Report: US ETF Assets Poised to Double by 2015

(July 14, 2011) — Assets in exchange-traded funds (ETFs) are projected to double to more than $2 trillion by the end of 2015, a report by BNY Mellon and aiCIO‘s sister company Strategic Insight shows.

The report — titled “ETFs 2.0: The Next Wave of Growth and Opportunity in the U.S. ETF Market” — revealed that ETF assets grew by 28% to just more than $1 trillion in 2010, down from the 47% growth rate in 2009. Furthermore, according to the report, roughly half of the U.S. ETF assets are from institutional clients.

According to Loren Fox, senior research analyst at Strategic Insight and an author of the report, investors are increasingly willing to use ETFs following the global financial crisis as they are increasingly willing to pay more for innovative products that promise greater return and lower volatility.

“The next wave of growth for ETFs is being driven by new asset classes, new indexes and new ways to use ETFs as tools for portfolio construction,” said Joseph Keenan, head of global exchange traded fund services at BNY Mellon Asset Servicing, in a release. “The ever increasing sophistication of these newly created ETFs can pose operational and distribution challenges for asset managers. However, with detailed planning and a focused strategy, a variety of innovative exchange-traded products can be brought to market to effectively meet investors’ needs.”

The report follows a recent Greenwich Associates study that revealed that institutional investors are increasingly bullish on using exchange-traded funds (ETFs) in their portfolios.

“Perhaps even more telling than those findings is the fact that not a single asset manager reported plans to cut ETF allocations in the coming two years, and less than one in 10 institutional funds plan to reduce allocations to ETFs in that period,” says Greenwich Associates consultant Andrew McCollum.