Non-traditional ETF Strategies Represent Rising Portion of Industry's Asset Growth
NEW YORK, July 13, 2011 — Assets in Exchange-Traded Funds (ETFs) in the U.S. are expected to double to $2 trillion before the end of 2015, according to a new whitepaper from BNY Mellon and Strategic Insight.
The report, ETFs 2.0: The Next Wave of Growth and Opportunity in the U.S. ETF Market, looks at the factors driving the rapid expansion of the ETF market (including exchange-traded notes, or ETNs) and how asset managers can tap the vigorous growth of this industry with products that are passive, active, or somewhere in between.
"The next wave of growth for ETFs is being driven by new asset classes, new indexes and new ways to use ETFs as tools for portfolio construction," said Joseph Keenan, head of global exchange traded fund services at BNY Mellon Asset Servicing. "The ever increasing sophistication of these newly created ETFs can pose operational and distribution challenges for asset managers. However, with detailed planning and a focused strategy, a variety of innovative exchange-traded products can be brought to market to effectively meet investors' needs."
Traditional index-based ETFs are likely to account for a falling overall share of ETF assets as non-traditional and alternative funds grab a larger slice of the market. Since the end of 2008, non-traditional ETFs have grown from 18 percent of the market to an estimated 30 percent of U.S. ETF assets by March 31, 2011, according to Strategic Insight's Simfund database. The BNY Mellon-Strategic Insight report predicts this trend will continue as investors become less likely to simply allocate their assets among growth stocks, value stocks, large cap stocks, small cap stocks and other traditional categories.
"Non-traditional ETFs will continue to increase their share of the ETF market," said Loren Fox, senior research analyst at Strategic Insight and an author of the report. "Commodity, leveraged, inverse, actively managed and hedge-fund-like ETFs are among the non-traditional ETF types that should see market share growth between now and 2016."
Begun in 1986, Strategic Insight is a competitive-intelligence source for the investment management industry, providing clients with in-depth studies, consultation, and electronic database systems. The firm assists over 250 organizations worldwide, including the largest mutual fund management companies operating in the U.S. and the largest insurance companies serving the VA business. Strategic Insight also helps over 60 of the world's largest asset managers expand in Europe and Asia. For more information, visit www.sionline.com.
BNY Mellon Asset Servicing offers clients worldwide a broad spectrum of specialized asset servicing capabilities including custody and fund services, securities lending, performance and analytics, and execution services.
BNY Mellon is a global financial services company focused on helping clients manage and service their financial assets, operating in 36 countries and serving more than 100 markets. BNY Mellon is a leading provider of financial services for institutions, corporations and high-net-worth individuals, offering superior investment management and investment services through a worldwide client-focused team. It has $25.5 trillion in assets under custody and administration and $1.2 trillion in assets under management, services $11.9 trillion in outstanding debt and processes global payments averaging $1.7 trillion per day. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK). Additional information is available at www.bnymellon.com.