The future of ETFs

by: Roger Nusbaum

Here's an article about the future of ETFs. I hope you read the article. It points to more commodity ETFs, currency ETFs, ETFs that hedge macro economic events, hedge fund indexed ETFs and actively managed ETFs, writes Roger Nusbaum.

I doubt that all of these would be great ideas but some of them will
and even the ones that aren't could lead to yet more good ones. An ETF
that gives the ability to hedge a macro economic event seems like the
type of thing that would have one big heyday and then be close to
useless forever. Currency and commodity ETFs could be very useful if
used in the context of a diversified portfolio but I could see people
losing on these when try to make a stand alone bet.

There will also be inverse index ETFs. Useful hedge or risky bet, they
will probably be very popular.

The actively managed ETF is still lost
on me. Conceptually this idea already exists; CEFs ( I fully
acknowledge the mechanical differences). The author of the article (he
knows more than me) is very excited about actively managed ETFs so
maybe I am missing something.

The things that most interest me are the currency, commodity and
inverse index ETFs. Also, although not mentioned in the article, I
think US investors will soon be able to access local ETFs domiciled
foreign countries. These have the potential to be the best way of
accessing places like Norway, New Zealand and smaller emerging markets.

I have written often about ETFs evolving to include exposure to more
areas of the market. This article makes me think I am on the right
track.

One last thing is from this month's Bloomberg Markets magazine. There is
an article about ETF providers on page 140. There was a nugget toward
the end about ETFs coming in Japan. Here is the quote:

...the
government introduced the funds ( meaning ETFs) to help banks rid
themselves of shares and entice individual buyers.

Good grief. This
stems from the cross ownership of shares in Japan that I believe is
unique to that country. You can more on this all over the internet if
you are curious. The reason I mention it is it seems like the banks are
selling what is perceived as damaged goods. Watch out.

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