The first phase in US ETF markets, marked by explosive growth, is over. The next phase has just begun, with ETF sponsors still coming to terms with the sudden rejection of beta products and quick switching among ETFs by, so-far, passive investors.
The new battleground will be in a new product category that has the features of popular beta-ETFs while serving the emerging demand of investors for alpha. We call this new category “alpha index-linked ETFs” and project that it will power the growth of the US ETF industry over the next five years, accounting for over $64 billion of the projected $3.6 trillion of ETF assets in 2017.
We forecast substantial growth in global assets under management, due to:
Global nominal GDP growth
Appreciation in asset values and increasing net inflows
Transfer from developed market to emerging market exposures