Deborah Fuhr has been closely following the exchange traded fund industry for the past 15 years. Today, she is co-founder of London-based ETF Global Insight, an advisory for institutional investors, and has detailed perspective on the industry.
Education remains a top priority for the ETF business as the products grow increasingly complex, she says.
First she was an investment strategist at Morgan Stanley and then global head of ETF research at BlackRock. [ETF Analyst Starts Research Firm]
Now she is a co-founder of an educational and advisory company. Ari I. Weinberg for The Wall Street Journal reports that Fuhr’s observation of an industry growing from a couple billion in assets under management, to a business with over $1 trillion in assets and over 1,000 products, helps her insight into the finer points of asset allocation and ETF use. [ETFs Seen Hitting Nearly $4 Trillion by 2016]
Here are some high points of Weinberg’s interview for with Fuhr:
- Overall, the growth of the ETF industry will continue because of the types of exposures investors can use ETFs for. The easy overseas exposure, low cost, and access to hard to reach areas of the market are supportive of further growth. [ETF Investors Concerned with Cost]
- ETFs are not immune to financial market meltdowns. A second financial crisis could send assets out of ETFs and into cash accounts.
- Active ETFs will not overtake mutual funds in the stock picking category. The fact that daily transparency is a must will keep most managers away from these types of funds. It could also hamper growth in this sector.
- Overall, Fuhr is most shocked at how much investor education on ETFs is still necessary. The easy-access to education is getting more abundant and the need for more education is growing right alongside the industry. [Advisor ETF Usage Rose 10% Last Year]
- When it comes to niche markets, your advisor needs to be very clear about how much you should be buying and holding and whether your trade itself could affect the market for the ETF and the underlying securities. As a general rule, never trade more than 20% of average daily volume.
- For individual ETF investors, the most important thing to know about is the benchmark that the product is intended to track. “Products with similar names can be based on market capitalization, equal weighting or some other indexing methodology that can deliver very different returns than what you expected,” Fuhr said. [The ETF Industry: Still Alive and Thriving]
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.