Is the end of mutual funds nigh?
According to data recently released by Broadridge Financial Solutions, ETF assets increased in absolute dollars by $265 billion over the past year as retail channels continued to push growth. This figure trumps long-term mutual fund gains by $65 billion, and definitively proves that ETFs are gobbling up a sizeable chunk of the mutual fund pie.
Frank Polefrone, Senior VP of Broadridge’s Access Data product suite notes that the 20 percent increase in ETFs over the past year came from “RIAs, independent broker-dealers, wirehouses and discount broker-dealers… with all of the $116 billion of increased ETF assets coming from retail distribution channels.”
Registered investment advisors are leading the push, with total ETF assets of $496 billion—increasing $78 billion over the same period last year. While some advisors are quick to jump on the ETF bandwagon, others are reticent to dismiss the added security a mutual fund promises.
“If someone is going to buy an ETF and hold onto it, they’re going to be just as volatile as the market,” said Paul Shelestowsky, Senior Wealth Advisor at Meridian Credit Union. “We try to outperform the market: participate in an up-market and provide protection to investors in a down market.”
ETFs might provide opportunities for knowledgeable investors who know how to time the market but, as Shelestowsky says: mutual funds “make money by not losing money.”
Not all advisors are quick to sound the mutual fund death knell. After all, why must ETFs and mutual funds be mutually exclusive?