More Bad News For Mutual Funds: ETF Assets Set To Double

The mutual fund crowd may have been breathing a slight sight of relief when the total assets under management at the nearly 1,300 U.S.-listed exchange-traded products dipped to $1.09 trillion at the end of June from $1.11 trillion at the end of May, but that respite may short lived. BNY Mellon BK is out with a white paper today saying that assets at U.S. ETFs are poised to double to $2 trillion by 2015, pointing to growth among ETFs that fit the “non-traditional” designation. Traditional index-based ETFs are likely to account for a falling overall share of ETF assets as non-traditional and alternative funds grab a larger slice of the market. Since the end of 2008, non-traditional ETFs have grown from 18 percent of the market to an estimated 30 percent of U.S. ETF assets by March 31, 2011, according to a statement issued by BNY Mellon. Strategic Insight, which contributed to the report, said commodities funds, inverse and leveraged ETFs and ETFs that mimic hedge fund strategies are among the segments that should see market share increase between now and 2016. “The next wave of growth for ETFs is being driven by new asset classes, new indexes and new ways to use ETFs as tools for portfolio construction,”said Joseph Keenan, head of global exchange traded fund services at BNY Mellon Asset Servicing. That's good news of ETF issuers, which have shown no shortage of new product ideas as more than 150 new funds have come to market just in the March-June time frame. What the potential move away from traditional fare means for Blackrock's BLK iShares, State Street's STT SSgA and Vanguard, the three largest U.S. ETF issuers, is unclear at this point, but those firms do predominantly issue ETFs that can be considered traditional. On the other hand, smaller issues that sponsor non-traditional funds such as ProShares, Direxion, IndexIQ and others could stand to benefit.