ETFs are gaining market share against mutual funds. Why? One driver is financial advisors using ETFs as part of asset allocation models, claims the Tuesday WSJ Fund Track
Data from Financial Research Corp (now owned by Mercatus), show that ETFs registered inflows of $138 billion in all 2008. Last year long-term mutual funds were hit with $185 billion of net redemptions. Despite the inflows, market losses meant that total assets in the roughly 800 existing ETFs fell 20 percent to $482 billion.
The paper points to the use of asset allocation models built around indexes by advisors as an explanation for the trend in flows. It points out that ETFs are not the only winner as index funds from Vanguard Group, Fidelity Investments and unnamed "other fund giants" -- SSgA? DFA? -- also are picking up inflows.
A second explanation is an increase in day traders using ETFs to exploit market volatility. One beneficiary of this trend is ProShares, which has seen its AUM climb above $20 billion from roughly $10 billion at the end of 2007.
Sean Hanna, Editor in Chief
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