COMMENTARY: Active Indexing with ETFs: Disruption and Implications

Abstract

The success of exchange-traded funds (ETFs) has been disruptive to the asset management business, driven by lower fees and the strong relative performance of index-based investment approaches along with their greater transparency and ease of access. ETFs are unique among investment products, utilized for both short-term and long-term strategies and available at the same cost to all categories of investors. ETF growth has raised several issues for asset managers and financial markets that call for new approaches. These include the rise of systematic, active strategies, the significance of index providers in education and marketing, and the challenges facing asset manager distribution. TOPICS: Exchange-traded funds and applications, passive strategies, mutual fund performance