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Thursday, June 14, 2012

ETF Growth Projections Are Exaggerated

News summary by MFWire's editors

The 401(k) market will be the fence that finally reins in ETF growth. That is the takeaway from a report penned by analysts at AllianceBernstein [profile] featured by Reuters. The report is titled "Asset Managers: Will ETF Growth Hit a Wall?"

The AllianceBernstein team forecasts that the ETF market will grow to $6 trillion in 2025 from $1.1 trillion in AUM today. That works out to a 13 percent CAGR. Yet, that forecast is conservative compared with the $10 trillion the industry has come to expect.

The wall ETFs will hit, they predict, is the 401(k) market. That silo will be virtually unbreachable, predicts analyst Luke Montgomery.

"The market is really controlled by the record keepers and those firms are largely mutual fund companies that do not want to give up market share. They are the ones who will have to invest in the record keeping to accomodate ETFs."

For an outside take, Reuters sought out Daniel Gamba, iShares [profile] head of U.S. institutional business.

Gamba told Reuters, "The 401(k) market is absolutely a difficult market to break into, but that does not mean it is not going to change."

If ETF makers do breach the wall around the 401(k) market, Bernstein projects that its predicted 13 percent CAGR will transform to a 17 percent CAGR.

Hope does spring eternal. 

Edited by: HFD

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