As ETF Industry Grows, New Trends Emerge

The exchange traded fund (ETF) industry has been experiencing superb growth this year: new providers are appearing on the scene while assets under management are hitting record levels.

The changes in the ETF industry can be viewed as a prelude to the evolving way that financial advisers and investors construct and manage portfolios. Ken McCarthy for Financial Planning reports that certain industry experts are calling for a 20%-30% annual growth rate for the “foreseeable future.”

One of the biggest moves that was made was BlackRock’s (NYSE:BLK) purchase of the popular line of iShares ETFs. The acquisition now  has many executives wondering which large firm will be the next entrant into the ETF landscape. Charles Schwab (NASDAQ:SCHW) is one of the biggest names to have been bandied about.

A recent survey by State Street Corp. (NYSE:STT) found that ETF industry assets totaled $640 billion in July after gaining $47.4 billion in that month. There were 750 ETFs, up from 538 two years earlier.

Other trends noted in the story include:

• One analyst feels that ETFs will continue to pull assets away from mutual funds, since they’re cheaper on average and easier to buy. The analyst felt that some of the more controversial types of ETFs, such as leveraged and inverse funds, should be able to withstand regulatory scrutiny.
• ETFs are moving into the retirement market, and the industry should gather assets after the funds are more routinely accepted as a part of 401(k) plans.
• ETFs are still a growing asset class, and it’s become increasingly important for investors to have the tools necessary to evaluate the products and their providers.

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