Yeah, but when will they impact 401(k) choice (if ever)?
While ETFs remain sparse in 401(k) investment menus, RIAs dominate when it comes to the product’s utilization and growth.
FinTech giant Broadridge Financial Solutions reports that exchange traded fund (ETF) assets grew by $144 billion, or 7.4 percent, in the year ending September 30, 2015, despite heady volatility during the summer months. Largely driven by retail channels, the quarterly data found that long-term mutual fund assets from third party distributors declined by 2 percent, or $156 billion, during the same period.
According to the company, registered investment advisors (RIAs) led all retail channels over the past year ending Sept. 30, 2015, adding $46 billion in ETF assets, followed by wirehouses with $45 billion and independent broker dealers (IBDs) with $41 billion. The only retail channel with increased assets for long-term mutual funds over this period was the RIA channel with an increase of $29 billion.
“ETF assets continued year-on-year growth through the third-quarter, despite the worst stock market drop since 2008, with advisors accounting for the lion’s share of investment,” Frank Polefrone, senior vice president of Broadridge’s Access Data product suite, said in a statement. “This trend demonstrates the increased use of passive products. RIAs, which hold a higher percentage of passively managed funds, were the only retail channel with an increase of long-term fund assets over the last year.”
Retail channels increased assets across several ETF global product categories, as defined by Morningstar, including fixed income, 23 percent, allocation funds, 22 percent, equity, 11 percent, and alternative, 5 percent. The two ETF categories that saw a decline in assets held by the retail channels were commodities, 18 percent, and convertibles ETFs, 9 percent. In contrast, all global product categories for long-term funds showed a decrease in assets over this same period.
Additional findings:
- Total long-term mutual fund and ETF assets across retail and institutional channels reached $7.2 trillion and $2.09 trillion, respectively.
- On a year-to-date basis, total ETF assets increased by $5 billion, or 0.2 percent, while long-term funds sold through distributors decreased by $243 billion, or 3.3 percent.
- While retail ETF channels were up $150 billion over the past year, or 13 percent, ETF assets from institutional channels decreased by $6 billion, or 1 percent.
- Long-term funds from retail channels were down by $199 billion over the past year, while assets from the institutional channels were up $43 billion.