Battle For The ETF Revolution’s Soul

January 12, 2016

[Editor’s Note: For further thoughts on this topic, tune in to FactSet’s upcoming webcast on Jan. 12 featuring Dave, and special guest Matt Hougan of ETF.com.]

There’s little question that 2015 was a stellar year for the ETF industry. Assets are at all-time highs, and a record number of new ETFs hit the market.

Despite volatile markets, ETFs pulled in $242 billion in new assets … a number that looks even more impressive when you consider that traditional mutual funds hemorrhaged $125 billion in outflows. That’s a $367 billion swing in a single year, away from an old technology and toward the hot new thing.

2015 was also a record year for ETFs in terms of new issuers coming to market. We had 23 brand-new ETF issuers enter the market last year, ranging from startups with cool new ideas (HACK anyone?) to old-guard firms like John Hancock and Goldman Sachs.

And while the big keep getting bigger—Vanguard- and iShares-branded ETFs pulled in $180 billion in new assets—many of the smaller ETF firms had huge growth years: Deutsche Bank, WisdomTree, First Trust, Schwab all posted asset-gathering numbers of more than 25% for the year.

With all this great news, it’s easy to look forward to 2016 with rose-colored glasses and think “Well, things will be even better in 2016!”

Take Nothing For Granted

And it might. But doing so blindly and without caveats would be a mistake.

ETFs are a disruptive force, and that’s got some folks scared. There’s increasing mobilization to reign in, co-opt, and alter the course of the ETF revolution. We’re at a pregnant moment of the ETF revolution; things could go any number of ways. As an investor—whether you’re an individual, an advisor, a portfolio manager or an ETF issuer—you’re going to be asked to take sides, and participate in shaping the future.

Here are the six things I think we all need to keep our eyes on:

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