Did Al Gore invent ETFs too?

Growth in the assets has deep thinkers making interesting comparisons

Apr 20, 2014 @ 9:45 am

etf, exchange-traded funds, exchange-traded products, etps, mutual funds, mars, global warming
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(Bloomberg News)

Sebastian Mercado has seen a lot of crazy charts comparing the massive flow of money into exchange-traded funds with other big trends. So the Deutsche Bank U.S. ETF strategist decided to add his own chart into the mix.

Growth, growth, growth

Exchange-traded products (ETPs) include exchange-traded funds and exchange-traded notes. <i>Source: Internet World, International Communications Union, Deutsche Bank, Bloomberg Finance</i>
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Exchange-traded products (ETPs) include exchange-traded funds and exchange-traded notes. Source: Internet World, International Communications Union, Deutsche Bank, Bloomberg Finance

ETF assets have more than doubled every four years since 2000. Financial markets willing, global ETF assets could reach a best-case $3.1 trillion by yearend, up from 2013's $2.2 trillion, says Mr. Mercado. The industry's growth and the trend the strategist pairs it with in the chart — ETF assets vs. worldwide internet use — show a 0.97% correlation.

As big as the internet?

<i>Source: PiratesVsTemp and RedAndr via Wikimedia Commons</i>
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Source: PiratesVsTemp and RedAndr via Wikimedia Commons

Do we think ETFs are as big or important as the internet? No. But a case could be made that ETFs are doing to the investment world what digital music did to the music world. Both are disruptive technologies, for sure. As the digitization of music and iTunes challenged the business model of the record companies, ETFs are bringing change to the old guard mutual fund companies, which are all looking at charts like Mr. Mercado's and trying to figure out a way to avoid going the way of the CD and the cassette tape.

The ETF/Internet comparison reminded Bloomberg.com's Eric Roston, who manages sustainability coverage, of a chart he said "is famous, or at least famous among people like me." People who, when asked how long it would take to get to Mars using a nuclear pulse propulsion technology, start scribbling on napkins. The chart he was thinking of is attached.

And in case you're curious, the real inventor of the ETF was Nate Most. You can learn about how he came up with the idea and his life in this poignant article in ETF.com written when he passed away in 2004.

(Bloomberg News)

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