Owing to their quick popularity, several companies are showing ardent zest in ETPs (Exchange-Traded Products). According to reliable statistics more than seventy one ETPs were launched just during the first two months of this year. In the whole last year this number has topped at 302. It means that the volume of ETPs would increase manyfold as compared with the year 2001. The number of total ETPs calculated on the last day of February, 2012, turned out to be 1432 whereas five years ago this number was just 700 in total. This ascending trend in the number of ETPs is a real index of their popularity. So far in this year, in the United States $140 billion net inflows have been recorded, which indicates the fascinating effects being cast on companies by ETPs.
Some experts divide ETPs into three categories. The first category is beta and the second one is strategy, whereas third category can be called a hedge. The first category is designed to tracking the market and the second one is for funding alternatives of the market. The third category can be regarded as short-term bet for market. Without a doubt, the industry is yet dominated by beta funds but other strategies are also gaining influence. There can be many reasons behind this change in trend. The first reason may be the dramatic fluctuation of costs. As far as beta funds are concerned, their expense ratio can be approximately 0.2% per year, whereas this ratio for strategy can be around 0.6 %. The fund expense ratio of hedge can be even higher than one percent. Owing to higher fee charges, ETP industry is looking to introduce other strategies. Another reason is the flow of money to outer circles. Indubitably, the marketing of strategy ETPs and hedge ETP works well, but still it needs further promotion.
It has been observed that ETP industry is not paying enough attention to educate public with such vigor as it was being done in the past five years. As many other strategies are forcing their way into this field, ETP companies and providers should take the responsibility of educating people in this regard. More time and resources should be earmarked for the promotion and awareness of ETPs.
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