The exchange traded fund market has turned a corner – moving away from new security creation to better distribution of existing products.
At the 80th Annual Security Traders Association New York (STANY) Conference and Dinner in New York last week, David LaValle, US head of SPDR ETF Capital Markets at State Street Global Advisors told attendees that the current trend in ETFs is about distribution – moving more existing products to investors rather than creating new ones.
We are actually closing more products than opening new ones, LaValle said at a panel session. This was the case for SSGA in 2016 and would be the case again in 2017, he added.
There is no more stigma in closing products anymore, LaValle said.
But that is not to say that new deal creation is dead, he told attendees. Given the maturity of the $3.3 billion ETF market, new and more esoteric products are now going to be created and come to market. For example, he reported that one particular West Coast mega pension fund was looking into gender diversity ETFs and others that make ETFs more of a capital markets vehicle as opposed to just an equities derivative instrument.
Were now on the cutting edge here, LaValle said.
One other trend that was discussed during the panel was the focus on fees. As investors struggle to get more bang for their investment buck, Seddik Meziani, professor of Finance at Montclair State University, said that ETF issuer, such as SSGA, can expect more pressure to bring down ETF fees.
Total expense ratios for ETFs still remain high, Meziani said. There is pressure to drop or reduce these fees as when compared to mutual funds, ETF fees look high.
