Exchange traded funds (ETFs) have seen growth slow over the past three months. During this period, assets under management globally shrank by a substantial amount.

Phil Craig for the Wall Street Journal reported that at the end of July, assets under management in ETFs had fallen to $786 billion from $805 billion in April, down 2.4% during this time.

These numbers will surely have to grow if ETFs are going to even come close to maintaining growth from the previous two years. Total ETF assets grew 41% in 2007 and 37% in 2006. Unless investing increases to a significant degree, 2008 is likely to see slower growth or potentially negative growth in assets under management.

Another negative for ETFs is pointed out by David Hoffman of InvestmentNews. He reports that the first half of 2008 was scarred with an increase in ETF closings, as 11 ETFs provided by Claymore Securities and 5 ETFs from Ameristock Corp were liquidated due to slow asset growth.

However, despite signs of slowing growth, there is still overwhelming evidence for future growth in ETF assets.

First off, the decline in assets can merely be traced to a global bear market. As the global ETF industry has more exposure to equities than any other asset class, the decline in assets under management essentially reflects market movement.

Also, ETF providers are still planning as though the ETF market has not been slowed by any means, reflecting their optimism. These providers of ETFs are proposing new products as though nothing has changed. As of Aug. 7, there was roughly 538 ETFs and ETNs in registration.

As we continue to experience a down market, it is highly unlikely that the industry will see a significant flow of investing into ETFs. However, once we get past the bear and start riding the bull, assets under management in ETFs undoubtedly have the potential to climb to greater new heights.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. 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.