In looking at the growth rate of exchange traded funds, the industry has been quickly expanding, garnering over $2 trillion in assets globally, and it has not shown any signs of slowing.
Bob Pisani for CNBC notes that U.S.-listed ETFs had just $100 billion in 2002, grew to $400 billion by 2006 and then doubled to $800 million by 2009. The industry then tacked on another 25% asset growth to $1.3 trillion at the end of 2012.
“ETFs are the most important development for investors – and the fund industry – in decades,” Pisani wrote, highlighting the diversification qualities that ETFs brought to the retail investor.
Next week, I will see Bob Pisani at the IndexUniverse Inside ETFs Conference in Florida where industry players and advisors will exchange ideas on actionable ways to navigate the current markets with ETF investments. That is, unless Bob gets stuck in New York due to the blizzard dumping snow on the Northeast.
ETFs have democratized the way investors can access various assets around the world, such as gold, other commodities, foreign equities and even international bonds. Moreover, ETFs also come with low-costs, portfolio transparency, tax efficiency and can be traded throughout the day.
When comparing ETFs to active managers, the performance is also in favor beta indexing methodologies. According to fund analyst Deborah Fuhr, 81.2% of active large-cap managers in 2011 did not beat the S&P 500.
While the $2 trillion that global ETFs have accumulated is still small compared to the $13 trillion in stock and bond mutual funds, the mutual fund industry is starting to take note. Some mutual fund providers have even turned to ETF products, as well.
For more information on ETFs, visit our ETF 101 category.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.
- Bob Pisani
- exchange traded funds