New exchange traded funds are struggling to attract significant assets due to increased competition and the fact that index-based ETFs already cover most asset classes and sectors, according to a report.
There were 308 ETFs listed in 2011, and 86% failed to gather at least $30 million in assets under management, CNNMoney reports.
That compares with 71% in 2010, and 64% in 2009.
“A few years ago, it didn’t take much to launch a successful ETF, as long as you were first to the market in a particular niche,” Ron Rowland, founder of Capital Cities Asset Management, told CNNMoney. “Now it takes a whole lot of marketing and media attention to get noticed. Most fund providers underestimate the amount of marketing dollars it will take to attract the asset levels they want.”
Actively managed ETFs haven’t gained traction yet, but the introduction of an ETF version of PIMCO Total Return Fund may change that. [A Look At PIMCO’s Planned Total Return ETF]
“The problem with the actively-managed ETFs currently on the market is that they lack a track record — so far, none are spin-offs or versions of actively managed mutual funds,” said Paul Weisbruch, head of ETF/options sales and trading at Street One Financial, in the report.
“But that’s what makes the Pimco Total Return ETF different,” he added. “There’s no guarantee that the ETF will perform as well as the mutual fund has, but investors can find comfort in the fact that the same management team is behind both products and strategies.”
The opinions and forecasts expressed herein are solely those of John Spence, 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.