Exchange-traded funds are outperforming futures across the world and the GFC is to blame says vice president of DWS.
DWS vice president Andrew Kalopedis told the Bloomberg ETF Conference that over the last decade there has been a drop in futures.
“We have seen roll costs increasing, liquidity drying up and net returns of fully funded futures decreasing as well,” he said.
Mr Kalopedis said it was becoming a lot harder these days to achieve a risk-free rate with futures ever since the GFC in 2008.
“The futures market has been changing since the GFC and around about 2008–9. Over the last 10 years we have seen quite a large deterioration and drop in the futures landscape,” he said.
Prior to 2009 it made sense to invest in futures but it is a different story now said Mr Kalopedis.
“The net performance of the fully funded future underperforms the gross return of the index. That net performance of the fully funded future actually drops down to where it is today roughly negative 5.5 per cent,” he said.
Now, ETFs were trading higher in most funds, even in the short-term said Mr Kalopedis.
“The net performance on ETFs are starting to outperform because with ETFs there are a fair few benefits you can achieve,” he said.
Mr Kalopedis said that ETFs allow for ease of trade, transparency, reduced administration amongst others.
“There is certainty of cost in an ETF, there is one MER that is disclosed and that is transparent verses futures where there is a change in monthly roll costs with obviously roll costs increasing to the detriment of your performance,” he said.
Mr Kalopedis said that there were more ETFs available now and said that all future traders should find out what ETFs could do for their portfolios.
“If you are a futures user, perhaps let your ETF issuer know which futures you are using and ask them which ones of their ETFs are outperforming the futures you are currently using,” he said.
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