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Half of ETFs Have Less Than $50 Million in Assets

By Money Management Executive
September 23, 2009
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With half of all exchange-traded funds falling short of the $50 million minimum profitability mark, attracting capital will be key to remaining competitive and potentially challenging mutual funds’ dominant market share, according to a report from Deloitte.

The ETF industry would be best suited to promote its intraday trading capability and tax efficiencies, said Cary Stier, leader of the asset management services practice at Deloitte. “But in order to execute on this opportunity, ETFs will have to expand investor-friendly attributes beyond transparency and low costs to compete for a share of the asset influx,” Stier said.

Deloitte also recommends that ETFs link to less exotic indexes and focus more on indexes with long-term appeal. ETFs also need to find a way to bundle trading fees and reduce bid-ask spreads so that they can fit seamlessly on 401(k) platforms.