Why mutual funds are buying ETFs

Josh Ehrlich of ETF Insight explains the latest trend in the industry: mutual funds that offer clients a portfolio of ETFs.

One reason is many mutual fund advisers are not licensed to sell anything else.

Another is that mutual funds are losing market share to ETFs at a steady pace. “To combat this loss in market share, the emergence of ETF managed portfolios has become one of the fastest-growing areas in the US managed fund arena. This hybrid strategy enables fund managers to offer their clients ETFs without directly impacting their management fees.”

Fund managers also see, according to Ehrlich, that ETFs are the most cost-effective way of adding diversification.

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