ETPs in 2012: An Infographic

2012 was a big year in ETP land. ETFs and ETNs gained assets as their mutual fund competitors suffered massive losses on the equity side. Here’s an ETP infographic summarizing the continuing growth story.

etf, etn, etp

ETF & ETN Infographic For 2012

 

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ETF Industry Faces Three Challenges

The ETF industry is growing by leaps and bounds. New entrants and products appear almost every week, assets are on the rise and many of the unique features of ETFs including transparency and efficiency are in demand. Yet with all this growth comes a variety of challenges for the industry. Here are three I would like to highlight.

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ETFs: Helping Investors Deal With Uncertainty

The markets are filled with uncertainty over Iran, the next development in the EU debt crisis and future tax hikes. ETF investors are well positioned for these uncertainties as the ETF vehicle itself provides investors with the access, efficiency and transparency to address uncertain times.

ACCESS

ETF investors have access to many types of asset classes that traditional investors in mutual funds are shut out from. Physical commodities like gold and silver are great examples of assets that ETF investors can access and mutual fund owners cannot. Gold and silver are not considered “securities,” a requirement to be held by a typical mutual fund. Instead mutual fund investors can own funds focused on gold and silver mining and exploration stocks. While these indirect approaches are not poor investments they can offer big differences in performance. For example, in 2011 when physical gold gained over 9%, gold mining stocks were off as much as 30%. The access through an ETF made all the difference.

EFFICIENCY

The average ETF charges around 55bps while the average mutual fund is close to double that figure. ETFs, when compared with mutual funds in the same asset class, are more cost efficient. In addition, most ETFs are structured in a way that makes them more tax efficient than the average mutual fund. No one likes to pay more taxes and being in a tax efficient product structure helps investors keep more of their gains.

TRANSPARENCY

The majority of ETFs reveal their holdings every day. This transparency allows investors to know what they own and why they own it. This level of transparency is unique in the secretive investment world. Mutual funds, for example, are only required to reveal their holdings on a quarterly basis. Quick question/scary thought…how can an investor properly asset allocate or assess their risk levels when they only know what they own four times a year?

ETFs are not a perfect investment vehicle but they do offer some built in features that make investing in uncertain times a little more palatable. Perhaps that’s why 2011 saw ETFs take in more new assets than mutual funds, despite the mutual fund industry being about seven times larger.

 

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Christian Magoon on “The Street”

In mid December, Christian Magoon visited with Greg Greenberg on the New York set of The Street to talk ETF hits and misses in 2011, India, Gold and the future of ETFs in 2012. He highlighted gold ETFs as both hits and misses in 2011. Physical gold ETFs finished the year gaining about 10% and hit all time highs in assets. Gold stock ETFs however were negative for the year with some products losing close to a third of their value. Magoon highlighted gold mining ETFs as an opportunity in 2012. He also highlighted the sell off in India in 2011 as a potential opportunity in 2012. India, he worst performing BRIC country in 2011, was oversold according to Magoon. Going forward Magoon mentioned factor products as an area for growth in 2012 for the ETF industry.

 

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Video: Magoon Hits Fox Business to Discuss ETFs

Christian Magoon recently was on the Fox Business set in New York to discuss the ETF industry and to highlight opportunities within the ETF space. The discussion was wide ranging and covered the pricing of ETFs, leveraged ETFs, Gold ETF, India ETFs and Dividend ETFs.

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