As the exchange-traded fund industry gains a larger foothold in the U.S. capital markets, both Fidelity Investments and TD Ameritrade are plunging deeply into the ETF space.
Fidelity last week received Securities and Exchange Commission approval to set up a series of actively managed ETFs, and TD Ameritrade on Tuesday launched a new ETF Knowledge Center designed to arm retail investors with education about ETFs.
The two financial firms’ raised stakes in the ETF market come as these funds saw record inflows of $191 billion in 2012, with assets under management totaling $1.4 trillion. In 2013, the average ETF allocation in advisors’ client portfolios is expected to rise to 7.8%, up from 7.1% in 2011 and 2012, according to Cerulli’s Exchange-Traded Fund Markets 2013 annual report, released in May.
“This is notable because growth has been stagnant in previous years,” said Alec Papazian, associate director in Cerulli’s asset management practice, in a statement. “Advisor adoption of ETFs continues to be the foundation of growth for the industry.”
Almost two-thirds of wirehouse advisors report using ETFs, the highest percentage out of all the channels. More than half of registered investment advisors (RIAs) are using ETFs, and fewer than 50% of advisors in the remaining channels use ETFs, Papazian said.
Top competitors have been watching Fidelity, according to an article in Barron’s, “Letting Fido Off the Leash,” which asserts that Fidelity as well as T. Rowe and Franklin Templeton “have what it takes to shake up the ETF industry.”
“Despite the crowding of the ETF market, sheer size and distribution can hugely help a latecomer, and Fidelity has both in spades,” wrote Brendan Conway for Barron’s. “That worked for Charles Schwab and PIMCO, which built fast-growing ETF businesses managing a combined $18 billion, even though their oldest products are barely three years old.”
The SEC has already approved active ETF applications from T. Rowe and Franklin Resources, Reuters noted Tuesday in a report on Boston-based Fidelity’s successful application.