Where are the rock stars in the world of exchange-traded funds?
This was the big question on the minds of trend-watching ETF pundits as they brought the Morningstar ETF Invest Conference 2013 to a close on Friday.
While the pundits agreed that Bill Gross, manager of the PIMCO Total Return ETF (BOND), is the biggest “rock star” in the fixed-income space, they also concurred that active management of “smart beta” equity ETFs will be the next big trend.
So step aside, Mr. Gross, said ETF media mavens Matt Hougan of IndexUniverse and Tom Lydon of ETF Trends at Morningstar’s “Meet the Pundits” panel on Friday. Your days as the biggest rock star in the ETF universe are numbered as smart beta awaits the emergence of rock-star equity ETF managers who will make as big a splash as rock-star mutual fund managers did in the 1980s. (Think Sir John Templeton’s Growth Fund and John Neff’s Windsor Fund.)
“The ETF business is boring. Bill Gross is our rock star. We need to do better,” Lydon said at the panel that moderator Brendan Conway of Barron’s characterized as a “no-holds-barred, rapid-fire” review of all things ETF.
Lydon wrote an ETF Trends comment in September that looks at trends such as the growing number of quasi-actively managed strategies, or factor strategies, that use enhanced, smart-beta indexing methodologies. On Friday, he noted that as ETFs have grown in popularity over the last 20 years, ETF and index providers’ initial expectation that active management would be the next big thing has given way to “active management in a smart beta deliverable.”