Charles Schwab is the largest custodian in the world, with $1.4 trillion on its platform. The discount broker made a splash when it launched a set of exchange traded funds (ETFs) less than a year ago. Those funds have already gathered $1.5 billion in assets.

We recently caught up with Schwab’s Senior Vice President, Peter Crawford, to talk about Schwab’s business and where it stands in the larger ETF industry. [Schwab ETF Event Celebrates a Growing Industry.]

Are you seeing more investors and advisors shifting out of mutual funds to ETFs, or do ETFs complement your current offerings?

Both. I think we’re seeing a couple things. Advisors and investors have an increasing preference for passive strategies, and ETFs are a beneficiary of that. When people choose passive strategies, they choose ETFs.

At the same time, ETFs are $800 billion industry-wide and mutual funds are $7-$8 trillion, so ETFs are a piece of the overall picture.

I think [mutual funds and ETFs]are going to coexist. ETFs will have the lion’s share of passive assets and mutual funds will be the preferred vehicle for people who want active strategies. Passive strategies will continue to creep up as part of the share of the overall pie, but people will want to have active management. [Schwab: ETFs Control Costs.]

Does that mean you don’t think actively managed ETFs will catch on?

I’m a bit of a contrarian on that. Everything we do here starts from client needs, and I don’t have any clients asking for actively managed versions of T. Rowe or the Janus 20 fund. I thin they’re happy with actively managed mutual funds. If you look at the ETFs’ ability to trade intraday, that’s not really relevant for active funds. I do think that where I see it is more in intelligent indexing, fixed-income, places where transparency is an advantage, where people want to know what their funds are holding. But in active equities, I don’t see it as a huge opportunity.

As the largest custodian of ETF assets in the United States, where do you see the ETF industry going?