While exchange traded funds (ETFs) may not take the place of mutual funds anytime soon, they’ve proven themselves a force to be reckoned with. The mutual fund industry seems to be following the old saying, “If you can’t beat ’em, join ’em.”
This has especially become evident in the wake of the credit market mess that has hurt investors with some big losses and surprises about what they were holding. Investors are mad and feeling burned. They’re going to put a greater weight on transparency when it’s time to get back into the market, and they’re going to want to know what they own. ETFs provide this all day, every day. Mutual funds simply don’t.
Investor dollars have been pouring into ETFs lately, just as new products are launched, and more mutual fund advocates are getting in on the action and are running them, reports Ian Salisbury for The Wall Street Journal.
Northern Trust launched an international family of ETFs in May and Pimco has filed a proposal with the Securities and Exchange Commission (SEC) to launch a bond ETF, and possibly more mutual fund giants will follow. If larger companies are not already in the game, they are likely in some stage of thinking about it.
Mutual fund companies are still the giants with about $11 trillion in assets. The invention of the actively managed ETF may spark the interest of many more within the mutual fund set.
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.