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Thursday, March 13, 2014

Is Amazon a Prime Model for Fundsters?

News summary by MFWire's editors

It was perhaps inevitable, like two-day shipping costs and instant video.

The low fees and apparent ease of use for do-it-yourself investors apparently has made the ETF sector into the Amazon.com of the fund industry, according to a CNBC article.

CNBC.com writer Anna Robaton quoted Morningstar director of passive funds research Ben Johnson as saying "ETFs are sort of the Amazon.com of the fund world,…They have had a leveling effect, offering both individual investors and large institutions access to a wide variety of exposures at very low prices."

As if active managers had enough problems asserting their relevance to investors. Some people already think that ETFs can replace your active funds.

Here is a good paragraph to glean from Robaton's timely piece:

Many advisors' and investors' attitude toward ETFs and mutual funds is closely tied to their belief in passive vs. active investing. The long-running debate around the two types of investing centers on whether active fund managers are worth the added cost.

To-be-sure, Robaton notes that the "cost advantages of ETFs have been somewhat eroded by the large number of actively managed ETFs that have hit the market."

But still, no matter who is singing it, it's still the same song for active managers: how will they articulate their value to investors?

What do they have to do now? Offer free two-day shipping and streaming of cheesy '70s sitcoms? 

Edited by: Ning Zhou


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