A COMPREHENSIVE GUIDE TO EXCHANGE- TRADED FUNDS (ETFs)

A COMPREHENSIVE GUIDE TO EXCHANGETRADED FUNDS (ETFs)

Joanne M. Hill, Dave Nadig, ManadttMHaotutgHaonugan

With aannaappppeennddixixononinitnetrenrantaiotnioanl aETl FEsTFbsybDyebDoerbaohrFauhhFruhr CELEBRATING 50 YEARS OF RESEARCH

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A COMPREHENSIVE GUIDE TO EXCHANGETRADED FUNDS (ETFs)

Joanne M. Hill, Dave Nadig, and Matt Hougan

With an appendix on international ETFs by Deborah Fuhr

Statement of Purpose

The CFA Institute Research Foundation is a not-for-profit organization established to promote the development and dissemination of relevant research for investment practitioners worldwide.

Neither the Research Foundation, CFA Institute, nor the publication's editorial staff is responsible for facts and opinions presented in this publication. This publication reflects the views of the author(s) and does not represent the official views of the CFA Institute Research Foundation.

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? 2015 The CFA Institute Research Foundation

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the copyright holder.

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Cover Image Photo Credit: B.Aa. S?trenes/Moment Open/Getty Images

ISBN 978-1-934667-85-9

8 May 2015

Elizabeth Collins Editor

Pat Light Assistant Editor

Editorial Staff

Cindy Maisannes Manager, Publications Production

Mike Dean Publishing Technology Specialist

Biographies

Joanne Hill currently serves as head of Institutional Investment Strategy at ProShares, a premier provider of alternative exchange-traded funds (ETFs) with more than $25 billion in assets. Her responsibilities include portfolio strategy, product research, and education. Prior to joining ProShares in 2009, she spent 17 years at Goldman Sachs, where she was a managing director leading global equity index, quantitative, and derivatives research. A recognized leader in the financial industry, Dr. Hill was recently named 1 of the 10 inaugural recipients of the Top Women in Asset Management Awards by Money Management Executive. Dr. Hill is a recipient of the William F. Sharpe Indexing Lifetime Achievement Award and has published extensively. She is co-president of Women in ETFs and was one of its five founding members. Dr. Hill has served on the editorial boards of the Financial Analysts Journal and Journal of Portfolio Management. She is on the board of the "Q" Group and heads the Research Committee. She is also on the investment board of the Montgomery County Schools Pension System. Earlier in her career, she was an associate professor of finance at the University of Massachusetts (Amherst). She received a PhD in finance and an MBA from Syracuse University.

Dave Nadig is vice president and director of exchange-traded funds at FactSet Research Systems, where he spearheads the in-depth ETF and asset class research of the FactSet ETF Team. Mr. Nadig has been involved in researching, reporting on, and analyzing the investment management industry for more than 20 years. As the chief investment officer of , the leading independent authority on exchange-traded funds, he built the world's most authoritative ETF data and analytics business (sold to FactSet in 2015). As a managing director at Barclays Global Investors, he helped design and market some of the first exchange-traded funds. With partner Don Lufkin, he went on to found , a revolutionary transparent mutual fund company that pushed fund disclosure to the top of the US SEC agenda. As co-founder of Cerulli Associates in the early 1990s, he conducted some of the earliest research on fee-only financial advisers and the rise of indexing. Mr. Nadig is widely quoted in the financial press, is a regular speaker at finance conferences, and publishes a widely read blog at . He has an MBA in finance from Boston University.

Matt Hougan is president of , where he runs the company's US business and heads up its editorial efforts globally. Mr. Hougan is widely quoted in the media and is a frequent guest on CNBC. He is a regular contributor to the Wall Street Journal 's "The Experts" series on wealth

A Comprehensive Guide to Exchange-Traded Funds (ETFs)

management and a featured ETF columnist for the Journal of Financial Planning, Financial Advisor magazine, and . A three-time member of Barron's ETF Roundtable, he was named 1 of the 25 most influential people in the ETF industry by ETF Database and was one of Registered Rep's "Ten to Watch in 2012." Mr. Hougan graduated from Bowdoin College with a degree in philosophy.

Deborah Fuhr is managing partner and co-founder of ETFGI, an independent research and consultancy firm that offers paid-for research subscription services on trends in the global exchange-traded fund and exchange-traded product industry, the institutional users, and its ecosystem. Previously, she served as global head of ETF research and implementation strategy and as a managing director at BlackRock/BGI. Ms. Fuhr also worked as a managing director and head of the investment strategy team at Morgan Stanley in London and as an associate at Greenwich Associates. She received the 2014 William F. Sharpe Lifetime Achievement Award for outstanding and lasting contributions to the field of index investing. Ms. Fuhr is one of the founders of Women in ETFs. She is on the editorial boards of the Journal of Indexes (United States), Journal of Indexes (Europe), and Money Management Executive; the advisory board for the Journal of Index Investing; and the investment panels of experts for Portfolio Adviser, the FTSE ICB Advisory Committee, the NASDAQ listing and hearing review council, the International Advisory Committee for the Egyptian Exchange, and the University of Connecticut School of Business International Advisory Board. She received her bachelor's degree from the University of Connecticut and her MBA from the Kellogg School of Management at Northwestern University.

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?2015 The CFA Institute Research Foundation

Acknowledgments

The authors wish to extend a special thanks to research analyst Stacey Brorup, , for invaluable assistance in the production and editorial work associated with this book. Leigh Chikos contributed editorial assistance on many of the chapters. We are also grateful to Laurence B. Siegel, director of research at the CFA Institute Research Foundation, for his idea for the project several years ago and improvements to the manuscript with his insights, questions, and editorial expertise. Finally, we would like to acknowledge CFA Institute Research Foundation Executive Director Bud Haslett for guiding the project through its long path and providing critical support along the way.

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