True. Most notably, PIMCO, the world’s largest bond fund manager, is gearing up to launch a line of bond ETFs. PIMCO filed for a proposed 1-3 Year Treasury Index Fund, which will trade on the NYSE Arca exchange and follow a Merrill Lynch benchmark. If PIMCO’s example sticks, we could see even more mutual fund providers getting into the ETF space.
6) Commodity ETFs will continue their expansion and gain even more popularity.
True. Let 2008 go down in history as one of the bigger years for commodities. Not only did prices shoot up to historic highs in July, but most of them lost big in the second half of the year. Some, such as oil and gas, lost 70% from their records. New commodity ETFs and ETNs were launched at a blistering pace nearly all year, and they covered strategies and commodities of all types: long, short, leveraged, gold, platinum and other precious metals, coffee, sugar, cotton, livestock, oil and gasoline.
7) Fixed-income assets will grow.
Definitely, but most of that money went to Treasuries. As we write, we’re in the midst of a rush to Treasuries that has driven yields down to lows not seen in 50 years. In fact, government debt is so popular right now that an auction of $30 billion in short-term securities at a 0% yield created so much demand, the government could have sold four times as much. This year has been all about investors looking for security. As of November 2008, there were 52 fixed-income ETFs available, compared with 49 at the start of the year.
8 ) U.S. investors will begin realizing that they can look abroad for their investments.
Not so much. Not that looking abroad was necessarily a bad thing, but this year, investors saw that there were few places for them to go outside of the standard safe havens. Every sector and global region has been hit in this crisis – even traditionally defensive sectors were left reeling.
9) Individual investors will start asking their financial advisors why ETFs aren’t part of their portfolios.
True. Investors are fed up, and it’s showing. We’re seeing a louder call for ETFs in 401(k) plans, as well as a push for better fee disclosure. While the industry is not quite there yet, it’s better off than it was a year ago.
Perhaps one bright spot in this financial crisis is how aware it has made individual investors about their portfolios, and we think that the days of convoluted and high fees and a lack of transparency are over. People are paying attention now. Investors are not only realizing that ETFs are the perfect product to remedy these issues, but they’re going to start demanding them more than ever when the market begins to turn around.
10) An ETF of ETFs will finally hit the U.S. market.
Yes. PowerShares led the way in May of this year, with a line of ETFs of ETFs.
- PowerShares Autonomic Growth NFA Global Asset Portfolio (PTO): The most growth-oriented of the three funds, with 90% equity and 10% fixed income. $9 million assets.
- PowerShares Autonomic Balanced Growth NFA Global Asset Portfolio (PAO): Holds 75% equity and 25% fixed income. $8 million assets.
- PowerShares Autonomic Balanced NFA Global Asset Portfolio (PCA): Holds 60% equity and 40% fixed income. $7 million assets.