Content provided by Joe Smith, CFA, Senior Market Strategist
The ETF industry continues to be a hot topic in the investment world as these flexible funds continue to show stellar growth. ETF flows for the year so far are on pace to set another record for asset-gathering activity.
So, by the numbers, what’s really behind the growth of ETFs? Here are three key charts that tell you everything you need to know.
1. ETF Asset Growth has Shifted From “Access” to “Insight” Exposures: ETFs prior to 2009 were largely focused on providing access to virtually every asset class investors could use in a portfolio. Today, new ETFs are designed to target a particular insight or investment strategy utilized by active managers, but packaged as smart beta ETFs.
2. ETF and Index Fund Net Flows Have Been Competitive Relative to Active Funds: Since 2006, ETFs and index funds have enjoyed positive net inflows. Active funds enjoyed positive flows from 2009 to 2014, but they have seen net outflows over the last two consecutive years.
3. ETF Growth is Still in Early Innings Relative to Assets: Despite the above-average growth in ETFs (especially smart beta and active ETFs), industry assets are still primarily located in active mutual funds. ETFs still have room to enjoy above-average growth until assets represent a more meaningful portion of total industry assets.