Preface vii Acknowledgments ix About the Authors xi CHAPTER 1 The Beauty of Simplicity - The Rise of Passive Investments 1 Outperformance - A Tough Challenge 1 Institutional Investors: A Small Change in Allocations, A Big Step for Passive Investments 2 Not All "Big Guys" Love ETFs 3 CHAPTER 2 The History of Indexing and Exchange-Traded Products 6 Frequent Pricing Thanks to Copper and Feather 6 Journalist Trio Pictures the Market 7 Indexation Across the Globe 7 Customized Indexing aka Smart Beta 8 Exchange-Traded Funds - A Unique All-rounder 15 Exchange-Traded Commodities - Heavy Metal Even for Lightweight Investors 46 Exchange-Traded Notes - The Underdog 53 CHAPTER 3 Index Evolution 57 Benchmark Indices 58 Smart Beta Indices (Second Generation of Indexing) 85 Next Generation Indices (Third Generation of Indexing) 104 CHAPTER 4 The Good, Bad and Ugly - A Critical Review of Today's Indexing Approaches 127 Synthetic vs. Physical Replication 128 Second Generation Indexing Critique - The Bad Ones 129 Commodity/Energy/Oil ETP Products 133 Volatility ETPs 135 CHAPTER 5 Advantages Unlimited - Portfolio Application Strategies for Superior Index Investing 139 Never Underestimate the Importance of Investment Costs 139 Smart Beta Deconstruction 144 Conclusion 152 Mind the Behavioral Gap - Earning More by Avoiding Investing Errors 152 The Next Generation of Asset Allocation - Risk Factor Allocation Approach in Portfolio Construction 155 The Ultimate Question: Passive or Active? 163 CHAPTER 6 Unchaining Innovation - The Future of Active Investing in Passive Products 166 Alternative Investing 166 Environmental, Social and Governance (ESG)-Based Investments 180 Conclusion 190 Customized Indexing 192 Glossary 200 References 210 Index 215
GOEKHAN KULA is managing partner and CIO of MYRA Capital. Formerly he was managing director and Head of Asset Management of the Walser Privatbank Invest S.A., and a board member of several Luxembourg-based investment companies. He is a CFA and FRM Charterholder and a consistent voice in the financial media published in Germany, Austria and Switzerland. MARTIN RAAB is executive director of Derivative Partners, Registered Investment Advisor, and a senior adviser to the board of MYRA Capital. He is the publisher and editor of several investment publications, a public speaker on financial products, and is regularly quoted by POLITICO, Bloomberg Brief and various other media. SEBASTIAN STAHN is Treasury and Investment Manager at Wustenrot Group. Formerly he worked as senior portfolio manager, fund manager and advisor to institutional clients at MYRA Capital and Walser Privatbank. He is a CFA charterholder and a renowned expert in efficient and rules-based investment strategies.