Five ETF Trends

AdvisorOne says these are the five mega trends that will affect the ETF universe in 2013:  {Abridged and some comments from me.}

1.  Proprietary indexes from bigger ETF firms:  "....In October, the Vanguard Group turned heads when it said it was switching index funds and ETFs with aggregate assets of $370 billion to new benchmarks developed by the University of Chicago's Center for Research in Security Prices (CRSP).

Vanguard’s abandonment of MSCI indexes in favor of alternative benchmarks is paving the way for a new direction. Because of sharp reductions in ETF expense ratios, fund providers have no choice but to cut index-licensing fees to keep assets from fleeing to lower-cost competitors."  

2.   Mutual fund providers enter the ETF market:  To me this is inevitable.  Billions of dollars are fleeing the mutual fund complex and headed to ETF land.  The mutual fund industry isn't going to just sit around and do nothing while this happens.  Whether they'll be successful at it is another matter.  No where the same kind of juice in ETFs that mutual funds command.  

3.   More Active ETFs:  See above, number 2.

4.   Fiduciaries running ETF retirement plans.

5. Continuation of fee wars:  Cutthroat investment management fees have been a blessing for investors, and in 2012, we saw sharp fee cuts in ETF expense ratios from Charles Schwab, iShares, PowerShares, Vanguard and others.  This theme will continue into 2013, especially as fund providers shift to eliminate or reduce their index-licensing fees.  Furthermore, commission-free ETF trading has intensified the battle. 

Finally the author notes at an ongoing effort to push ETFs inside 401{K} plans.  This is already happening.  It's something we are starting to work with now.  More on this at a later date.

Link:  5 ETF Megatrends For 2013