The ETF landscape has seen tremendous developments over the years and only continues to evolve at a rapid pace due to enhanced technology and investor interest.
In fact, the current ETF landscape consists of 2,888 funds, with 44% of revenue coming from “smart” funds and 11% of revenue from “active” funds.
Dave Nadig, financial futurist at ETF Trends and ETF Database, shared his provocative five-year predictions this week at Exchange: An ETF Experience.
Nadig’s first prediction for the ETF industry’s development is focused on corporate governance.
“Corporate governance is going to be one of the biggest things we talk about for the next five years. We’re talking about it today with Elon Musk and Twitter,” Nadig said. “It’s really not any different than concerns people have about the index providers owning a lot of the company and how they influence those decisions. So I think that’s something that’s going to be a big one.”
Nadig’s second prediction is that corporations will turn to non-traditional sources of financing.
He added that this development will primarily be in the fixed income space, and while it all sounds strange and far-out, it’s real and already happening.
“Billions of dollars are already flowing through — I think it’s going to get really interesting really fast,” Nadig said.
The downside of corporations turning to non-traditional sources of financing leads to Nadig’s third prediction: The U.S. will cede most of the interesting crypto innovation to the EU and Asia.
“We seem to be years behind in terms of where we need to be. We want to make this country the investment innovation capital of the world,” Nadig said. “We’re losing that race, losing non-jurisdictional trading platforms, where you’re registering the Bahamas or Caymans or something like that. It’s going to be a big issue.”
“I think it’s worth paying attention to — I would like the United States to be the front end of that,” Nadig added.
Nadig’s fourth prediction: separately managed accounts for everyone.
Nadig expects separate accounts, or direct/customer indexing, to see a steep drop from the current minimum investment amount, making them more accessible to smaller investors.
“I think you’re going to see that hit the $25,000 minimum very quickly,” Nadig said.
Finally, Nadig predicts that while ESG will grow, it will fragment while analytics slowly improve.
“I think on one hand, ESG is going to be part of every investing conversation, people are going to look at their funds and ask what its carbon scores are,” Nadig said.
“I think that’s going to be part of a lot of investment conversations,” Nadig added. “But the products, the ways we actually implement things, really have to graduate from folks that sort of care to folks that really care.”
For more news, information, and strategy, visit ETF Trends.