetradedfunds/12/brief-history-exchange-traded-funds.asp). Investopedia is a great website, full of lots of information on investing. If you look at ETFs as a search term you get an abundance of insights from the very basic... to more advanced... In the next blog we'll look at "The Revolution" episode and also look at where the current ETF climate is right now in 2021. Stay tuned!

UPDATE: As of July 2021, the ETFtracker has been updated to a new format - to see how the new app works you can check out the following App Guide videos on Youtube: https://www.youtube.com/watch?v=AbRHrqsgFjE&list=PLjC6E9VHX9Hh7Fa8Csa2hlWJmLVcONo01&ab_channel=ETFtracker and this article in the blog: https://www.etftracker.com.au/post/etf-app-features-and-new-videos-coming. Data Stories is somethign we will bring back in another format later on though. In this article we show you how you what's in the Data Stories section of the ETFtracker application. This section combines data analysis that is seen in the other parts of the app with some helpful annotations that present a more user friendly view of what is going on in the latest monthly data in the app. Each month we create 4 data stories that users can navigate to by clicking on the main grey blocks at the top of the page. As users go to those sections they will see some narrative highlights as well as some charts with some filters that they can interact with.

UPDATE: As of July 2021, the ETFtracker has been updated to a new format - to see how the new app works you can check out the following App Guide videos on Youtube: https://www.youtube.com/watch?v=AbRHrqsgFjE&list=PLjC6E9VHX9Hh7Fa8Csa2hlWJmLVcONo01&ab_channel=ETFtracker and this article in the blog: https://www.etftracker.com.au/post/etf-app-features-and-new-videos-coming In this article we show you how you what's in the Single Stock View section of the ETFtracker application. This section came from a request from customers looking at the Analytics section on its own. Despite the power of insights generated from this section it was limited in that you could only view a section of information on the page at a time. There was only Performance or Transactions or FUM that was available to view for any given ETF issuer, category or individual fund. The Single Stock view section allows users to filter down to any level and see a variety of statistics that relate to that view. This gives users a better snapshot of any given grouping at a time,.

UPDATE: As of July 2021, the ETFtracker has been updated to a new format - to see how the new app works you can check out the following App Guide videos on Youtube: https://www.youtube.com/watch?v=AbRHrqsgFjE&list=PLjC6E9VHX9Hh7Fa8Csa2hlWJmLVcONo01&ab_channel=ETFtracker and this article in the blog: https://www.etftracker.com.au/post/etf-app-features-and-new-videos-coming In this article we show you how you what's in the Analytics section of the ETFtracker application. Once a user is in the app, they can move to the Analytics section using the menu options on the left hand side. The Analytics section was built to make in-depth analysis of the monthly ETF data more visual and interactive than having to pour through multiple Excel/PDF files for answers. This section has a variety of sub-categories relating to Performance Historic Yield Liquidity Transactions Spread Inflow/Outflow FUM Comparisons Table Each section takes data from the ASX/Chi-X reportes and shows different views of this data via separate charts and sub-sections. In the example below we can see a user look at performance and different sub-menu views. They also click on some of the filters to change what's on the page and can even expand on charts to see them in more detail.

UPDATE: As of July 2021, the ETFtracker has been updated to a new format - to see how the new app works you can check out the following App Guide videos on Youtube: https://www.youtube.com/watch?v=AbRHrqsgFjE&list=PLjC6E9VHX9Hh7Fa8Csa2hlWJmLVcONo01&ab_channel=ETFtracker and this article in the blog: https://www.etftracker.com.au/post/etf-app-features-and-new-videos-coming In this article we show you how you what's in the Dashboard section of the ETFtracker application. Once a user is in the app, the default landing page is the Dashboarrd section. This is updated once a month to incorporate new ASX and Chi-X datasets and provides a snapshot of the ETF markets for the month. In the example below the user is looking at December 2020 data. There are some filters the user can access and change and as this occurs, the charts and visuals on the page change. Additionally, if a user wants to view the data in more detail they simply can hover over a chart and click the expand button on the top right of that object. Once the image in full screen mode, the user can go back by clicking "Back to Report" on the top left of the page.

UPDATE: As of July 2021, the ETFtracker has been updated to a new format - to see how the new app works you can check out the following App Guide videos on Youtube: https://www.youtube.com/watch?v=AbRHrqsgFjE&list=PLjC6E9VHX9Hh7Fa8Csa2hlWJmLVcONo01&ab_channel=ETFtracker and this article in the blog: https://www.etftracker.com.au/post/etf-app-features-and-new-videos-coming In this article we show you how you can use filters to do analysis within the ETFtracker application. Once the user has navigated to a page they are given the option of drop-down filters that show different values users can select to view data in different forms. See below for animation of filtering in action. In this example the user has navigated to the Analytics section and chosen different sub-menus. They have also selected different category filters and as they navigate to different menus, the filters have synced. This makes it easier to perform analysis as opposed to creating a new filter each time. Additionally, the user can select multiple field values by holding down the CTRL button as they make their selections.

UPDATE: As of July 2021, the ETFtracker has been updated to a new format - to see how the new app works you can check out the following App Guide videos on Youtube: https://www.youtube.com/watch?v=AbRHrqsgFjE&list=PLjC6E9VHX9Hh7Fa8Csa2hlWJmLVcONo01&ab_channel=ETFtracker and this article in the blog: https://www.etftracker.com.au/post/etf-app-features-and-new-videos-coming In this short article we show you how to navigate the ETFtracker Application once it's been accessed. Navigation is based on the main menu section on the left side of the app as well as sub-menus that change according to which menu option you have selected. The main menu is divided into SECTIONS and CATEGORIES. There are 4 section Dashboard Analytics Single ETF View Data Stories Each of these sections may or may not have its own set of Categories. As you click on each section you'll see what is available. For more details of what's in each section in terms of features, please see the relevant blog articles. See below for animation of navigation of the app action.

UPDATE: As of July 2021, the ETFtracker has been updated to a new format - to see how the new app works you can check out the following App Guide videos on Youtube: https://www.youtube.com/watch?v=AbRHrqsgFjE&list=PLjC6E9VHX9Hh7Fa8Csa2hlWJmLVcONo01&ab_channel=ETFtracker and this article in the blog: https://www.etftracker.com.au/post/etf-app-features-and-new-videos-coming In this short article we show you how to find the ETFtracker Application when you get to our main site, www.etftracker.com.au. Access is quite simple. Once on the homepage, users just need to navigate to "The Apps" menu bar where they will see the ETFtracker application. Users can choose to use the app on that page or click on the expand button on the bottom right of the app box and this takes users to a new tab where the app is opened in full. See below for animation of this in action. It is recommended that full screen mode is activated as you'll get a better experience of using the app when you're in this view.