According to data from the hedge fund tracking service HFR, and the London-based research firm , exchange-traded funds will soon overtake hedge funds in terms of total amount invested. The numbers show that within only a few months the 25 year-old ETF/ETP industry will overtake in popularity the 70 year-old hedge fund industry.
The fact that the ETF industry has been outpacing the hedge fund industry in its growth is surprising to many observers who note that the hedge fund industry has also been growing quickly, just not as quickly as ETFs. At the end of 2013 there was $230 billion more invested in hedge funds than in ETFs, compared to only $13 billion more in hedge funds at the end of the first quarter of 2015.
One explanation for this trend is the disappointment many investors have had in hedge fund returns, which often lag behind the returns realized by the S&P 500.
“With the positive performance of equity markets, many investors have been happy with index returns and fees,” the report said. This situation has had a positive effect on exchange traded products.
