In the News: The Rise of ETFs

The topic of the rise of exchange traded funds and the (relative) decline of open-end mutual funds is seemingly inescapable these days -- here's a roundup of recent articles:

• Jen Ryan at the Wall Street Journal (sub. req.) reports that while open-end mutual funds have seen outflows, their ETF counterparts are seeing substantial inflows. One cautionary note is the strength of the inflows into international equity funds.
• Roger Nusbaum in TheStreet.com gives a levelheaded look at the ETF phenomenon. ETFs have become increasingly popular and have received significant asset inflows. However, Nusbaum rightly points out that “ETFs are not a panacea.

Comments

[daveowenevans:]

Great article, thank you. I just wish the UK ETF market could develop to the same level.

2005 Dec 01 06:22 AM

[John Heneghan:]

Great article by Roger. I enjoyed his thoughtful analysis that an "all ETF" portfolio may not always the best solution for all markets. ETFs and indexing work best in large, liquid and efficient markets. Opportunistic active risk budgeting in smaller, less liquid or niche markets, like Ireland, or undervalued markets can enhance returns for more risk tolerant investors. A couple of additional examples of asset/market exposures not available through ETFs with widely different risk dynamics would be timber assets (available through Plum Creek Timber (PCL) and Rayonier (RYN)) and Russian market through Central Europe and Russia Fund closed end fund (CEE).

2005 Dec 01 09:21 PM