ETF News

"Red hot" ETFs expected to resume growth

Exchange traded funds (ETFs) have been "red hot" since they were first introduced in 1993 and analysts expect the sector to resume its strong growth as the world recovers from recession. Reuters said that while inflows have slowed this year amid generally shaky investor confidence, ETFs have still attracted around $35 billion (�21.2 billion) in new cash, according to Strategic Insight's fund tracking database Simfund. By contrast, traditional mutual funds have seen outflows of $49 billion. Even during 2008, when markets crashed and investor flight reached its peak, ETFs attracted a net $176 billion. Fran Kinniry of Vanguard Group told the news service: "If we do see better capital markets, we believe that the growth to the structure itself is in its very early innings." Reuters said ETFs are attractive to investors because they offer exposure to a basket of securities without the risk associated with owning individual stocks. Specialist ETFs are particularly popular, with funds focused on natural resources and government bonds attracting some of the highest investor inflows this year, it added. Worldwide ETF assets were valued at around $789 billion at the end of the second quarter. Strategic Insight expects this to hit $1 trillion by 2011.