U.S. Markets closed

ETF Industry Outlook For 2013


The “State of the ETF Industry” is in considerable health as the recent Inside ETFs conference in Florida proved. Many of the industry observers and analysts that attended can confirm that the exchange traded fund industry is alive and well and in a position for more growth.

“At the conference, heads of the five different ETF providers that combined control approximately 90% of ETF assets participated in a panel to discuss recent developments and what’s ahead for the future. Similar to last year, these executives stressed the need for more investor education, given that many of the more recently launched products are constructed differently than the well-diversified SPDR S&P 500 Index (SPY) , which turned 20 years old in February,” Todd Rosenbluth of S&P Capital wrote in a recent note.

Index Universe sponsored its 8th annual Inside ETFs conference in Hollywood, Fla., as Charles Schwab announced the creation of their commission-free ETF version of its OneSource mutual fund platform, reports James J. Green of AdvisorOne. Many market participants call the platform evolutionary.

Industry experts such as James Ross, head of State Street Global Advisors ETF suite, emphasized the importance of understanding a product structure and how certain ETFs get exposure to a given asset class. He also noted that not all ETFs have the same bid/ask spread, which means trading could be more costly than investors realize, reports Rosenbluth. [How Financial Advisors Are Using ETFs]

Ben Fulton of PowerShares was also in attendance and pointed out the innovation that has come about from index creation, which has allowed more fundamentally driven benchmarks come to market. For instance, PowerShares launched the PowerShares S&P 500 High Dividend Portfolio (SPHD) , which holds 50 stocks with the highest dividend yields in the broader S&P index that have incurred the lowest volatility. [High Dividends and Low Volatility: Can it Work in An ETF?]

“Today, a slew of ETFs are used by individuals, advisors, and institutions for purposes as varied as long-term, buy-and-hold investing to very short-term speculation in exotic asset classes. There are now over 1,440 U.S. ETFs, and their assets account for about 13% of mutual fund and ETF assets,” Michael Rawson wrote for Morningstar. [Three Misconceptions About ETFs]

Most industry analysts expect ETF asset flows to continue the upward momentum in 2013, as well as an increase in the number of ETFs that are coming to market.

Tisha Guerrero contributed to this article.

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.