Global ETF assets under management are expected to grow to as much as $4.7 trillion by the end of 2015, as the industry enters a new phase of growth, according to a report by consultant McKinsey & Co.
The report, “The Second Act Begins for ETFs,” projects that the next phase of growth will be characterized by growing competition, an increase in active ETFs, globalization of the ETF marketplace and new competitive models.
The report notes that assets under management of exchange-traded products — covering ETFs, exchange-traded commodities and exchange traded notes — have grown 31% from 2000 to 2010, compared with AUM growth of roughly 5% to 6% for mutual funds during the same time period.
Onur Erzan, McKinsey principal and co-author of the report, said in a telephone interview that ETFs will be offered in more retirement plans such as 401(k) plans and they will provide greater access to absolute return and alternative strategies. New ETFs will cater more to the retail market, he said.
State Street Global Advisors, iShares and Vanguard have dominated the ETF business for two decades, but niche players and specialists are expected to enter the market, Mr. Erzan said. He added, however, that he does not anticipate a “huge change” in the industry landscape.
Ogden Hammond, McKinsey associate principal and co-author of the report, said in a telephone interview that the window of opportunity for launching a new generation of ETFs could close quickly.
“Big players have made dramatic moves in the active ETF marketplace,” he said. “What could happen is asset managers waiting on the sidelines may find they are too late to the party.”