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To print article, click Print on your browser's File menu. Go back Posted 1/17/2005 |
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Fund Spy A banner year for exchange-traded funds Last year was so good for ETFs that they will have a hard time following their own act in 2005. By Morningstar The year just ended was a good one for exchange-traded funds. ETF assets grew by 47% to $222 billion, according to current figures in Morningstar's database. ETF purveyors launched dozens of funds, including groundbreaking gold and China offerings. The industry also buzzed with talk of creating other commodity-linked and even actively managed ETFs. Here's a look at some of 2004's trends, as well as a look ahead to 2005. How'd they do? Among ETFs, performance mirrored that of the traditional fund universe. Value-oriented ETFs beat growth-leaning ones, though both styles gained. Likewise, small-cap ETFs beat large-cap funds, and international offerings beat domestic vehicles. ETFs with exposure to emerging markets in Asia, Eastern Europe and Latin America did well. Consumer, industrial, energy and real estate sector ETFs also rallied. Anything tracking technology, semiconductors and large-cap pharmaceutical stocks lagged.
My, how theyve grown The ETF industry, which remains small compared with the $7.9 trillion traditional mutual fund business, continued to expand. Firms launched 35 new ETFs 2004, the most in five years and the second-largest number of new ETF offerings ever. Vanguard launched more ETFs than anybody in 2004, and most of the 18 new Vipers it rolled out are now the cheapest ETF options in their respective categories. Industry leader Barclays Global Investors introduced 13 new ETFs, including iShares FTSE/Xinhua China 25 Index More about ETFs on MSN Money
Turn up the volume The two biggest ETFs -- Nasdaq 100 Trust Shares What's next? A number of new funds should hit the market in 2005, including socially responsible ETFs from iShares and Powershares, and exchange-traded share classes of Vanguard European Stock (VEURX), Vanguard Pacific Stock (VPACX) and Vanguard Emerging Markets Stock (VEIEX) index funds. Barclays also could launch its own Gold ETF, which has been in registration with the SEC for about a year, to compete with streetTracks. You can also expect more talk about other commodity-based and actively-managed ETFs. Don't expect to be able to trade them in 2005, though. It took the SEC nearly a year and a half to approve the first Gold ETF, and it's likely to take a long time to get the okay for a commodity ETF tracking oil or other natural resources. Similarly, regulators are likely to take a good, hard look at actively-managed ETFs -- if and when one ever seeks approval. In the case of actively-managed ETFs, it's also still not clear why anyone would want one. A large part of ETFs' appeal is they are not actively-managed funds, which, on average, tend to lag their benchmarks over time and charge too much money in fees. Disclosure: Barclays Global Investors (BGI), which is owned by Barclays, currently licenses Morningstar's 16 style-based indexes for use in BGI's iShares exchange-traded funds. iShares are not sponsored, issued, or sold by Morningstar. Morningstar does not make any representation regarding the advisability of investing in iShares. |
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