Research & Reports

ETFs:
Growth, Innovation, Competition

Exchange-Traded Funds (ETFs) are among the most innovative investment-management products of our time. ETFs continued growing in the difficult market environment of 2008, drawing inflows of more than $260B globally, reaching more than $725B of assets in the US, Europe and Asia combined at the end of last year. Strategic Insight is pleased to present this in-depth report on ETFs, which looks at the products, growth trends, distribution strategies and investor use of these innovative products – and, more importantly, sums up what it all means to firms in the investment management business.

While the ETF sector may offer current and future
opportunities in both passive and active products, this sector’s growth is affecting even those firms not directly involved in the managing and selling of ETFs. ETFs are making their presence felt both in how our business is currently being conducted and how firms think about the future of investment management. This unprecedented report addresses the key questions about ETFs, including: How do ETFs complement and compete with traditional mutual funds? How do ETFs change the way advisors manage individuals' money?

This report, centered on the US but offering details on ETFs around the world, covers in unmatched depth and breadth the diversity of ETF products and the future of the ETF space.

The topics to be covered include:

• Trends in flows and asset growth
• Who uses ETFs and why
• ETF distribution strategies
• The potential of actively managed ETFs
• ETFs in Europe and Asia

Among the insights that ETF providers can glean from this report are:

• Which distribution trends will favor ETFs
• What advisors really value about ETFs
• Where future ETF growth may lie

Among the insights that those not offering ETFs can learn from this report are:

• Why more firms are entering the ETF business
• Distribution and marketing best practices
• Key ETF product development trends

Some of the report’s key findings include:

• Exchange-Traded Products (ETPs), which include ETFs, trusts and ETNs, drew a record $176 billion in net inflows last year in the US, impressive gains in a very difficult market environment. And ETFs in Asia and Europe captured more than $80 billion.

• Some 40% to 50% of ETF assets reside with institutions, based on information gleaned from large ETF sponsors. These institutions include pension funds, hedge funds, endowments, foundations, proprietary trading desks, and mutual funds. And 50% to 60% of ETF assets reside with retail users, including financial advisors and the direct retail channel. But new ETF sales are skewing a little more heavily toward retail.
  
  
• After $176 billion of 2008 inflows, it seems inevitable that US ETF assets, already topping the $500 billion level, will reach the $1 trillion milestone within several years. A wild card is how well actively managed ETFs are received in the next few years.

The report is based on research using proprietary surveys, extensive discussions with executives and advisors at all levels of the industry, Strategic Insight's Simfund databases, and SEC filings.

The study is a must-read for any firm that is actively engaged in managing ETFs, considering the launch of ETFs, or just trying to better understand the role of these products in the marketplace and their competitive position versus mutual funds. The comprehensive data provide key intelligence on various aspects of the products, and will include detailed assets, flow and other information.