The fund industry daily, Ignites, informs me via my morning e-mail: Advisors Not Buying ETF Hype, Sticking with Active Funds. That's curious in that every month, ETFs attract more assets, Morningstar's ETF coverage gains more readers, and I hear from I don't know how many advisors who have questions about ETFs, because they're incorporating them into their practices.
So I read the article. "In a survey of more than 400 advisors, Cerulli found that nearly 45% said they prefer using actively managed funds in their clients' portfolios rather than primarily passive ETF products."
Silly me, I had thought the elections were over.
Speaking of the Morningstar ETF team, they might have been coming on a bit high in writing that Schwab's low-cost, no-commission-fee ETFs was a "shot heard around the world." It's a fine offer yes, but how long will it last? Schwab's NTF (no transaction fee) fund program was launched with a cost of 25 basis points per year to the underlying funds, and the strongest language this side of binding that the fee structure would stay that way. The NTF program is now at 40 basis points, fellas. No doubt, Schwab's ETF prices will also go where the market will bear.
For hyperbole, however, a shot heard around the world can't touch the Target Date Manifesto, headlined "Retirees Lose Millions in 'Target Death Funds.'" (Fleetingly, that had me thinking about Central American death squads. Which got me musing about Sandinistas. Thus, the Clash. Then "London Calling" began to ring in my head. But I digress.)
Reading about how target-date funds are "fatally flawed" (more corpses), I wondered just how badly target-date funds have fared. Over the trailing 12 months, the average 2010 target date fund is up 21.5%. If that's death, then let me die 1,000 sweet deaths, Juliet.
The next time I see "New Normal" on a Morningstar headline will be one time too many. All right, several times.
This article was first published as part of John Rekenthaler's blog on Morningstar.com.
