On this panel, ETF Trends publisher Tom Lydon will join Matt Hougan of Inside ETFs, Ben Johnson of Morningstar, Dave Nadig of ETF.com and Crystal Kim of Barron’s to take a glimpse behind the scenes of the ETF industry and provide candid insights and opinions about the ETF landscape, the regulatory outlook, and effective strategies for advisors using ETFs today.
The U.S.-listed ETF industry has grown to 2,043 exchange traded products from 112 fund sponsors and 135 index providers with $3.067 trillion in assets under management, according to XTF data. Over July, U.S.-listed ETFs saw $23.4 billion in new investor money flowing in, which pushed assets under management in ETFs over the $3 trillion market.
The popularity of the ETF investment vehicle has been attributed to a number of factors. For instance, the rising demand for cheap and efficient index-based ETFs has come at the expense of traditional actively managed open-end mutual fund as more investors grow weary of high costs and underperformance of active strategies.
ETFs have been a popular play this year with investors plunging into the market as the bullish conditions extend toward the ninth year. Last year ETFs had a record inflow of $287 billion for the entire 2016, and the ETF industry has already brought in $272 billion in inflows in just the first seven months.
Overall, most of the money has flowed into bond ETFs, notably corporate debt, as fixed-income investors sought attractive yield-generating assets in a stubbornly low yielding environment. More investors are also seeking riskier bets to fuel trades in stretched market conditions.
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More investors are turning toward smart beta or factor-index, rules-based ETF strategies that provide an alternative to the potential risks found in market cap-weighted methodologies that have grown top heavy in an extended bull market environment. There are now 730 U.S.-listed smart-beta ETFs with $607.7 billion in assets under management, and the number is only rising as more try to capitalize on potentially improved risk-adjusted returns.
With valuations looking pricey in U.S. equities, many ETF investors have also shifted their attention toward relatively cheaper markets, like emerging markets and Europe. The shift in flows may reflect investors changing sentiment on Europe and EM markets after investors yanked billions out of related equity ETPs globally last year. Consequently, cash that may have been sitting on the side is finally being put to work.
For more information and registration information for the 2017 Morningstar ETF Conference, visit www.morningstar.com.