ETF Industry Has Reached Maturation Without Maturing
We are seeing the sorts of excesses you see at the top of a market.
The ETF industry still has a lot of growing up to do.
Photographer: Michael Nagle/Bloomberg
Blackrock Inc., the top issuer of exchange-traded funds in terms of assets under management, will close 16 ETFs this month. Even though ETFs get shuttered all the time these days, I was mildly amused by the names of some of these funds, such as the iShares Edge MSCI Min Vol EM Currency Hedged ETF. The closing of that the one will surely upset those who are a sucker for a good Venn diagram of emerging markets, factor investing and currency hedging.
A lot of the good real estate in ETF-land is currently occupied, so what you get now are fringe ideas. As Bloomberg Intelligence ETF analyst Eric Balchunas observed recently, the new funds that have generally succeeded are those that either have exceptionally low fees or are “shiny object” funds that invest in things like marijuana or blockchain. The ETF industry likes to think of itself as a legitimate competitor to the open-end mutual fund industry, but with offerings such as the now-delisted Whiskey & Spirits ETF you can be forgiven for thinking the business is a bit unserious.