It's a hot area. Assets in smart-beta ETFs have doubled in two years, to about $420 billion. That’s the good news. The bad news: There are over 400 ETFs with such strategies, many of which have a big head start.
While some of Goldman's lineup has expense ratios below the average asset-weighted 0.30 percent average for smart-beta ETFs, others carry higher-than-average expenses. Here are the new products and their fees:
* Goldman Sachs ActiveBeta Emerging Markets Equity ETF (GEM), 0.45%
* Goldman Sachs ActiveBeta Europe Equity ETF (GSEU), 0.35%
* Goldman Sachs ActiveBeta International Equity ETF (GSIE), 0.35%
* Goldman Sachs ActiveBeta Japan Equity ETF (GSJY), 0.35%
* Goldman Sachs ActiveBeta U.S. Large Cap Equity ETF (GSLC), 0.09%
* Goldman Sachs ActiveBeta U.S. Small Cap Equity ETF (GSSC), 0.25%
If breaking into the ETF world is so hard, why is Goldman bothering at this late date? The chart below shows why, in graphing the slow extinction of actively managed stock mutual funds. While index mutual funds are also growing, they aren’t growing as fast as ETFs.
This brings us to the dilemma facing the world’s largest asset managers that have yet to jump into the ETF game. Do you ride the mutual fund gravy train for a while until it dries up, or begin shifting over to the new, passively managed ETF world, and risk cannibalizing yourself to survive for the next 50 years?