Exchange traded funds (ETFs) are luring new assets left and right, catching on with small investors, financial advisors and institutional investors alike. But who’s holding most of them?
Institutions held about half of all ETF assets at the end of last year, according to a study. To be sure, everyday individual investors have taken a liking to ETFs, but hedge funds and pension funds held about $250 billion of the $497 billion in U.S. ETFs at the end of December 2008, according to a study by Barclays Global Investors. (November ETF assets).
A study last year done by Financial Research Corp., however, projected that ETFs will represent 6.8% of the total assets held in retail investments by 2012. It would overshadow mutual funds in market share for the first time. (More facts and figures on ETF growth).
In the United States, many still view ETFs as a retail product, or “mutual funds with extra bells and whistles,” Barclays analyst Deborah Fuhr says.
But it’s not so simple – there are some very key differences, reports Ian Salisbury for The Wall Street Journal. They include:
- ETFs cost less, on average, than mutual funds do. That’s because most ETFs don’t pay an active manager to pick stocks.
- ETFs trade throughout the day like a stock at prices that match their underlying values, combining features of conventional open- and closed-end funds.
Although ETFs initially caught on with institutional investors such as hedge funds and day traders, they are not far from being staples in the portfolios of all types of investors. (How Wall Street is using ETFs to lure investors).
For more stories about ETF assets, visit our ETF Performance Reports category.
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.