The ETF industry is booming and on pace to gather $1 trillion in inflows this year. Today at Exchange: An ETF Experience, Dave Nadig, financial futurist at ETF Trends and ETF Database, dove into the past, present, and future of ETFs.
Considering the current state of the ETF industry – bustling and attracting inflows from various client types – it may be a surprise that Nadig extended his prediction of when ETFs will surpass mutual funds in terms of total assets under management.
The prediction slipped to 2028 from 2025. However, it has nothing to do with ETFs waning in popularity and everything to do with the normalcy of double-digit returns and strong performance in recent history.
“The reason our target of 2025 is no longer accurate and we had to push that out – welcome to the bull market,” Nadig said, pointing to the percentage increase among the ETF and mutual funds’ asset bases. However, mutual funds started with a leg up with more assets under management. “Now you have much more to chase.”
“As soon as the markets take a breather, everybody sells non-performing active mutual funds. They buy cheap beta, and they think they’re just parking it there, but it never leaves,” Nadig said. “I say that that’s going to continue to happen.”
Looking at the ETF industry, Nadig said the argument of whether or not there’s a 60/40 portfolio baseline is ridiculous because the ETF industry is skewed more like 90/10 – with a hefty focus on product development within equities.
“The equity focus in the ETF industry remains incredibly strong,” Nadig said, pointing to fixed income as an area that is particularly ripe for exploring new products. “Anything touching fixed income seems like really fertile soil to be building the next generation of asset management.”
For more news, information, and strategy, visit ETF Trends.