As mutual funds diminish in value with fees eating away at any possible returns, exchange traded funds (ETFs) are enjoying the company of many new investors flocking to their family of funds.
The abhorrent performance in last year’s market has continued to push equity investors to index funds and ETFs in what seems like a long-term trend, reports Sue Asci for Investment News. Actively managed equity mutual funds experienced a record net outflow of $208.3 billion last year, the third outflow that has occured in more than two decades, while equity index funds gained net inflows of $28 billion and exchange traded funds reported inflows of $158 billion.
Even in Canada, the trend is evident: Barclays is saying that for the first time, it outsold the best-selling long-term mutual fund providers in 2008, reports The Canadian Press.
During dismal market conditions, investors usually try to avoid costs of active management in favor of index funds. This recent downturn could have advisers favoring ETFs. But there are some managers that think money moved to index funds or to cash willl be short lived as active funds will one day reign supreme in a favorable market.
In a video feed provided by Ignites, Grail Advisors CEO William M. Thomas, has stated how there are new opportunities for ETFs to restore asset spaces that have been lost. He sees the market pullback as the right time for exchange traded funds to take up areas of vacant mutual fund places.
The founder and managing director at RI-TA, Agustin J. Fleites, also believes in the potential for active ETFs. He has also noted that ETFs reduce trading costs and has praised the tax efficiencies of index products.
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.