Investment firms that are solely marketing mutual funds might want to take a look at recent research released by Boston-based Cerulli Associates because if their estimate of $6 trillion for the U.S. ETF market by 2020 is even remotely close to being correct you can bet your bottom dollar it will be at the expense of mutual funds.
"While many sponsor firms believe the ETF market will continue to grow organically, growth will largely be a result of more investors using the low-cost vehicle," explains Jennifer Muzerall, senior analyst at Cerulli. "As new investor segments continue to acclimate to ETFs in their portfolios and sponsors develop new products, ETF assets are expected to climb as the industry enters its second decade."
Cerulli believes that ETFs gains will come at the expense of mutual fund companies whose slow erosion can only be slowed by these asset managers entering the ETF arena themselves and providing investors with more than just product but actual investment solutions that help them reach their retirement goals.
"With more asset managers developing an ETF strategy, product proliferation will continue to increase, and firms will need to think strategically about the types of products they develop, attempting to fill any white space that remains untouched," Muzerall explains. "As investor sentiment is evolving toward solutions-oriented outcomes, sponsors need to think of ETFs no longer solely as a product, but as a tool for investors to achieve their investment objectives."