Exchange traded funds could top hedge fund value by end of year

Michael Bow
Follow Michael

THE MOUNTAIN of cash invested in exchange traded funds (ETF) could surpass the size of the hedge fund industry as early as next year, a study released today predicts.

ETFs, which are baskets of assets which trade like stocks, currently have about $2.4 trillion (£1.46 trillion) of assets under management, close to the $2.6 trillion invested in hedge funds.

EY, formerly Ernst & Young, said ETF assets will overtake hedge fund assets within the next 12 to 18 months, led by surging sales growth rates in Asia.

The move would be another blow to the hedge fund industry, which is under pressure from investors over fees and performance.

“[ETF] growth will come from innovation, from more wide-spread users of, and uses for, ETFs as they take market share from active and other passive competitors,” EY’s ETF leader Lisa Kealy said.

EY said the US market will grow by 15 per cent annually, with Europe growing up to 20 per cent a year. Asia will outpace both regions with growth of nearly 30 per cent a year until 2019, the firm said.

“The US market is still growing at 15 per cent, which is an incredible rate for a more mature market,” EY’s global asset management ETF lead Matt Forstenhauseler said.