Joe Eqcome

ETFs Take the Lead: Will Mutual Funds Fade Away?

Russell

For me there are two issues regarding ETFs overtaking mutual funds.

The first is the index (ETFs) versus active management (mutual funds) argument. An article in today’s WSJ intimated that on a risk adjusted basis most actively managed mutual funds lag behind their indexes over time. Not a pretty picture. Score one for ETFs.

But threshold issue may be the success of newly minted, actively managed ETFs which are just being rolled out.

If actively managed ETFs provide comparable returns of mutual funds in some of the major investment categories for those seeking active management, then why would you want to own a mutual fund?

All things being equal, the ability to trade ETFs during the day is a compelling feature over mutual funds.

I guess the other question is: what is the complexity and cost of converting a mutual fund to an ETF?

Maybe if you can’t beat them, you join them.