After a few months of lost assets, some are asking if exchange traded funds (ETFs) have become victims of their own success.
A landmark year in 2007 has led to a weaker success in 2008, amplified by rocky market conditions. During the first quarter of 2008, the number of ETFs coming to market fell 70% to 27 new funds. In the first quarter of 2007, 94 funds were launched, reports Shefali Anand for the Wall Street Journal.
When things get rocky, it doesn’t take long for blame to be passed around: gimmicky indexes, lack of seed capital, the number of investment alternatives available, and so on.
But the fact is, ETFs are just like any other market product. Last year, the markets were moving and shaking – can you fault the providers for wanting to jump in and capitalize? Now that things have become more volatile, there’s nothing wrong with investors and providers wanting to throttle back until the situation is resolved.
While ETFs are down about 10% assets-wise, consider that the markets are off by as much or more than that.
Everything operates in cycles, and ETFs are no exception to the ebbs and flows. When the market begins performing again, more investors will once again look to ETFs to put their money to work. Perhaps a turnaround has already begun: last month, ETFs assets rose by $20.1 billion.
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.