Exchange traded funds come in all shapes and sizes, but investors tend to shy away from ETF products with low trading volumes. Fund providers, though, contend that potential investors have misconstrued liquidity concerns and are only missing out on ways to expand their portfolios.
“We want investors to have a good experience and to utilize ETFs that would be most beneficial to their portfolio,” Ryan Issakainen, senior VP and ETF strategist at First Trust, said, reports Jackie Noblett for Ignites. “It’s an important issue because when they understand liquidity, it opens up a whole new universe of ETFs they can use.”
Additionally, liquidity misconceptions have led to a negative impact on fund products available to advisors.
“It becomes a chicken-and-egg syndrome,” Tony Davidow, managing director and ETF portfolio strategist at Guggenheim Investments, said in the report. “You need the trading to get the assets, and unfortunately what happens is a lot of products come out, they don’t get the attention they deserve from the platforms, which would drive the trading and then drive the assets.”