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The "front-running" we're talking about isn't really a huge problem. It's a relatively limited arbitrage opportunity, and the ETF fund runners can just start pe
by exelius 11y ago
The "front-running" we're talking about isn't really a huge problem. It's a relatively limited arbitrage opportunity, and the ETF fund runners can just start performing this sort of arbitrage themselves if it becomes too big of a problem. I'm guessing insurance against this kind of activity is already priced into the fees of most ETFs (so yeah, they're scraping value, but not a lot and there's not a lot of opportunity for expanding it).
- vegabook 11y agoThey absolutely should be doing that, but this market inefficiency is strangely persistent. In the bond world at least, I have watched hundreds of billions under management by sleepy fund managers in Europe who operate like bureaucrats for years: all they want is to be fed the index rebalancing weights each month and they don't take much notice of the value being left on the table by not anticipating changes efficiently. Perhaps its because the industry is biased towards fees rather than performance that this persists, but I don't have a great explanation for it. I know for sure though that there are fast-money guys who obsess daily about weighting momentum and turning points and they do well quite consistently.