Active fund shops can take heart, the death of traditional, actively-managed, daily valuation mutual funds has been greatly exaggerated. Chris Taylor of Reuters reports that the inflow gap between equity ETFs and traditional equity mutual funds was $5 billion last month, down from $46 billion in December.

"Mutual funds are more nimble in navigating the investing landscape," said Loren Fox, senior analyst for fund research firm Strategic Insight. "If you're locked into a tight box with an ETF, and your box is going down the tubes, then low costs aren't your first concern. It's the fact that you're losing a lot of money."

"Investors and advisers are attracted to ETFs for their low expense ratios, tax efficiency, transparency and ability to be traded throughout the day," said Erik Liik, CEO of FocusShares, which offers a menu of ETFs that track Morningstar indexes. "They've democratized investing by bringing virtually all types of investments to all types of investors."

Fox thinks that, in the long run, ETFs and traditional mutual funds will learn how to co-exist.

The Reuters article also includes information from a Vanguard report, as well as input from Rick Ashburn, chief investment officer of California-based advisory firm Creekside Partners, and Kirk Chisholm, principal of Portland, Maine-based money manager NUA Advisors. 

Edited by: HFD


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