Retirement Plans Could Send ETF Assets Soaring

The exchange traded fund industry could grow over fivefold in the next seven years as the $9.7 trillion participant-directed defined contribution plan market and more financial advisors shift into the investment vehicle.

“The use of ETFs is nascent,” according to a Principal Financial report. “Only 2.5% of DC assets in the U.S. is invested in them. More and more financial advisors are likely to channel assets into them, such that the total ETF assets will top $9.5 trillion by 2020, up from the current level of $1.7 trillion.”

Principal Financial also highlights the growing acceptance in actively managed ETF offerings.

“As their registration process becomes less onerous, active ETFs in particular are likely to proliferate and drive this growth,” the report added. “Indeed, plans are afoot to create ETFs based on lifecycle risk, with distinct tilts towards healthcare, life sciences, fuel and retirement communities backed by simple hedges.”