A Comprehensive Guide to Exchange-Traded Funds (ETFs)

CFA Institute

Joanne Hill

Research

202 Pages

This paper examines how ETFs evolved from niche trading vehicles into a $2.9 trillion global market shaping portfolio construction, liquidity, and investor behavior. The authors argue ETFs influence up to 40% of trading volume, while growth in fixed income and commodity products is reshaping management.

Key Takeaways

Trading Dominance Rising: ETFs represented more than 11% of mutual fund assets in 2013, up from 2% a decade earlier, while accounting for 25% to 40% of US exchange trading volume.
Industry Concentration Risks: The top five ETF providers controlled 75.4% of the $2.63 trillion global ETF market in 2014, with iShares alone holding a 37.3% share.
Fixed Income Expansion: Fixed income ETFs reached 12.5% of US ETF assets by Q1 2014, growing more than $100 billion annually as investors embraced bond market liquidity and transparency.
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