As investors shift from a buy-and-hold mindset to more frequent portfolio rebalancing in an attempt to hedge against market volatility, the exchange traded fund industry is attracting greater interest with its low-cost index products while mutual fund providers continue to struggle.
Financial advisors no longer seek to add value through market-beating managers but focus on low-cost index-based portfolios, such as ETFs, reports Tom Lauricella for The Wall Street Journal.
The shift in investment strategies has helped Vanguard attract $58 billion in assets in the first six months of the year, or over one third of all new investments in mutual funds. While the fund provider does offer mutual funds, advisors are investing in Vanguard’s ETF products – Martha King, head of Vanguard’s adviser-services group, notes that about three quarters of the money going into Vanguard ETFs is from advisors. [ETFs Outperform Mutual Funds]
In comparison, American Funds saw assets under management shrink 9% over the past year and has experienced 36 consecutive months of outflows.
With the rising popularity of ETF products, American Funds is also exploring the ETF option.