The Dumbest Guy In The Room Part 2 of 3

My first meeting was with WisdomTree. They want to be, and I believe will be, a big player in the industry. They are interested in exploring fixed income in a meaningful way and he was intrigued by the idea of an equity ETF that covered the Nordics including Iceland which we talked about for several minutes. He also agrees that the N-11 is a logical place for a future product but that a frontier ETF is probably a ways off.

I posed the idea of a dividend ETF that weighted the sectors in line with the S&P 500. For example it would be 20% financials not 35%-40% like most broad dividend ETFs. I think this may have come up before in-house (and actually I'm not sure I didn't find this idea elsewhere) because of how quickly he answered; the idea runs the risk of having the some of the biases that go along with cap-weighting that they are trying to avoid.

One last item on my time with WisdomTree; in my last couple of articles on WisdomTree funds for TSCM I thought I had stumbled onto something. Some of their funds almost have two classes of the same fund one of which will have about 1000 holdings and then a high yielding version of the same fund that will have 300-400 taken from the larger 1000. My theory was that if dividends are the thing then wouldn't the high yielding version, the one with 300-400 names, always outperform? The response was there may be something there. Not a yes not a no but interesting.

I spent quite a bit of time with the folks from Claymore. If anyone is going to take on some of the more esoteric ideas from the list I posted yesterday, my bet would be on these guys. First thing is the Oil Up (UCR) and Oil Down (DCR) Macroshares are interesting. I'll write more later but they capture the movement of oil without having to manage any oil contracts I can also say the concept is of interest to other fund companies. I also had a one on one sit down with the guy who designed the Claymore Patent ETF which will trade under ticker OTP. I had heard of this idea before and it seemed so out there that I would not have even thought of mentioning it. But getting the explanation from the guy allowed me to understand what they are doing. I do not have an opinion yet but studying it is not a waste at all. The fact that I needed ten minutes face time with the designer of the index to understand it may be a tell that the fund may not be popular.

I had a very quick howdy with someone from the CBOE. I asked if anyone was interested in making an ETF out of their buy-write indices; that have five of them and they were involved with helping the ASX in Australia create their buywrite index. There is interest, that's about all that he could say. Unfortunately the CBOE booth was not getting a lot of traffic, so I am not sure there will be enough interest to make investible products around these or not but I hope so.

Come back in a couple of hours for part three.