Survey: ETFs Will Continue To Grow, Mutual Funds Will Continue To Dominate

by on July 23, 2009

I came across some interesting statistics compiled by Cogent Research LLC and reported in the Wall Street Journal this morning. According to a survey of some 1,500 brokers and advisers, concerns over poor performance and a lack of transparency are driving professional money managers to move assets away from traditional mutual funds and into various exchange-traded products and other alternative investment vehicles. A few of the interesting statistics from the survey:

  • Survey respondents manage an average of $80 million apiece
  • Clients’ holdings of mutual funds are expected to decline from 30% currently to 27% in 2011 (this figure was at 35% in 2007)
  • Advisers expect to allocate 14% of client holdings to ETFs by 2011, up from 8% at present and 5% in 2007.
  • 10% of client assets will be in variable annuities by 2011, up from 7% in 2007

ETFs have been gaining in popularity as investors have embraced their transparency, tax benefits, and low cost structures, while also becoming increasingly skeptical of the added value derived from active management. But while ETFs continue to eat into the market share, any reports that exchange-traded products will knock traditional mutual funds from their perch any time soon are very premature. According to the Investment Company Institute (the fund industry’s trade group), mutual fund assets totaled more than $10 trillion through May. U.S. ETF assets stood at about $590 million at the end of June, implying a ratio of about 17-to-1.

Disclosure: No positions at time of writing.