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ETFs growing faster than mutual funds

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ETFs have been gaining popularity among investors as a result of the poor performance of actively managed funds, according to Five Star Equities. The low costs, transparency, liquidity, and better tax efficiency are some of the major reasons ETFs are being chosen over mutual funds.

"That’s what makes us the best game in town for investors and it is the reason why ETFs are growing faster than mutual funds," Jonathan Steinberg, founder & CEO of WisdomTree, said in a recent interview with Yahoo Finance.

There are approximately 1,500 different exchange traded products, with only 47 actively managed ETFs, the remaining 97 per cent fall into the passive, unmanaged or specialty grouping. Steinberg, whose firm runs 14 of the 47 actively managed ETFs, says Exchange Traded Funds are set for "literally trillions and trillions and trillions of future growth." He predicts that eventually active and passive ETF will make up 50 per cent of all long-term assets. The number currently stands at 10 per cent, which Steinberg says is attracting 50 per cent of all new investing money. "The ETF is to the mutual fund, what the internet is to the newspaper," he says.

 

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