Kranefuss shared his own thoughts about why ETFs continue to attract money, even in severely down markets.
“ETFs provide a very convenient mechanism for both individuals and institutions to trade whole segments of the market. It’s been growing pretty consistently for about five years…You get the benefit of knowing what you own.”
The trend has extended to ProShares, according to CEO Michael Sapir, who says that their overall assets continue to grow and the short and leveraged ETF provider is about even in terms of assets on both the long and short side of its ETFs.
“For the first time, that’s the case since we started in June 2006.”
The trend began about seven weeks ago, he says, when assets began to pull out of their short ETFs and go into leveraged positions. “The ETFs that have seen the greatest flows are the ultras.”
Sapir does admit that the ETF has had its share of difficulties in recent months as the market has struggled, but he doesn’t think that it’s all doom and gloom for the industry from here on out.
“People tend to suggest that this sounds the death knell for the ETF industry. The truth lies somewhere between those two extremes. ETFs will continue to thrive over time, but they’re probably not going to take in all the assets that are available for investment,” Sapir says.
As for who’s bringing in the money, Sapir says he’d be surprised if it were individual investors, as most self-directed investors are moving off to the sidelines while they wait for a turnaround. “I’d be surprised if they’re moving into conventional ETFs at this point. They’re kind of scared.”
Whatever the reason and wherever the money is coming from – individual or institutional investors – Sapir isn’t surprised. “We’re not in the business of predicting what parts of the market are going one way or the other. That’s been what our investors use the ETFs for. I’m not surprised by anything.”