As the exchange traded fund industry crafts innovative products and expands the universe of products available, asset growth could become the greatest impediment to industry, but the increased competition among fund providers will ultimately benefit the end investor.
According to a survey of 95% of the ETF sponsor market, Cerulli Associates found that product proliferation and its impact on competition is the top challenge to asset growth, with 41% of respondents considering it the major factor, reports Jackie Noblett for Financial Times.
Specifically, a group of new entrants, including JPMorgan Asset Management, Calamos and WBI Investments, are creating smart-beta and actively managed ETF offerings in response to the crowded traditional beta-index ETF space. [Smart Beta: Hate the Term, not the ETFs]
“We have to be more careful about what we launch and be more committed to what we launch in order to be differentiated and successful,” Scott Ebner, global head of product development and research at SSgA, said in the article.
According to Morningstar data, 23 ETF sponsors have launched 127 funds so far this year, compared to 143 new ETFs for 2013 and 156 new offerings in 2012.
“Before, sponsors were competing in a product strategy with just one or two firms, but now you’re talking about almost every firm wanting in on the latest strategies,” Jennifer Muzerall, senior research analyst at Cerulli, said in the FT article.