Practical Applications of Are Flows Costly to ETF Investors?

Abstract

As ETFs evolve to include more exotic products, cash creation and redemption is becoming a more common strategy for investors to gain exposure to less-liquid, difficult-to-trade assets, particularly in emerging markets.

In Are Flows Costly to ETF Investors? , Gerald Buetow and Brian J. Henderson examine whether or not cash creations and redemptions are costly to investors. Buetow is Chief Investment Officer at Innealta Capital , in Charlottesville, Virginia, and Henderson is an Assistant Professor of finance at the George Washington University , in Washington, DC.

“The idea was that, if we are going to incorporate these exposures into our various strategies, then we should be able to understand the implicit cost of the exposures, ” Buetow explains. “This research attempts to better quantify those costs. ”

TOPICS: Exchange-traded funds and applications, exchanges/markets/clearinghouses, in markets