The exchange traded fund (ETF) industry is setting the bar pretty high for mutual fund companies. Some of these providers are ready to begin offering exchange traded products in an effort to keep up with the game.
The ETF industry has racked up about $1 trillion in assets, sparking the interest of major mutual fund providers. Janus, Alliance Bernstein and Dreyfus and Pimco have all filed to offer (or already launched) some sort of ETF version of their existing successful mutual funds, says Jonelle Marte for The Wall Street Journal.
Expect to see more active ETFs in the product line up. This is where the industry is headed and it’s time and a little overdue. [Shooting Towards Wider Acceptance of ETFs.]
“The whole idea of active management is you’re going to beat the market,” says Rick Ferri, founder of Portfolio Solutions and author of “The Power of Passive Investing.” “That’s why you pay higher fees, but the studies confirm that [active ETFs]haven’t been beating the market.” Meanwhile, skeptics believe that the trading fees associated with ETFs will rack up, and not necessarily lead to higher returns at a lower price. [Why actively Managed ETFs Haven’t Taken Off Yet.]
The long term investor is poised to benefit from an actively managed ETF more than a short-term trader. The long term will keep costs at bay, and benefit a buy-and-hold strategy more than it will support a day-traders constant buying and selling. That is where the fees could add up.
Tisha Guerrero contributed to this article.
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.