ETFs are investment funds that trade on stock exchanges and hold assets such as stocks, bonds or commodities, allowing broader and cheaper access to certain investments.
While the ETF industry recently topped $4 trillion, Jeff McCarthy, CEO of ETF at BNY Mellon, told CNBC also at FundForum on Monday that this is just the start of the market.
“Many forecast that by 2021, you’ll see $6 to $8 trillion in these products. Specifically in Europe, I think we’re poised for significant growth and kind of a break out from the $650 billion that we have in assets today,” McCarthy declared.
“There is going to be more of a convergence between traditional active managers and ETFs. Part of that is the flow to ETFs…and part of that is the cost pressures that will continue to be put on active managers,” he added.
Noting that the average expense ratio in Europe is now only 31 basis points, McCarthy highlighted the pressure on active managers to take proactive steps to address the challenge.
“I do see more active managers launching ETFs and I do see more acquisitions around the globe of active managers getting into the ETF space inorganically,” he predicted.
McCarthy also sees a further step down in fees and expenses as inevitable.
“I think fees will continue to have pressure put on and you’ll continue to see a trend towards downward expense ratios on investment vehicles.”