When it comes to social graces and utilizing efficiency, Europe seems to take first place, and now they are leading the incorporation of exchange traded funds (ETFs) into pension plans.
European pension funds have aggressively increased their use of ETFs within pension plans in the last year as the predicted surge in ETFs and their usage took place, reports Sophia Grene for Financial Times.
Previously, 13% of institutional investors used ETFs in 2006, and now 44% use them, according to Invesco’s European institutional asset management survey. ETFs have been found useful because regulations of many funds make it hard for them to use derivatives. Around 83% of of central and eastern Europe use ETFs in pension plans, and 18% of pension funds in Ireland and the United Kingdom use them.
Will the United States be catching up anytime soon? The latest widespread acceptance of ETFs among investors and advisors means that the providers are turning to the retirement plan market. Many say this is the final frontier for ETFs. But a number of large infrastructure hurdles remain in the way of fully incorporating ETFs into 401(k) plans. Most defined contribution plans simply cannot handle a product that trades throughout the day, reports Marianna Lemann for Financial Times.
Industry insiders and experts agree that ETFs will be available in retirement plans sooner rather than later. Some plan administrators are working for it, and 401(k) participants who want them available in their own plans should ask their human resources department about it.
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.