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Vanguard’s Sauter calls for greater education efforts from ETF industry


Vanguard Chief Investment Officer Gus Sauter has challenged the exchange-traded fund (ETF) industry to be responsible in developing new products and called for greater efforts to educate investors about ETFs.

During a speech at the IndexUniverse “Inside ETFs” conference, Sauter said the ETF industry has been characterised by “growth and innovation.” From 2000 to 2010, assets in ETFs grew by about 30% per year. By comparison, traditional mutual funds grew by about 5% annually over the same time. Globally, ETFs now hold roughly usd1.5 trillion in investor assets.

Sauter said that the rapid growth of ETFs has been largely good news for investors, providing them with greater access to diversified, low-cost index funds, as well as for advisors, providing them with simple, flexible investment tools for building well-constructed portfolios for their clients.

However, Sauter noted that ETFs have been blamed for a wide range of problems, from creating the May 2010 Flash Crash to contributing to ongoing market volatility. In rebutting the criticism, Sauter compared the volatility of the US stock market to that of the German stock market.

“ETFs are much more dominant in the US market than in Germany, but market volatility in each has been the same – exactly the same,” he says.

Sauter encouraged ETF providers and investment advisors to play the role of an educator when it comes to ETFs. “I believe that as providers of ETFs and as distributors of ETFs, we have a responsibility to make sure the investing public is as informed about ETFs as it can be,” he says. “Everyone in this room has an opportunity to help investors reach their goals. It starts with ETFs 101.”

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