ETF's Everywhere {Part I}

Five years ago when we at Lumen Capital Management introduced our structured ETF investment strategies, ETFs were a relatively unknown investment vehicle. They were just gaining prominence when the Crash of 2007-09 occurred. I think they really came into their own during that period and acceptance amongst the investment community, particularly among individual investors, has grown exponentially. Barrons Magazine seems to have noticed as they featured their cover story on the industry this weekend. This week we're going to excerpt that story and highlight it's most important points. Today we feature part I.

ETF'S EVERYWHERE:

THE BOOM IN EXCHANGE-TRADED FUNDS IS reshaping the investment landscape by challenging traditional mutual funds and giving investors, large and small, the opportunity to get exposure to virtually every major market and asset class in the world—and many minor ones as well.

ETFs are passive mutual funds and trusts that trade like stocks on major exchanges; they can be bought or sold anytime during the trading day. They held a record $940 billion of assets in the U.S. on Oct. 31, up from $794 billion at year-end 2009, and are on track to hit $1 trillion around the end of 2010.....Exchange-traded funds are gaining market share at the expense of traditional mutual funds, which (excluding money-market funds) hold about $8 trillion of assets.

The benefits of exchange-traded funds include low fees, relative to mutual funds, transparency of investments and tax efficiency because of low portfolio turnover. ...."A lot of investors are realizing the benefits of diversification, and ETFs allow broad diversification at low cost," says Gus Sauter, chief investment officer at Vanguard. It's understandable that investors favor broader portfolios because a U.S-focused equity strategy hasn't done well in the past 10 years, in which the S&P 500 has essentially been flat. As global economic power shifts away from developed markets, investors want exposure to rising countries like China, India and Brazil.

Link:  ETF's Everywhere.

*Long ETFs related to the S&P 500 in client acounts.  Long ETFs related to China and Brazil in client accounts.