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Tuesday, February 9, 2010
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ETFs a threat to mutual funds, Cerulli says
Despite what mutual fund insiders have been saying for years, exchange traded funds are indeed a threat to mutual funds, according to a report released today from research firm Cerulli Associates Inc. of Boston.
Advisers are using ETFs in multiple ways, in both the core and satellite allocations, as well as in the active and passive slices of investors’ portfolios, according to the report. Advisers who are strategic asset allocators are likely to be more interested in ETFs for their lower fees and long-term-investment themes, the report said. And advisers who employ a tactical-asset-allocation approach in their clients' portfolios may use ETFs because they offer continuous liquidity and access to commodities and other markets where they want to make a concentrated bet. "We believe that ETFs will be increasingly packaged as solutions with the assembler or platform controlling the portfolio construction,” Cindy Zarker, a director with Cerulli and lead author of the report, said in a statement. “One way mutual fund managers can combat this threat is to assemble portfolios that combine various satellites into solutions that offer professional management [the chance] to optimize the risk and return.”
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