Asset Managers Step Up to Address ETFs as Assets Continue to Surge
There has been a considerable rise in institutional use of exchange-traded funds. As mentioned ina recent Hedgeworld report,the value of assets in ETFs topped $745 billion during the first three quarters of 2007, according to data compiled by Morgan Stanley. The report states there has been a “significant increase in institutional investors using ETFs.” In fact, ETFs have become some of the most actively traded issues on the NYSE. Executive search firm, A.E. Feldman, says many of the firm’s clients are heavily into ETFs right now and job seekers seeking portfolio manager opportunities would benefit from stepping up to learn more about this growing class of low-cost securities.
An ETF is a security that tracks an index or a basket of assets, but trades like a stock on an exchange. Unlike index funds, which are priced once after the end of each trading session, ETFs can be bought and sold throughout the market day. Intraday trading allows investors to take advantage of temporary price dips. Market timing isn’t the only advantage offered by ETFs. Every active trading strategy that can be used with traditional stocks, such as shorting and buying on margin, can also be used with ETFs.
Available in hundreds of varieties, ETFs track nearly every index imaginable. There are ETFs for virtually every sector and subsector in stock markets around the globe. For example, emerging markets ETFs allow an investor to spread their dollars across a number of countries and currencies while getting exposure to some of the fastest-growing economies in the world. These securities also offer all of the benefits associated with index funds, including low turnover. Moreover, their expense ratios are significantly lower. The average management fee expense for an ETF is 0.24 percent.
Specifically, more than 2,200 institutional investors are using one or more products, says Morgan Stanley. The firm’s research also shows that Investment advisory firms are the biggest holders of ETFs. By the end of 2006, 1,564 firms invested a 13% jump from the year before. Coming in second, 285 hedge fund managers are using ETFs a 36% increase from 2005. Exchange traded funds are also gaining popularity among traditional mutual fund managers as an investment tool that provides additional diversification.
As of September 30th, 339 ETFs have been launched this year, according to the Morgan Stanley report as reported in Hedgeworld. That number exceeds the 280 ETFs launched in all of 2006. The firm predicts that more than 500 new ETFs are also on the way. That includes plans to launch 398 in the U.S. alone. Morgan Stanley also estimates that ETF assets under management will exceed $2 trillion by 2011.
Amid the ETF surge, A.E. Feldman also reports that there is strong demand for candidates in fund administration as well as fund accountants and professionals with expertise in derivatives operations.
