How ETFs Are Changing
Money For the Rest of Us
J. David Stein
4.5 • 1.4K Ratings
🗓️ 13 November 2019
⏱️ 31 minutes
🧾️ Download transcript
Summary
How regulatory changes could lead to a boom in new ETFs, including actively managed ETFs. Why ETFs continue to be one of the most innovative, cost effective and tax efficient investment vehicles.
Topic covered include:
- How big is the ETF market relative to mutual funds.
- What are the benefits of ETFs that have allowed them to gain market share from mutal funds.
- What are some of the negatives with ETFs.
- What has changed to make it easier for sponsors to launch new ETFs.
- How do non-transparent actively managed ETFs work.
- What are some examples of more complicated, outcome-based ETFs.
Thanks to LinkedIn and SleepNumber for sponsoring the episode.
For show notes and more information on this episode click here.
- [2:45] The benefits of ETFs
- [8:40] Challenges with ETFs
- [12:50] The rules that have changed
- [15:25] What is an AP Representative?
- [18:40] Should you invest in actively managed ETFs?
- [21:30] All about outcome Based ETFs
- [26:20] Understand what drives performance
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Transcript
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| 0:00.0 | Welcome to Money for the rest of us. This is a personal finance show on money. How it works, how to invest it and how to live without worrying about it. I'm your host David Stein today's episode 277. It's titled, Why ETFs are Changing. |
| 0:15.8 | A few episodes ago, episode 273, I mentioned in the US there is over four trillion dollars invested in US sponsored |
| 0:26.4 | exchange traded products. That includes about 2,300 exchange traded funds and another 165 or so exchange-traded notes. |
| 0:38.7 | That compares to only 794 billion dollars in 2009 in exchange-traded products. Now EDFs and ETS are much smaller |
| 0:49.0 | compared to mutual funds. In the U.S. there are more than 8,000 mutual funds. In the US there are more than 8,000 mutual funds with 15.4 trillion |
| 0:58.0 | dollars in assets. About 25% is invested in passive index funds. |
| 1:05.0 | Now while the mutual fund industry is bigger, |
| 1:08.2 | it has been losing ground to ETS. |
| 1:11.9 | In 2019, there's been more than 135 billion dollars in inflows into ETS and |
| 1:19.6 | 200 billion dollars pulling out of mutual funds. |
| 1:25.0 | Given how E.T.F's market share is growing and has been growing, |
| 1:30.0 | as investors we need to understand what is happening in the EDF space and recognizing |
| 1:37.0 | mutual funds are not just going to stand by, particularly actively manage mutual funds, and let their market share diminish. |
| 1:46.4 | So in this episode we're looking at what is changing with ETS, why it's easier for companies |
| 1:52.4 | to create ETS, why they're creating actively managed ETS. |
| 1:58.0 | And we're going to look at some examples of some new ETS products are somewhat intriguing. |
| 2:05.0 | One of the interesting things with ETS, it's a very concentrated industry. |
| 2:10.0 | According to a report by CFRA, EDF assets grew by over 90% for the five years ending August 2019. |
| 2:22.3 | But just 100 funds captured 83% of those assets, and Black Rock and |
| 2:28.9 | Vanguard managed two-thirds of those funds. Vanguard and Blackrock of those funds. |
| 2:37.7 | Vanguard and Blackrock, which owns the Icehares brand, they are the biggest players, |
| 2:38.9 | and then you have these smaller players |
... |
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