The ETF universe has come a long way from its niche investment status to everyday, mainstream status.
“ETFs have gone from sort of a fringe element, right, like an inhabitant of misfit toys, to being very mainstream,” Ben Johnson, Director of Global ETF Research for Morningstar, said at the recent Morningstar ETF Conference. “We’ve gone from about $800 billion worth of assets in ETFs to now in excess of $3 trillion. ETFs have made it.”
There are now 2,096 U.S.-listed exchange traded products on the market from 120 fund sponsors across 142 index providers listed on four different exchanges with $3.3 trillion in assets under management, according to XTF data. So far this year, U.S.-listed ETPs have attracted $411.5 billion in net inflows, already surpassing overall ETF inflows for all of 2016.
An increasing number of investors are becoming acquainted with the benefits of the low-cost, easy-to-use ETF investment vehicle, especially with more becoming disillusioned with long underperformance and high costs of traditional open-end mutual funds.
“These are really great. These are very cost efficient, stable, transparent building blocks that I can use to deliver great outcomes for my clients,” Johnson said. “The conversations shifted more from sort of structure and training to theory and portfolio construction.”
In the early stages of growth, the ETF industry has been heavily invested in educating investors and financial advisors on the benefits of the ETF structure. While education still continues to this day, more have grown acquainted with the nifty fund structure. Consequently, investors are now using their know-how of ETFs and crafting tailored investment portfolios that incorporate the various ETF strategies.
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