Job of a good ETF consultant is to ensure desired deliverance of the money even under an adverse economy and to command the investments per say that the availability of the returns procured are as per the Investors point of view and not the market conditions, which if nothing else, are organically volatile in nature.
Behind all the economics jargon and infinite data analysis, the pure objective of an ETF Research is singular; to create an all ETP Portfolio containing asset classes that try to generate maximum alpha with a moderate or no risk and amid all the parallel realities must suffice the actual needs of the investors as and when he may require it.
Markets peak out and crash, but the true investment objective is to ensure security of the principal. Making money is of utmost importance and is equally confusing in a market where more than 1400 ETFs are listed on their corresponding indices. The exotic exposures that these funds enable is due to their basket like methodology that will en capsule every aspect of the desired investment area but mostly includes equity and bonds that are listed on foreign exchanges, as the basic idea for market traded funds is to cover the best of the world equity from each sector and of every investment focus.
The ETF Industry does rake in billions of dollars in term of daily volumes and AUMs [assets under management] but still more than 75% of wealth of this sector is concentrated in less than 25 ETFs. Read more on Best ETFs.
The thumb rule here is to get coupled with the funds that have heavier AUMs as bigger corpuses increase investor confidence and to an extent provide higher probability of gains.
The trend however does not restrict the choices for the participants as just because the fund has a close to $ 10 billion as an asset corpus will not appeal to all investors and likewise many ETFs with as little as $5 million have delivered double digit returns in 2012 which was supposedly a dull year.
Most ETF Asset Managers when asked would rightly admit that their clients approach them for at least one of the reasons given below and let us also take an individual snapshot:
Private Wealth Management: This is basically the investor realm with high aspirations and is also the most comprehensive when it comes to individual preferences.
Retirement Solutions: Although this is one of the busiest areas, but applies a simple logic that regular small savings go a long way when touched with the magic wand of compounding.
Institutional Investment Management: Being the big boys with big money, the needs and the investment objectives of an institutional investor are most exclusive. The terrain may include pension funds, charitable trusts and in some cases even HNIs [high net-worth investors].
Advisory Solutions: Professional advisors, who are working on a micro level, often seek help from the research firms to obtain trade-marked solutions from ETF consultants. The firms in turn guide their clients towards success of their investments.
The advice is good only if it meets the Target Income of the client although each of the above clientele is also influenced by a number of other factors such as individual risk appetite, investment horizon and market sentiment, just to name a few.
The biggest lure to date is the unique investment focus that the ETF Universe offers. From the exotic frontier economies to the world bond markets, equity traded products enable exposures that were traditionally unavailable to American investors and even if, were simply falling in high risk high reward category.
A pre investment ETF research is also vital simply because too many choices are available among products that have literally no historical data to compare with and in fact the very youth of these funds kept a sizable chunk of street skeptics at bay when they were first introduced in the March of 2008.