Investing October 10, 2000

Exchange Traded Funds Pull in $5.6 Billion in Q3

October 10, 2000 (PLANSPONSOR.com) - Over $17 billion has flowed into exchange-traded funds (ETFs) in the first half of this year, and now total $57.5 billion, according to a new study by mutual fund researcher Strategic Insight. The study found that $5.6 billion poured in during the third quarter, largely due to new offerings from Barclays Global Investors and Merrill Lynch.
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At the end of September there were 76 exchange-traded funds, and 13 exchange-trade baskets of stocks called Holdrs. In 1998 ETFs held just $15.6 billion.

Most ETFs offer lower costs and more tax advantages than do traditional mutual funds, as well as offering the flexibility to trade funds throughout the day, rather than just once a day. On the other hand, investors end up paying brokerage fees for those additional privileges.

For starters, investors must pay a brokerage fee each time they buy or sell an ETF. For individuals who prefer to invest in their funds on an ongoing basis (also known as dollar-cost averaging), those fees can cost an arm and leg over the long haul.

According to Dow Jones the largest ETFs are:

  • $24.0 billion – Standard & Poor’s 500 SPDR, managed by State Street Global Advisors
  • $13.7 billion – The Nasdaq-100, managed by the Bank of New York
  • $ 3.05 billion – The S&P 400 Midcap SPDR
  • $ 2.10 billion – The Biotech HOLDR
  • $ 1.90 billion – The Dow Jones Diamonds

Currently, four fund companies offer exchange traded funds. State Street Global Advisors has 50% of the total ETF assets, down from 65% at the end of 1999. The Bank of New York currently has 29%, Merrill Lynch 11% and Barclays now has 10% after rolling out 29 new ETFs this year.

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