The firm also offers a line of "ultra" funds, which essentially give investors double the return (or double the inverse) of an index's daily gain. Bullish about oil? ProShares' Ultra Oil & Gas fund aims for daily results that double the performance of the Dow Jones U.S. Oil & Gas index. Recently, Direxion Funds filed a proposal with regulators for funds that offer three times the performance (or the inverse) of an index. Although these funds aren't as risky as pure short-selling—in which you could lose more than you invested—they should be approached with caution.
8. ETFs are gunning for your retirement money. Exchange-traded funds have yet to make a big dent in the 401(k) market, which is dominated by mutual funds. But that will soon change, Jonathan Steinberg, chief executive officer of WisdomTree Investments, said at the ICI conference. The firm recently launched an ETF platform for 401(k) plans. "This is one of the last areas of the asset management world that has not yet broken down," he said. "You may find some initial resistance, but ETFs are really compelling. Once they start, they'll wear everyone down." Sponsors are also marketing target-date ETFs.
9. This is just the beginning for actively managed ETFs. The next big trend in this industry is actively managed ETFs, which aren't tied to an index like traditional exchange-traded funds. Instead, they hinge on manager skill. Companies including Bear Stearns and PowerShares have already launched actively managed ETFs, and plenty more are on the way. "The floodgates, we understand, are just about to open on actively managed ETFs," writes Jim Wiandt of IndexUniverse. It's too soon to tell if active ETFs will be a smashing success, but the industry is "working harder, faster, and the rate of change will be exponential. There is no end in sight," Steinberg said.
10. Many ETFs will live, but some will die. The booming ETF industry is fiercely competitive, and some funds (particularly those that track narrow sectors or industries) never gain traction with investors. Earlier this year, Claymore Securities dropped 11 ETFs from its lineup because they failed to attract much money. The flops included Claymore/KLD Sudan Free Large-Cap Core, Claymore/Robeco Developed World Equity, and Claymore/Clear Global Vaccine.