How IndexIQ Intends To Tackle ETF Market

As senior advisor and advisory board member at IndexIQ, Paul Mazzilli is bringing unparalleled expertise about the world of exchange traded funds (ETFs).

He got his start with ETFs in the early 1990s. “I know as much as anyone - all the players, all the products and I know quite a few financial advisors.”

At IndexIQ, he’ll be taking his knowledge of products and markets and what advisors are looking to do and use it to help launch ETFs as well as design forthcoming funds. IndexIQ specializes in hedge fund replication strategies using indexing, and their first line of funds will be based on this strategy.

As someone who’s been in the ETF world since the beginning, Mazzilli has a lot of thoughts about where they’ve been and where they’re going from here.

He doesn’t think 2008 was as bleak for ETFs as it was for the general markets. “In spite of the markets being down 35%, ETFs actually had a large increase in the number of shares. They performed relatively well and showed the benefits of indexing.”

In the coming year, Mazzilli feels that there’s still plenty of room for ETFs to grow, as many investors don’t even know what they are yet. In fact, financial advisors could be opening the door for new ETF investors. As for the ETF naysayers, Mazzilli doesn’t believe it.

“You still have $700 billion-plus in assets,” he says. “When you go through volatile markets, when people go back into equities, they favor indexing and ETFs.”

Tony Davidow, executive vice president and head of distribution at IndexIQ, adds that he feels ETFs will grow at the expense of mutual funds. “There’s trillions in mutual funds. Those assets went down, and ETFs will ultimately be the beneficiary of those flows.”

Negative news about hedge funds recently may have soured investors on the strategy, but Mazzilli and Davidow aren’t worried about that. In fact, they see it as one glaring hole within the industry in general.

“The issues have been more structurally. The lack of liquidity, they’re difficult for investors to get out of. Madoff is a perfect example of a lack of transparency and what it means to invesors. We’re capturing the positive attributes,” Davidow says.

Those are: liquidity, transparency and a reasonable cost structure. “Isn’t that what all investors are looking for?”

Posted in Categories: Contributor, ETFs, External Research, Stocks.

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