What ETFs’ Next Act Will Look Like – The Wal Street Journal 10-23-12

Salient to Investors:

The SPDR S&P 500 ETF is 9% of all U.S. ETF assets. Exchange-traded products comprise $1.3 trillion in assets. Net new cash into ETFs is on pace for more than $100 billion for the 6th year in a row.

XTF reports that over 80 exchange-traded products have been withdrawn from the market since January. Fixed income makes up only 18% of all US ETP assets, despite the overall bond market being 3 times the size of the equities market. Experts predict bond ETFs are about to take off.

Morningstar estimates that ETF managed portfolios were up 48% in a single year.

Cerulli Associates estimates ETFs accounted for 0.2% of the $3.14 trillion in assets in U.S. 401(k) plans at the end of 2011 vewrsus 53.2% and 12.5% for mutual funds and collective trusts, respectively.

Ron Rowland at Capital Cities Asset Mgmt said that 19% of ETFs and nearly half of all ETNs are not profitable for their sponsors.

Dan Weiskopf at Forefront Capital says investors should focus on how well an ETF trades and how closely it tracks its index.

Lee Kranefuss says more investors will be drawn to funds based on investing fundamentals and trading strategies.

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