The outlook for exchange-traded products (both funds and notes) is strong, according to a new report from SEI called Exchange-Traded Products: A Look Ahead. Over the past 10 years, assets in such products have grown from $16 billion to $487 billion, for an annual compound growth rate of 41%.
Ninety percent of the sponsor companies in the space that SEI surveyed said they expect growth to continue, despite a recent decline in assets due to the market downturn.
A full 28% are planning to launch ETPs within the next 18 months. Among this group, 80% plan to offer equity-focused products, and 10% are working on commodities products.
Distribution, however, needs to be handled adeptly to make that growth happen, 90% the sponsors said. Following that, 50% said selecting the right market niche is the second-most important criteria. Operations was cited as the third-most important factor.
Despite a recent downturn in assets, there is still clearly a lot of interest among investment managers in exchange-traded products, said Phil Masterson, managing director, thought leadership at SEI. Exchange-traded funds have had inflows in excess of $100 billion from the start of the year through October. Managers believe the growth opportunity still exists, as long as there is a sound strategy and a strong infrastructure to back it up.