Some basic information about Exchange Traded Funds (ETFs)

The Exchange Traded Funds (ETFs) have $1.18 trillion assets invested across 1,476 funds. This amount of funds equals to one-third of all money invested in the U.S. equities. This is a remarkable achievement for the ETF industry which started in 1993 with a single fund. During 2000 to 2010, funds invested in ETFs grew more than 30 percent a year. A recent publication by Bernstein indicates that the ETFs will grow to $6 trillion by year 2025 with an annual increase of 13 percent.

 

Today ETFs are in index funds, commodities, currencies, derivatives, fixed-income, and many others. What started as a vehicle to capture an entire index with no active management, today the trend is to actively manage ETFs. Actively managed ETFs are attracting more and more 401(k) plan funds from mutual funds that control 55 percent of 401(k) investments.

One-third of the assets in ETFs are managed by three big entities: Black Rock (runs iShares), Vanguard Group and State Street (runs popular SPDR funds). These big three manages 77 percent or $905 billion of the $1.18 trillion ETF investment leaving only $272 billion or 23 percent of the remaining investment to 47 other ETFs.