ETF Trends
ETF Trends

As the market trends shift and transform, many exchange traded fund (ETF) providers have realized that they must do so, too. Thus, in an effort to keep up with changing market conditions, ETF providers are acting accordingly.

In response to issues surrounding the current bear market, plain vanilla ETFs of yesterday simply will not do. David Lindorff for Bank Investment Consultant reports that investors are showing interest in new fixed-income ETFs such as pre-refunded muni bonds, high-yield muni bonds, high-yield taxable bonds, international bonds and emerging-market bonds.

Providers such as ProShares and Direxion are keeping up with the conditions with recent filing and launching of triple-leverage ETFs, as well as inverse funds that maximize their underlying indexes in the opposing direction. Daisy Maxey for The Wall Street Journal says that the economic slump is forcing the closure of some ETFs and slowing launches of others—but it hasn’t stunted innovation. The market is making room for a degree of innovation.

In general, the numbers suggest that even with investors leery about the financial markets, ETFs are gaining ground, particularly compared to mutual funds. In 2008, mutual funds lost close to $400 billion in invested assets, in addition to the capital depreciation they suffered in the market crash. Over the same period, ETFs had a net inflow of $178 billion in new assets, some of it new, and some of it shifting away from mutual funds.

The trend is clearly toward more complicated ETFs, with an increase in new actively managed ETFs, and a lot of pressure on them to outperform their benchmarks. The start of “personality” ETFs marketed on the name recognition of the active manager may also start another trend.

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.