The formerly white-hot enthusiasm for mutual funds has begun to cool down as the growth of US-listed Exchange-Traded Funds (ETFs) rapidly outpaces traditional investment products—a trend that's likely to continue in the US. What are leading asset managers and financial services providers doing to enhance their ETF operating models to meet current and future demand?
Mutual funds are no longer the only game in town. While the US has historically been the global trendsetter for the investment management industry, the formerly white hot enthusiasm for mutual funds has begun to cool down. In recent years, the growth of US-listed ETFs has rapidly outpaced that of traditional investment products—a trend that is likely to continue in the US, with Europe and Asia-Pacific following suit. This surge in ETF popularity in the eyes of both investors and sponsors is due to several factors—but it pretty much boils down to this: with investors seeking lower-cost options, asset managers that do not offer ETF products may lose assets to those who do. As a result, asset managers are making ETFs a strategic component of their investment-product offerings so as to attract new assets.
As the ETF industry continues to grow and evolve, many US-registered ETF sponsors are expanding from well-established market indices into custom indices. This seismic shift is creating unique roles for financial firms—but ETF processes, roles, automation, and controls still lack the maturity and standardization of mutual funds. To that end, we are seeing leading asset managers and service providers proactively analyzing and addressing the maturity of their ETF operating models to ensure that their technology platforms and distribution channels will be able to meet current and future demands. Is your ETF operating model market-ready?