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Rekenthaler Report

When Disclosure Isn't a Good Thing

Back histories, hot prospects, and cold alternatives.

If at first you don't succeed, invent another index.

Last month, the regulator of fund marketing, FINRA, approved the usage of backtested performance data for exchange-traded funds. As a result, ETFs may now publish the performance of the indexes that their portfolios replicate for time periods that pre-existed their indexes. In other words, ETF and index providers can tinker around with the rules for a proposed new index until that index shows fabulous pre-history results, then publish those performance numbers as if the index had existed at the time.