An Expert Take on ETFs: New Markets, Future Growth

Mariana Bush says investors continue to shift away from mutual funds.

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Recently, Heather Bell of IndexUniverse interviewed Mariana Bush, a senior analyst at Wachovia Securities who covers the exchange-traded funds industry. Here, I've highlighted a few takeaways from Bush:

On ETF growth: "I think flows will just simply continue to go into ETFs because people will continue to prefer ETFs over mutual funds. I get calls from people telling me they are moving into ETFs, away from mutual funds. I am still surprised when I talk to people—fairly financially knowledgeable individuals—and they don't know about exchange-traded funds."

On ETF overload: "It's hard for me to keep track of how many dividend-focused funds there are. My feeling is, at this point, we already have plenty. Just look at the financial ETFs. We don't only have the broad financials, but we have the industry financials and the subindustry financials; even with REITs we have a bunch of sub-sub-sub indices, which is nice for those people that do want that fine tuning, but in other areas we already have plenty. They have to go into asset classes where we don't have exposure yet, and that's why they have gone into commodities, currencies, and strategies (such as 130/30, for example.)"

On future ETFs: "Corporate loans is an area where we don't have a single exchange-traded tracking product.... Hedge-fund-like ETFs is an area we have not seen yet, a possible new space for ETF providers to enter. Another area is currency/commodity."

On choosing between similar ETFs: "Most comparable funds are really tracking different indices. They may appear to be similar, but one may have much larger-cap stocks than the other one; one may have a much higher weight in a subindustry than another one. We prefer to compare the exposure of the indexes. I think that's going to make, as I said before, a bigger difference in performance versus a difference in expenses."