Behind Closed Doors, ETFs Are All The Rage

By
Cinthia Murphy
June 20, 2014
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Morningstar’s conference attendees don’t say much publicly about ETFs, but that doesn’t mean they’re being ignored.

Some 2,000 asset managers and advisors landed in Chicago for the annual Morningstar Investment Conference last week, where they spent the better part of three days talking about markets and the economy. Discussion ran the gambit of all matters related to investing, but conspicuously missing was a whole lot of meaningful talk about exchange-traded funds.

Yes, there were some key ETF pundits in attendance like Research Affiliates’ Rob Arnott, and Portfolio Solutions’ Rick Ferri and ETF portfolio due diligence expert Brooks Friederich, from Envestnet, to name a few. There were a few panel discussions centered on ETF portfolios and strategies. But there weren’t all that many people talking about ETFs in the massive exhibit hall of Chicago’s McCormick Place.

To be fair, this is an investment conference that’s primarily attended by mutual fund managers. Morningstar hosts an all-ETF event in the fall every year where we talk about nothing but ETFs.

But if you consider that the ETF market is the fastest-growing segment in the financial world today, expanding at roughly a 25-percent-a-year pace and now boasting more than $1.85 trillion in assets in the U.S. alone, it’s not absurd to expect ETFs to creep into conversations about money management in the hallways of a large conference such as this one.

What’s interesting is that it seems that the relative silence about ETFs among mutual fund managers is apparently just seemingly. Behind closed doors, sources told me, conversations are raging between these asset managers and the indexing world about their inability to go on ignoring the ETF space, and their need to find a way in.

These managers want in, but they’re struggling to find a way that doesn’t completely eradicate their mutual-fund-fees gravy train.

That’s understandable. Who can compete with strategic broadly diversified ETF portfolios that cost a “whopping” 5 or, maybe, 10 basis points a year? The low fees ETFs are often heralded for represent, in a way, a real barrier to entry for many mutual fund managers.

 

ETF DAILY DATA

The bond funds 'HYG,' 'TLT' and 'JNK' added money on Wednesday, March 25, as total U.S.-listed ETF assets dipped just below $2.1 trillion.

A number of iShares funds, including the bond funds 'TLT' and 'HYG' paced the firm's issuer-leading inflows on Wednesday, March 25. Total U.S.-listed ETF assets meanwhile dipped to just below $2.1 trillion.

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