You hear a lot about the explosive growth of Exchange Traded Funds, or ETFs, and in some cases, it is clearly quantifiable.
Take the case of Select Sector SPDR Trust, where asset volume rose 10% in the first quarter alone, according to its director of wealth management, Dan Dolan. Assets rose $1.7 billion to $18.8 billion. Thus far in the second quarter, assests are up about $1 billion. Select Sector SPDRs are ETFs that divide the S&P 500 into nine sector index funds.
"More individual investors are coming in, " says Dolan. ETFs, which resemble index funds in that they track a set group of stocks, are typically a portfolio of stocks and bonds that trade as individual stocks and have been very popular with institutional investors since their creation in the early 1990s. Barclays iShares group has made a name for itself in the young asset class, but ETFS are offered by other big names in the business, such as Vanguard.
“Energy is coming back,” says Dolan, adding that the sector attracted $800 million in new money in the first quarter. Utilities, basic materials and consumer staples are also attracting money, while financials, in particular, are not. Utilities are up 33% in the past 12 months.
As of March, there were more than 400 ETFs trading on the markets with almost another 400 in the pipeline. The explosive growth of ETFs have been a boon to Barclays as well as the American Stock Exchange, where many of the funds trade.
That growth has included what some would consider exotic or esoteric versions of ETFs, often commodities based. CNBC's Bob Pisani talks to the exchange's CEO Neal Wolkoff about the launch of its first natural-gas ETF.
Bond ETFS were very popular during the credit market rally that was triggered by the Fed's prolonged period of easing from 2001-2003. With many banking on rates cuts later this year, interest is bound to perk up again.
In our weekly guide to investing, CNBC 101, Bob Pisani has the details on a handful of new bond ETFs from iShares and Vanguard.