January 11, 2012

ETF Fund Popularity May Have Peaked

There was an interesting article in the Financial Times about Exchange Traded Funds (ETFs) today. The essence of the article was that ETFs as an Asset class have started to lose their popularity with investors. The article alluded to this fact with the title, "Investors Appetite for New US ETFs Wanes." ETFs allow investors to trade a basket of securities such as the Dow Jones Industrial Average, Precious Metals, or other industry groups or market sectors on an Exchange with low maintenance fees - learn more about ETFs by visiting my What Are ETFs page. According to the article, the US ETF Industry ended the 2011 year with more than 1 Trillion dollars under management. This compares to 540 Billion at the beginning of the 2009 year. There are several possible reasons for the decline over the past couple years including over saturation of the ETF Market. For example, there are several ETF products issued by different iszuers that are designed to track the same or similar benchmarks. Last year alone, 302 new ETF funds were launched in the US bringing the total number of active ETFs trading to 1,369 funds compared to a total of 389 at the start of 2007.