Exchange Traded Funds - US - February 2007

Table of Contents

• Scope of this Report
• What you need to know
• Introduction and scope of this report
• Abbreviations and terms
• Abbreviations
• Terms
• Executive Summary
• Overview
• Fast facts on ETFs
• New products and future trends
• Market Drivers--Current Conditions
• Proliferation of product creating an overcrowded market space
• Challenges to ETF market entry
• Challenges to ETF asset growth
• Structured notes may challenge as new flavor of the month
• Mutual funds may alter their shape
• General public still unfamiliar with ETFs
• Industry providing information for investors to evaluate ETFs
• Ratings agencies furnishing analyses of ETFs
• Morningstar Ratings
• Standard & Poor' s Ratings
• Lipper Ratings
• AltaVista Ratings
• Buyside Research
• TrimTabs Investment Research
• Regulatory activity
• Focus on fees
• Financial intermediaries are paying more attention to ETFs
  • Figure 1: Independent advisor comparative product average allocation, 2003 and 2005
• Financial advisor survey results
  • Figure 2: Clients' level of interest in alternative investments, November 2006
• Services to help advisors evaluate ETFs
• International and commodity ETFs
• Rollover dollars a possibility
• IRAs may be lucrative marketplace for ETFs
• Deferred compensation plans a largely untapped market
• ETFs designed as lifecycle funds
  • Figure 3: Default investment options offered by plans, by size, 2006
• Health Savings Accounts may gain ground
• Market Drivers--New Opportunities
• New ETF strategies are competing with mutual funds
• Financial advisors changing product mix
  • Figure 4: Channel comparison--advisor product mix, 2004 and 2005
• SMA growth opening doors for ETFs
• UMAs beginning to take shape
• Qualified plan market opportunities
• ETFs in the 401(k) plan: the next generation
• Case study--Invest n Retire
• Case study--401(k) Retirement Solutions
• ETFs and small business 401(k)s
• Case study--ShareBuilder
• Online brokerages and ETF investors
• Institutional investors and hedge funds focusing on ETFs
• Actively managed strategies for ETFs
• ETFs used within variable annuities
• ETFs in 529 college savings plans
• European and emerging markets ETFs
• Market Size and Segmentation
• Overview
  • Figure 5: ETF assets, 1995-2006
  • Figure 6: ETF assets, by investment type, 2005 and 2006
  • Figure 7: Number of ETFs, by category and expense ratios, 2006
  • Figure 8: Number of ETFs and percentage with more than $5 billion under management, 1995-2006
  • Figure 9: ETF assets and compound average growth rate versus mutual funds, 2000-06
  • Figure 10: Net cash inflows to mutual funds & ETFs, 1999-2006
• Competitive Landscape
• Major players
  • Figure 11: ETF sponsors by assets under management, May 2006
  • Figure 12: Mutual fund company issued ETFs, 2005
• Competitive landscape by sector
• Commodities ETFs
• Oil ETFs
• Gold and silver ETFs
• Fixed income ETFs
• Socially responsible ETFs
• Financially-based ETFs
• Dividend ETFs
• Sector ETFs
• Niche market ETFs
• ETF options
• Health Care ETFs
• International ETFs
• ETFs with tactical strategies
• Exchange Traded Notes
• Real Estate ETFs
• Advertising and Promotion
• ETF Advertisements
  • Figure 13: Print advertisement for Mid-Cap SPDRs, 2006
  • Figure 14: Print advertisement for Amex Diamonds, 2006
  • Figure 15: Print advertisement for Fidelity ONEQ, 2006
  • Figure 16: Print advertisement for Integrity annuity ETFs, 2006
  • Figure 17: Print advertisement for Integrity annuity ETFs, 2006
  • Figure 18: Direct mail advertisement for Integrity PortfolioNavigators, 2006
  • Figure 19: Direct mail advertisement for Integrity AnnuiChoice variable annuity with ETFs, 2006
  • Figure 20: Direct mail advertisement for BGI' s iShares, 2006
  • Figure 21: Direct mail advertisement for BGI' s iShares, 2006
  • Figure 22: Print advertisement for Nuveen Investments, 2006
  • Figure 23: Print advertisement for Seligman Target Horizon ETF Portfolios, 2006
• The Consumer
• Summary of consumer findings
• Overview of advisors and ETFs
  • Figure 24: Proportion of advisors who invest for individuals, institutions and retirement accounts, December 2006
  • Figure 25: Assets under management for those who recommend ETFs, December 2006
• ETFs and other investments
  • Figure 26: Percentage of advisors with client assets invested in ETFs, by advisor age, December 2006
  • Figure 27: Mean percentage of assets under management invested, by investment type, December 2006
  • Figure 28: Mean percentage of assets under management in mutual funds and ETFs, by advisors with individual and institutional clients, December 2006
  • Figure 29: Mean percentage of assets under management in mutual funds and ETFs, by advisors whose accounts are primarily retirement accounts, December 2006
• Proportion of clients and portfolio size
  • Figure 30: Proportion of clients to whom ETFs are recommended as an investment, December 2006
  • Figure 31: Average size of a portfolio advisor would manage for a client to whom they would recommend ETFs, December 2006
  • Figure 32: Proportion of clients to whom ETFs are recommended as an investment, December 2006
  • Figure 33: Average size of portfolio for which ETFs would be recommended, for financial advisors advising on tax-deferred retirement accounts, December 2006
• Advantages and disadvantages of ETFs
  • Figure 34: Advantages of ETFs over other investments, December 2006
  • Figure 35: Advantages of ETFs as investments for clients over other investments, by advisor age and income, December 2006
  • Figure 36: Reasons for using alternative investments, November 2006
  • Figure 37: Reasons retiree clients are reluctant to invest in alternative investments, November 2006
• Reasons for not recommending ETFs
  • Figure 38: Reasons for not recommending ETFs, by gender, December 2006
  • Figure 39: Reasons for not recommending ETFs, by advisor age and income, December 2006
• Plans to increase allocations to ETFs
  • Figure 40: Intentions to increase the proportion of client assets allocated to ETFs, by gender, December 2006
  • Figure 41: Percentage of advisors who plan to increase the proportion of client assets allocated to ETFs, by advisor age and income, December 2006
• Types of ETFs recommended
  • Figure 42: Types of ETFs recommended to clients, for advisors who recommend ETFs, by gender, December 2006
  • Figure 43: Type of ETFs recommended to clients, by advisor age and income, December 2006
• Level of knowledge about ETFs
  • Figure 44: Level of clients' knowledge about ETFs, by gender, December 2006
  • Figure 45: Level of clients' knowledge about ETFs, by advisor age and income, December 2006
  • Figure 46: Level of advisor knowledge about ETFs, by gender, December 2006
  • Figure 47: Level of advisor knowledge about ETFs, by advisor age and income, December 2006
• Attractive target segments for ETFs
• Options investors
• Mutual fund investors may be interested in ETFs
• Retirees may be interested in ETFs
• Market Forecast
  • Figure 48: Forecast of total U.S. exchange traded funds assets, at current and constant prices, 2006-11
• Appendix: Trade Associations