he bear caught the booming exchange-traded fund (ETF)
industry with its pants down. Despite heady growth
among ETFs, all of the 97 existing products are based
on stock indices. Look for the Bank of New York
(BoNY)to be among the firm's rectifying this
Joseph F. Keenan
, vice president, exchange-traded
products at BoNY, said that the bank is contemplating
finding a sponsor for a fixed-income ETF. He made the
remarks to attendees at Tradeworx Symposium on Online
, yesterday at the Princeton Club in
New York City.
"Today there are no fixed income or cash equivalent
products," Keenan explained, adding that "hopefully we
will work with a fund sponsor soon" to introduce these
The American Stock Exchange
's Erik Liik
also told the attendees that one of the challenges facing
alternative products such as ETFs is that product
development has gotten ahead of the development of
tools to use the products.
"Now 70 percent of the buyers are institutional
investors," Liik said. He added that retail investors
have not yet embraced these products since the tools
to assist advisors in constructing portfolios with
ETFs either do not exist yet or are too cumbersome.
Keenan stated that one of the mistakes made by early entrants in the ETF
business was to create too much diversity among
products. This left advisors in the dark
about how to use these instruments in client
"Everyone thought there would be a shift to products
being bought, not sold, but that did not happen,"
Liik noted that the assets in SPDRs have doubled each
year since 1995 and now stand at $25 billion. Assets
in the "Cubes" (QQQ) product based on the Nasdaq 100
and managed by BoNY have reached $22 billion, added
the BoNY official.
Despite the growth, Keenan called the last few years
the "age of unreasonable expectations" for the ETF
"It took sixty years for the US fund business to grow
and mature," he concluded.
Stay ahead of the news ... Sign up for our email alerts now