Last week investor Jim Rogers warned passive investors about the dangers of a looming bear market that could be the worst ever experienced. At the heart of his comments was this caution to ETF investors:
“When we have the bear market, a lot of people are going to find that, ‘Oh my God, I own an ETF, and they collapsed. It went down more than anything else.’ And the reason it will go down more than anything else is because that’s what everybody owns”.
The argument for passive exposure has grown in an investment environment marked by low returns – Rogers’ point is that ETF investors will feel a lot more pain when the market goes south.
As if on cue, however, ETF investors have been shaking up their exposure and adding more active and factor-based products to their portfolios. According to new data from ETFGI in London, they’ve been pouring money into active and smart beta ETFs at a growing pace.
This year, assets invested in active ETFs have increased by 40.9% as investors react to the uncertainty of Trump, Brexit and North Korea. Jittery investors pushed asset levels to new records, with active ETFs listed globally rising to US$61.10 billion. Investors have a lot of product to choose from – there are now 432 active ETFs listed globally.
Investor anxiety also saw more ETF investors seeking factor-based products –assets invested in smart beta ETFs hit US$630 billion at the end of August increasing 18.3% over the first eight months of the year. There are not 1,279 smart beta equity ETFs for investors to choose from globally.