The U.S. exchange-traded funds market is primed to double up on its current $1.5 trillion in assets to the tune of more than $3.5 trillion in assets over the next five years, according toiShares latest forecast.
According to the firm, ETF growth in the U.S. is expected to be driven by:
- Continued growth of fee-based advisors and greater ETF adoption by financial advisors of all shapes and sizes;
- Self-directed investors and the expansion of commission-free ETF platforms;
- Increasing institutional usage of ETFs;
- Retail and institutional investors adding ETFs for core exposures;
- Continuous growth of fixed income ETFs;
- New client segments such as banks and offshore investors
But what are the firms views on the growth of active ETFs versus passive ones in retail and institutional portfolios? "We continue to see tremendous demand from retail and institutional investors for index-based ETF products, whereas we see limited interest in actively managed ETFs," according to Mark Wiedman, the Global Head of iShares, in an e-mail reply to Money Management Executive.
And what are his views on ETFs in 401(k) plans?
"ETF use in 401(k) plans is hampered by recordkeeping technology challenges. There is limited use of ETFs in 401(k) plans today. Some participants are investing in ETFs through their 401(k) brokerage window and a few advisors are offering ETFs in smaller-sized retirement accounts by wrapping ETFs in other investment products such as mutual funds. Until the technology issues are resolved, we see minimal usage of ETFs in 401(k) plans," he said.