Investors Will Win the ETF Price War

March 1st, 2011
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Contributed by: The Mad Hedge Fund Trader
Many hedge fund traders are unhappy about the current near monopoly enjoyed by the top three ETF issuers, BlackRock, State Street, and Vanguard, which control 83% of the market. At last count more than 1,100 ETF’s were capitalized at more than $1 trillion. The result has been grasping management fees, exorbitant expense ratios, and poor structural designs, which create massive tracking error.

The good news is that new entrants are flooding into the ETF space, and the heightened competition they are bringing will help curtail the worst of these abuses. This development will accelerate the demise of the bloated and arthritic mutual fund industry, whose end has been a long time in coming. Not only will management fees and expense ratios plunge, there will be a far broader range of offerings, as new funds are launched from a diverse range of institutions coming from differing areas of expertise. Failure to enter the newly lucrative ETF market by the remaining giants sitting on the sidelines means that their existing mutual fund businesses will be cannibalized.

Look no further than bond giant PIMCO, which is coming out with a plethora of fixed income related funds, Van Eck’s expanding list of ETF’s for commodities, and the even growing list of inverse and leveraged inverse ETF’s presented by ProShares. The bottom line will be that lower costs and tighter spreads will leave more profits on the table for the rest of us.
For Detailed Investor Profiles on these Investors, click below:
BlackRock
PIMCO
Related People: Bill Gross; Laurence D. Fink; Mohamed A. El-Erian
Related Entities: Barclays Global Investors; Merrill Lynch Investment Managers; PNC Financial Services; State Street Research & Management; Allianz SE; Bank of America; BlackRock Equity Funds; Blackstone Group*; Pacific Investment Management Company LLC; PIMCO Europe LTD; PIMCO Global Advisers; PIMCO Global Bond Fund; PIMCO Total Return Fund
Related Article Tags: Investment Management, Fund Manager and General Financial News; Hedge Fund Resources and Featured Partner News


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