The introduction of exchange-traded funds carved out its own niche in the financial sector, which in turn, grew exponentially and with that rise in ETFs, industry changes are abound. Douglas Yones, Head of Exchange Traded Products at the New York Stock Exchange, is all too familiar with these market trends in ETFs.
Whether as a standalone investment product or a complement to an existing portfolio, Yones witnesses firsthand how investors utilize these products. Furthermore, he’s keen on where the industry is currently and where it’s headed.
Utilizing ETFs in a Portfolio
Once financial advisors arm investors with the necessary knowledge regarding ETFs, it is now up to them to identify way on how to incorporate them into an existing portfolio as complimentary products or as hedges against current investment strategies.
“People are using ETFs in a lot of different ways—both as investment vehicles, but also as trading vehicles,” said Yones in his latest In The Know segment filmed at the NYSE. “They can express changes in the thoughts of the overall market, maybe make a small adjustment to their portfolio and they’re doing simply, easily with ETFs.”
Because of their adaptability as an investment product, ETFs have experienced exponential growth with respect to capital flows. With over $120 billion in assets flowing in, that growth is expected to only continue as more ETFs enter the marketplace.
“It’s been a great year on net cash flow for anyone who’s launching ETFs or has a business where they’re generating assets as well as on the trading side,” said Yones.
Rise of Fixed-Income
The adoption of ETFs for various uses has spurred areas of growth where investors are now able to corner certain aspects of the capital markets that where not readily available before. One of those is the fixed-income space where investors can obtain bond exposure and diversification without having to invest directly in the debt itself, almost creating a new class of bond investors that can thrive in various economic scenarios.
“It’s these fixed-income ETFs that continue to be launched with new ways to access that market wrapped in an ETF wrapper,” said Yones.