ETFs To Surge in 2008 (Think India, Carbon)
It's been another big year for Exchange Traded Funds (ETFs), those baskets of stocks that trade like individual stocks. 2008 will also be a big year -- so here's what to look for.
1) First, more single-country ETFs, including for Turkey and India.
2) How about the first actively managed ETF? Expect the first ones from PowerShares, but Vanguard also has some in registration.
3) Look for more commodity ETFs as well, as many of the biggest ones have had healthy gains this year. Example: the market leading iShares GSCI Commodity Index Trust (GSC) is up 31% this year. Expect ETFs for coal and heating oil.
4) How about an ETF that trades carbon allowances? Look for firms that want to trade carbon emission allowances under the European Union Emissions Trading Scheme.
The Big Picture:
1) A lot more ETFs coming. There are nearly 600 ETFs already in existence, and according to IndexUniverse there are already over 400 more in the pipeline. Most duplicate what we already have; the remaining ones will serve an ever narrower group of investor interest.
2) Finally, my most important prediction for ETFs in 2008: expect a big move to make them more available to 401(k) plans, which will greatly expand their popularity. The loser: big, open-ended mutual funds that charge large up-front and back-end fees.
3) What's it all mean? A lot more Assets Under Management. Global Trends Investments estimates AUM could hit $1 trillion, up from $422 billion in 2007.
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