Firms continue to pump out ETFs but packaging the funds into portfolios for advisors and investors will be a big driver of the industry’s continued growth.
According to a recent Morningstar report, assets in ETF managed portfolio strategies have increased 30% year-to-date as of June 2012 and expanded 48% since Sept. 2011 when the company first announced its plans to rank and research ETF managed portfolios.
ETF managed portfolios usually have more than 50% of portfolio assets invested in ETFs.
“They represent one of the fastest-growing segments of the managed account universe,” Morningstar said. “Professional money managers are packaging portfolios of ETFs into investment strategies to meet a wide array of investor demands, and thanks to the continual development of individual ETFs they are providing access to both stand-alone investment strategies and one-stop, complete solution offerings.”
Morningstar ranks and provides research for 490 ETF managed portfolios from 120 firms with $50 billion in assets under management as of June 2012.
As we see a continued shift toward fee-based advising, financial advisors are investing in low-cost, broad-based investments such as ETFs.
BlackRock CEO Larry Fink says said the firm is the most excited about the opportunities in ETFs since it acquired the iShares business from Barclays.
“We think there are huge opportunities on the retail side and there’s continual growth on the institutional side,” Fink said.
He added the firm sees structuring ETFs on behalf of its clients as another area of growth.
ETF managed portfolios are quickly growing as advisors outsource fund portfolio services and cater to the greater demand for retirement and financial advice. [Growing Demand for ETF Managed Portfolios]
ETFs are a natural fit for fee-based advisors who charge clients a percentage of assets under management, rather than trading commissions. The model is designed to more closely align the interests of the advisor and the client.
Narly half of advisors are using outside managers to assemble ETF portfolios. [Advisors Tap ETFs for Tactical Asset Allocation]
For more information on the ETF industry, visit our current affairs category.
Max Chen contributed to this article.