Vanguard Investment Chief Bullish on ETFs

January 25th at 1:21pm by John Spence

Vanguard Group saw the highest inflows among exchange traded fund providers in 2011 and the firm’s chief investment officer says the company remains upbeat on the growth prospects of the ETF business.

“ETFs are 15% of the assets in the mutual fund industry,” Vanguard CIO Gus Sauter told CNBC’s Bob Pisani in an interview this week. “They are huge and growing at the fastest rate in the industry. ETFs are here to stay [and] a big part of the future.”

Vanguard led ETF inflows in 2011 for the second year in a row, hauling in nearly $36 billion. [U.S. ETFs See More Inflows]

“ETFs we look at as just a way to distribute our index funds,” Sauter said. Vanguard is best known for its passively managed index funds but has adopted ETFs as an alternative wrapper.

The world’s largest actively managed mutual fund, Pimco Total Return Fund, is also readying an ETF offshoot. [Active ETFs Seen Taking Off in 2012]

Speaking at the Inside ETFs conference this week in Florida hosted by Index Universe, Sauter debunked the myth that ETFs are responsible for higher volatility in the market.

“We have looked at systemic problems because of volatility we’ve seen in the marketplace. We really don’t think they have. We think macroeconomic events created that volatility. We think ETFs are a great investment product for investors to gain low-cost, broadly diversified exposure to the market,” Vanguard’s indexing guru told CNBC.

“We don’t believe concerns [ETFs] are creating distortions in markets are correct,” Sauter said. [Do ETFs Really Exacerbate Volatility?]

Vanguard Total Market Bond ETF (NYSEArca: BND)


The opinions and forecasts expressed herein are solely those of John Spence, 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.

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