In both theory and practise, an ETF on the S&P500 can outperform the S&P500 :)
How?
- You invest 75% of the assets in the underlying. 25% in synthetics. That way you are invested in the actual stocks for the most part...but have the flexibility of synthetics to cover inflows / redemptions etc
- You stock lend 75% long-term to generate the incremental return above the headline S&P 500 returns
Or would trading costs ensure you can't outperform? Looking at ETF.com $VOO $SPY don't, even though they pay a % of their securities lending activities into the ETF.
Perhaps the ETF could even engage in modest leverage? e.g.
- Stock lend just 50%
- Lever the other 25%
- Put excess returns into cash
- To provide a buffer to NAV
Perhaps it's something to do on the Dow 30, not S&P500 to facilitate low transaction costs.
Financial engineering... just what the market doesn't need, eh? ;)
Submitted March 27, 2017 at 04:51PM by shane_stockflare http://ift.tt/2mJL3Xa
