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“Several fund providers needed to see proof of concept before they initiated their own conversions,” said Ryan Jackson, senior manager research analyst for Morningstar Research Services. “In many cases, the benefits of the ETF structure do more good than harm for investors.”
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ETFs are a win-win for both investors and issuers, BofA strategists wrote in a note. Ever since they were created some 30 years ago, investors have saved over $250 billion simply by choosing ETFs thanks to their lower cost and higher liquidity, their calculations show.
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It’s been a banner year for ETFs in the U.S. with assets hitting nearly $11 trillion and inflows peaking at $1 trillion.
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There have also been more than 650 fund launches — a record too. With regulators potentially approving the creation of more ETF share classes as well as alternative investments, the runway for growth remains long.
Still, there will always be a place for mutual funds in portfolios, according to Mohit Bajaj, director of ETFs at WallachBeth Capital. There are currently more than 7,000 mutual funds with $28 trillion in assets, according to BofA.
“Many fund managers do not want to give their ‘secret sauce’ out to the broader community and not divulge holdings on a daily basis,” Bajaj said.
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