ETF industry could grow to $15T in next 5 years
ETFs are sound investments for first-time, average and sophisticated investors, expert says
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During "Exchange: An ETF Experience" run by VettaFi, which was held Feb. 5-8, 2023 at the Fontainebleau Miami Beach, Bryon Lake, managing director, global head of ETF Solutions at JPMorgan Asset Management who is based in New York City, predicted that the ETF industry will grow to $15 trillion in next five years.
"ETFs are now 30 years old, there has never been a rolling five-year period where ETF assets haven’t doubled, including 2017- 2022 when they grew from $3.5 trillion to $7 trillion," Lake tells FOX Business. "Myself and JPMorgan Asset Management expect ETF assets to more than double from $7 trillion today to $15 trillion by the end of 2027, driven by the growth of active and passive strategies in the ETF wrapper."
What factors are building the momentum?
When asked what specific drivers are causing the momentum, Lake notes several factors, which include specific indexes, and the appeal to all types of investors.
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"In fact, I think active strategies, which last year accounted for 15% of flows and so far this year are 23% of flows, will be a major driver," Lake explains.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| JPM | JPMORGAN CHASE & CO. | 185.80 | +4.66 | +2.57% |
In addition, he states first-time ETF buyers will contribute to growth.
"Yes, I believe that more investors will be attracted to the benefits of the ETF wrapper, tax efficiency, liquidity, transparency to name a few," Lake says.
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And ETFs, he says, are sound investments for first-time, average and sophisticated investors.
"Myself and JPMorgan Asset Management think of the ETF as a technology, what you put inside of the ETF is the investment engine," Lake says. "It’s important for investors to evaluate carefully, the great news is that ETFs are widely available as they trade on the exchange, they are easy to research on issuers' websites because they are transparent, and investors know what they own."
ETFs can be a fit for all types of investors
Roxanna Islam, associate director of research with VettaFi, agrees that ETFs attract both new and experienced investors.
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"Investors like ETFs because of their lower costs, liquidity, and tax efficiency. Given the variety of options within the ETF industry, ETFs can be attractive to all levels of investors," she says.
JP Morgan Asset Managaement believes that the ETF market will nearly double in size by 2027. Photo credit: iStock
An ETF wrapper can make certain investments more accessible to newer investors, says Islam, like fixed income or alternative investments, which may be too complex on their own.
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"Even more sophisticated investors can benefit from the diversification of investing in an ETF compared to picking individual stocks," she says. "Inverse, leveraged, and single-stock ETFs can also be attractive to sophisticated investors looking for short-term exposure."