With good reason ETFs get a huge amount of publicity in the media, the blogosphere and here at Abnormal Returns. According to the Investment Company Institute ETFs at the end of July held $1.086 trillion in assets. Not too shabby. However that pales in comparison to the $12.009 trillion in assets held in mutual funds. You can see via Google Trends that ETFs slowly but surely taken mind share from mutual funds.
There is every indication that ETFs will continue to take share from traditional open-end mutual funds. The traditional money managers are chomping at the bit to enter the actively managed ETF space. It seems like not a day goes by without news on this front. These firms recognize the fact that ETFs are the next growth vehicles for the asset management industry.
The question is what about the millions of investors who still have their money invested in open-end mutual funds? It is one thing to tell these investors to move their money into ETFs. However in many situations, like 401(k) plans investors are limited in their choices.
I am not saying that the blogosphere should stop its interest in ETFs. ETFs are a big part of what active investors and traders use these days. It is simply worth putting into perspective the fact that ETFs are not yet, and will not be for some time, the primary investing vehicle for most Americans.
Luckily there is still some good work being done in the traditional open-end mutual fund space outside of the Morningstars of the world. For instance, Mutual Fund Observer which is a successor site to FundAlarm, consistently does a good job of covering with a skeptical eye the mutual fund industry. David Snowball does yeoman’s work in highlighting funds flying under the radar or new funds coming online.
Investing, whether it is in an open-end fund or ETF is still investing. Just the structure is changed. Even ardent ETF investors can sometimes learn from how the other $12 trillion invests.
Items also worth checking out:
September 2011 commentary. (Mutual Fund Observer)
The second act begins for ETFs. (McKinsey & Company)
A-list ETF sites. (Abnormal Returns)