As the asset management industry evolves, innovative product options are being introduced to compliment traditional pooled vehicles. These rapidly emerging alternatives are influencing - and in some cases reshaping - the investment landscape. A forerunner in this race is Exchange-Traded Funds (ETFs) which are expanding individual investor access to asset classes and strategies once out of reach. ETFs allow investors to achieve asset allocation through portfolio diversification with lower costs, greater transparency and improved tax efficiency.
U.S. ETF assets have increased by 12 times over the past ten years, growing from $88 billion in 2001 to $1.2 trillion today. To put this in context, the current U.S. mutual fund market with over $13 trillion is still the dominant form of investing in the U.S. However, the ETF market is rapidly growing with 44 investment advisors across 1,475 funds. New entrants are cautious given the majority of assets are controlled by the top three advisors. Nevertheless, ETFs have gathered nearly $76 billion in new assets as of June 2012.