Chip Roame, managing partner of Calif.-based research shop Tiburon Advisors, is bullish on index and alternative investment products.
During a keynote presentation for Tiburon CEO Summit XXII in NYC this morning, Roame said what’s growing in wealth management right now is low-cost indexing and hedge fund products while over $1 trillion in outflows is in long-only equities. “That’s polarization,” he said.
According to Roame, active management is a zero sum game and less than zero sum after taxes & expenses. Yet, over three-quarters of assets are actively managed, he said. On the indexing front, there are now 1,221 exchange-traded funds, up from just 19 in 1997, managing nearly $1.2 trillion.
“Exchange-traded funds are far more important than anything else out there,” he offered.
Roame also said that consumer households in the U.S. currently hold $28.6 trillion in investable assets and $72.2 trillion of total assets. “You’re after that $28.6 trillion if you’re in the brokerage or investment management space,” he said. “The average American has $250,000 in investable assets. It’s funny we don’t know that as an industry.”
He added that mutual funds continue to manage the bulk of the assets across distribution channels such as wirehouses (45%) and regional broker-dealers (48%) versus individual securities at 34% for both channels and variable annuities at 4% and 11%, respectively.
