Exchange Traded Funds (ETFs): Hyperactive rather than passive

Passive investing is now more popular than ever. ETFs became a prominent vehicle for this investment style and have enjoyed a remarkable increase in popularity. There are 4,700 equity-ETFs worldwide by now, which bring together USD 3.4 trillion, and the tendency is growing.

There should be no doubt that these products have some desirable characteristics. These include low costs, high price transparency, the ability to reflect a wide variety of strategies and markets and, last but not least, the tradability of the securities at all times. While the first mentioned characteristics are undoubtedly advantageous, this is less clear for the characteristic of tradability. This is because the possibility of instantaneous trading may lead investors to activism, which has little in common with the actual idea of passive investing.

Download study as PDF (Reading time ca. 12 min)