Has It Become a Case of Too Much of a Good Thing with ETFs?
January 16th at 1:00am by Tom Lydon
Too much of almost anything isn’t a good thing, even where exchange traded funds (ETFs) are concerned.
Some industry executives think that the business may be growing too fast for its own good. Lawrence Carrel for TheStreet adds that 290 new ETFs hit the market last year, compared to 159 launches in 2006, according to Morningstar. Greg Friedman, head of iShares product management in Americas, questions whether the rapid pace of development is in the best interest of the industry and the investors.
Many of the newer, more narrow ETFs launched last year failed to ever gain traction. Much of the $623.6 billion assets are focused on the larger products that track broad indexes, and 58.44% of assets are focused on the 20 largest ETFs. In response, this makes trading newer ETFs illiquid and cause share prices to trade out of sync with net asset value.
Products need to be more well-thought out, Friedman says. Otherwise, this investment vigor that fuels the industry could be its own demise.
