Paul Singer and some of his fellow hedge fund hotshots may not like it, but ETFs are continuing to rake in investor cash and are on their way to another record-setting year.
In fact, the $3 trillion industry ended July with $273 billion of inflows this year, within just $13 billion of setting a new high with five months still remaining on the calendar, according to State Street Global Advisors, which tracks ETF flows.
Singer, founder of Elliott Management, told clients in a letter last week that exchange-traded funds are "devouring capitalism" as they mute the voices of small investors and mitigate the risk of large investors so long as the funds replicate the indexes they track.
The funds have exploded in recent years as the popularity of passive investing has surged and the track record for active mutual fund managers has been mostly abysmal. ETFs primarily track broad market indexes like the S&P 500 as well as those for bonds and commodities. They don't use high-cost managers who trade in and out of positions.
In short, it's become the preferred way to play the market during a stunning bull run that began in March 2009.
Central banks like the U.S. Federal Reserve have been keeping interest rates low and liquidity flowing since the days of the financial crisis. What's resulted has been the second-longest bull market in history, pushing the S&P 500 to a 271 percent gain, and, this year in particular, market volatility to historical lows.
"Investors are generally following the central bank money," said David Santschi, CEO of TrimTabs Investment Research, which tracks market and economic data. "It's the easiest and cheapest way."