Investors can buy actual steel and oil, he said, but it’s not practical. "We feel we’re giving investors access to things they couldn’t before. We clearly disclose that we’re equities."
The bottom line, Magoon said, is that investors are simply being given more choices and that’s never a bad thing. "We’re trying to give investors, who are free to choose, tools they can use that are a lot less expensive than mutual funds…the more choices consumers have, the better off they are."
Today, Matthew Hougan at IndexUniverse also took issue with the story. While he sees no problem picking bad funds, as there were more than 200 launched last year and some are bound to be duds, he doesn’t understand the picks. Hougan wonders if Morningstar understands ETFs at all, in fact.
Hougan says that GXC was actually one of the best ETFs launched last year, especially compared with the iShares FTSE/Xinhua 25 (FXI). It actually offers a more diversified portfolio and broader exposure to China.
While some investors might find that these funds work great in their portfolios, others might not see it the same way. As Magoon said: investors have choices.