Rob Ivanhoff of Financial Products Research states the largest firms” have a lot more to lose.” [ETFs Take on Popular Mutual Funds.]
A larger firm may have to grapple with how its client base will react ETFs, and how the new tool will sit with the other investments, mutual funds, and the overall image. The smaller firms are ETF-based, so the aforementioned is not a factor. Rather, they distinguish themselves with targeted funds in sectors that are already displaying investor demand. [ETF Usage Will Double By 2012.]
“Where we’ve seen success is where firms view ETFs as really just another delivery vehicle. If you give people exposure in areas where they’ve already expressed interest before, you’re probably going to get interest,” said Paul Justice, director of North American ETF research at Morningstar, in the Ignites story.
An example of this tactic is Van Eck, which oversees single-country and commodities ETFs. Rydex SGI has been able to reach investors with a lineup of currency ETFs, while Charles Schwab has gained investor interest with commission-free trading for clients. [Schwab Sees Growth in ETF Business.]
Tisha Guerrero contributed to this article.