Who Asked For These ETFs???
Tony, your final chance to weigh in with your overall winner. Give it to us.
It's going to be my wild card USMC, the first two actively managed funds. My first reaction upon seeing them is, "Oh, great. Another large cap growth concentrated equity that I have no idea how they screen in their stocks and it's the same names with an active share of less than 50%." It's just hard not to instinctively dismiss them, and the product categories get incredibly saturated. I'm not sure why issuers keep launching more and more concentrated stuff and moving towards less transparency and even trying to fold in private assets, but that's a conversation for another day.
Top is one of those things where I get the rationale for it, but who asked for this? It's not hard for anybody nowadays, especially with commission free brokerages, to just assemble your own basket of the top names. Direct indexing exists, and this is one of those ETFs that direct indexing proponents are going to point to and say this is stupid. We can do this at a lower cost.
So I'm going to go with my wild card USMC. I really think for 12 bips getting a concentrated portfolio like 25 stocks where they explain precisely how they screen in and weigh their names, and you know the active share is not great, but I can't complain for 12 bips if I need a tax loss harvesting partner for the Q's or for SPY or for the even like S&P 100, USMC is perfect. It doesn't track the same benchmark portfolio, is differentiated enough so you're not going to run a foul the wash sale rule, and the historical performance is lined up. And did I mention the fee is only 12 bips? That's not a lot of drag there.
Yeah, 20. I really want to emphasize that because it's one of those hidden gems that people just ignore. I've only seen it used by RIAs. Not a lot of retail knows about it. But the other takeaway I give to retail is that if you're going to look for concentration, Shaina mentioned it, you're not going to find a lot of alpha in the mega cap space. Everybody allocates to these, but then if you move into the small cap space and you package it into an ETF, you run into issues where the fund grows so large that they end up comprising a significant portion of the volume from these small cap names.
The ARC funds have had that issue with some of their smaller, more speculative biotech holdings. So, this is one of those places where if you're going to go small, look into an SMA or something or even some of those older, weirder CEFs. I don't really like them because of the high fees and the use of leverage, but there's a few decent ones out there if you look closely.
Closed end funds, CEF for our audience. Closedended funds. I would say that's a place where go look at a mutual fund. I know everybody hates mutual funds these days, but they work in certain places and that would be one of them.
That's exactly it. We don't need to ETF everything. I've said this before in other places, but not everything needs to be ETFed. So to sum it up, USMC wild card all the.
