With inflows to exchange-traded products on a record pace this
year, industry observers and market participants are turning to
their heads to what 2013 has in store for
ETFs
. Following
$15.6 billion in inflows last month
, which bring the year-to-date total to $154 billion, the year
ahead for ETFs looks bright in the eyes of some.
"While many forecasts for 2013 are tied to the state of the
U.S. economy and the likelihood of Congress having resolved the
fiscal cliff, S&P Capital IQ believes the ETF industry will
continue to gather assets," said S&P Capital IQ in a research
note.
The research firm points to expense ratio reductions as one
driver of inflows to ETFs, calling 2012 "the year of the expense
ratio cut." In September, Charles Schwab (NYSE:
SCHW
) cut fees on all of its lineup. BlackRock's (NYSE:
BLK
) iShares, the world's largest ETF sponsor, would fire back with
its own fee reductions. In late November, PowerShares, the
fourth-largest U.S. ETF sponsor,
cut fees on six of its ETFs
.
Of course, it cannot be forgotten that Vanguard, often viewed
as the low-cost leader in the ETF space, announced index changes
for 22 of its ETFs in October. Those changes are aimed at lower
investor costs and position Vanguard to potentially lower fees on
those products next year.
S&P Capital IQ did note that emerging markets ETFs appear
poised to thrive again in 2013.
"One prediction we will make is that diversified international
and emerging market products will continue to garner attention as
investors seek out low-cost, diversified ways to take on added
risk in hopes of achieving higher returns," the firm said in the
note.
S&P Capital IQ highlighted the PowerShares S&P
Emerging Markets Low Volatility Portfolio (NYSE:
EELV
) and the iShares Core MSCI Emerging Markets ETF (NYSE:
IEMG
) as newly minted funds that could provide competition to the
Vanguard MSCI Emerging Markets ETF (NYSE:
VWO
). IEMG debuted in October as lower cost alternative to VWO. The
iShares offering has an expense ratio of 0.18 percent compared to
0.2 percent for VWO. IEMG now has $130.1 million in assets under
management.
EELV, which debuted in January, has accumulated $86.5 million
in AUM. That fund along with the iShares MSCI Emerging Markets
Minimum Volatility Index Fund (NYSE:
EEMV
) have benefited from investors' appetite for low volatility
ETFs. While both EELV and EEMV have slightly higher expense
ratios than VWO, both have delivered superior returns in
2012.
Bond ETFs will continue to be asset-gathering juggernauts, in
S&P's opinion. Inflows to the group totaled $3.8 billion last
month and stand at $48 billion for the year. The research firm
highlighted the inflows to the PIMCO Total Return ETF (NYSE:
BOND
) and the SPDR Barclays Capital Short Term High Yield Bond ETF
(NYSE:
SJNK
). Those two ETFs debuted earlier this year and have gathered
assets at break-neck speed. BOND could end the year with $4
billion in AUM while SJNK has attracted $551.6 million since its
mid-March launch.
More established bond funds also have the potential to thrive
again next year, S&P noted.
"With the yield on the 10-year Treasury note likely to remain
below 2% in 2013, we think investors will continue to see the
benefits of these ETFs and more established and diversified ones
such as iShares Core Total Return US Bond Market ETF (NYSE:
AGG
) and the Vanguard Total Bond Market ETF (NYSE:
BOND
).
For more on ETFs, click
here
.
(c) 2012 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.