6. There will be a physically-backed ETF explosion. No longer content to offer physically-backed gold, silver, palladium and platinum ETFs, providers will launch a slew of other physical funds. Most hotly anticipated are the aluminum and copper funds, which are still in registration. We predict that they’ll get the go-ahead in the first quarter.
7. ETFs will get even cheaper. Though there will be an eventual bottom to both ETF expense ratios and trading commission costs, we’re not there yet. TD Ameritrade’s move to offer 100 ETFs commission-free is a first step – we predict we’ll see even more of the same in the coming year. And those price wars? Look out below for falling expense ratios!
8. Actively managed ETFs catch on. Active management has struggled to really catch on with investors. But one area of active management that proved its worth in 2010 was fixed-income. Having the flexibility to make portfolio adjustments as economic conditions change proved to be a valuable commodity this year, and we think investors will get wise to this and give active bond funds a boost. Active management first burst on the scene in April 2008, so we think investors will be looking them with a keen eye.
9. ETF critics will back off. This year, the Kauffman report, Bogan report and BusinessWeek’s article about commodity ETFs took the industry to task. Although there will be increased and welcome critical thinking when it comes to ETFs, we predict that people will finally get educated and stop being scared of them.
10. ETF assets will continue the uptrend and hit $1.5 trillion. ETF assets finally hit $1 trillion in late December. We predict that they’ll not only stay there, but they’ll build on that. A recent study showed that most investors don’t know what an ETF is; if they were able to hit $1 trillion with so few knowing, imagine the possibilities as more people learn.
Here’s to a great 2011!