BlackRock's Kapito Says ETFs Will Double in Three to Four Years

  • Calls the product "a better mousetrap" than a mutual fund
  • Says investors continue to come up with new uses for ETFs

Robert Kapito, the president of BlackRock Inc., said the market for exchange-traded funds will double over the next three or four years.

“ETFs are just a better mousetrap than a mutual fund,” Kapito said Tuesday at an investment conference sponsored by Goldman Sachs Group Inc. “Every day people are coming up with new uses for them.” 

For example, Kapito said investors are exploring the use of ETFs as hedging tools and as alternatives to derivatives. "We’re just in the early stages of where this is headed," he said.

ETFs, which mainly track indexes and are traded like stocks, had $3 trillion in assets as of Oct. 31, according to BlackRock, the world’s largest money manager. U.S. ETFs account for more than $2.1 trillion of the total. U.S. mutual funds had almost $16 trillion in assets as of Oct. 31, according to the Investment Company Institute, a trade group.

The cost of ETFs continues to fall. BlackRock dropped fees on seven of its U.S.-listed ETFs last month. However, Kapito said clients, not competition, dictate what BlackRock charges. "We’re not in a price war," he said.

New York-based BlackRock is the world’s largest provider of ETFs, with $1.1 trillion in assets in its IShares products. Vanguard Group ranked second with $504 billion, according to BlackRock data.

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