“Personalized indexing is adapting an index specifically for sophisticated investors who need a slight tweak for themselves,” Roame said. “The CEO of a major corporation might say, ‘Build me an S&P 500 index excluding exposure to my industry because I have enough of that risk in my job.’”
Roame also points to independent advisors as a major factor for the growing interest in indexed products.
“RIAs will boost their use of ETFs substantially in coming years (it is now about 6%) because they want to charge fees on the accounts,” Roame said. “The RIA channel is the most fiduciary-minded of the advisory channels so RIAs will look for the lowest-cost products to put inside their fee accounts. The largest RIAs have long been big users of index mutual funds.”
The actively managed ETF space could “take hold eventually,” but the active space still face some hurdles, such as small track records, Roame added.
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Max Chen contributed to this article.