ETF Selection (1 of 4).
A buyer-beware signal flashes in the distance for Exchange Traded Fund (ETF) investors.
On May 20/11 the Benefits and Pensions Monitor reported the formation of an ETF lobby group … the Canadian ETF Association (CETFA). CETFA is “an independent national association that will represent and promote the Canadian ETF industry.” ‘Lobby group’ should make Individual investors and regulators collectively say ‘oh, oh’. Lobby groups aren’t usually formed with the customer’s interests in mind.
The ETF marketplace is starting to look mature. Starting to look crowded. Diluted. No longer pure. The ETF growth curves are mimicking the growth curves of other financial products of earlier years.
“Over the last five years, assets in Canadian-listed ETFs have grown an average of 27 per cent annually, from $12.3 billion in December 31, 2005, to $40.8 billion currently. There are almost 200 ETFs listed on the TSX as of April 30, 2011”.
The TMX exchange says it now lists 260 ETFs. Thousands more trade on U.S.and on other exchanges around the globe.
See Economist.com A good idea in danger of going bad.
(Investment geeks can compare the growth rates in the ETF industry to the growth rates of the Organic food industry or the growth rates in the Offsite Personal Storage industry … for Vancouverites who can’t stuff their all their stuff into their 547 square foot condos).
Sound familiar? It should remind investors of the Mutual Fund industry in the 1990’s.
How can overwhelmed Individual Investors sort through the ETF proliferation? See parts 2, 3 & 4.Next time? ETF Selection 2 (of 4). Doug Cronk CFA is Manager, Investments for a Canadian Pension Plan