ETFs Outlook for 2023: Continued Innovation and Growth
Unlike mutual funds, ETFs have grown in bull and bear markets.
Global Head of ETF Solutions
Head of ETF Solutions in Europe
Head of ETF Bridge Team, North America
Innovation has been a recurring theme of ETFs since the birth of SPDR launched the ETF market 30 years ago. Today, ETFs are in the midst of their third distinct iteration, a phase we call “ETF 3.0.” The first phase, ETF 1.0, began in 1993 and largely encompassed the broad beta marketplace driven by cap-weighted indices. Innovations included expansion into jurisdictions around the globe, as well as into more and more asset classes, including international equity, fixed income, precious metals and commodities.
The second phase, ETF 2.0, started in 2003 with the introduction of smart beta or factor-based indices. This was really the beginning of active management (we’ll call it active-lite) and the use of quant investing within the ETF investment vehicle. Not only was this important in expanding end investor choices; it was also important from a market entry standpoint as new participants were welcomed into the market.
This brings us to ETF 3.0, which started in 2008 with the approval of the first active ETF, and continues today. This is the next leg of innovation and growth in the marketplace.
In this report, we look back at 2022 to highlight important developments. We also discuss the key trends we expect in 2023.
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