MIB: There at the beginning of the ETF

He helped to design some of the very first Exchange Traded Funds (ETFs) as managing director at BGI; as co-founder of Cerulli Associates, he conducted some of the earliest research on fee-only financial advisers and the rise of indexing. He is currently managing director of CBOE’s ETF.com, and his name is Dave Nadig.

Few people are as knowledgeable about how the plumbing underlying how ETFs are assembled and maintained.

We discuss the odd legal structure of ETFGs – that in order to even exist they require a special waiver from the Securities Exchange Commission. The SEC is expected to change these rules in order to make the creation of ETFs less expensive and more predictable. They will still retain the huge structural advantages they hold over mutual funds, namely, a tax advantage that does not create phantom capital gains the way mutual can.

Nadig also discussed why 3 firms – Blackrock, Vanguard, and State Street –dominate the ETF universe. Currently, there are over 2300 ETFs trading today, and a Darwinian battle for survival is brewing for many of them.

His favorite books are here; Transcript will be forthcoming later this week.

You can stream/download the full conversation, including the podcast extras on iTunesBloombergOvercast, and Stitcher. Our earlier podcasts can all be found at iTunesStitcherOvercast, and Bloomberg.

Next week, we speak David Hunt, CEO pf PGIM