By selecting Continue, you will leaveU.S. Bankand enter a third party Web site.U.S. Bankis not responsible for the content of, or products and services provided by FINRA, nor does it guarantee the system availability or accuracy of information contained in the site. This Web site is not controlled byU.S. Bank. Please note that the third party site may have privacy and information security policies that differ from those ofU.S. Bank.
End of pop up window. Press escape to close or press tab to navigate to available options.
Exchange-traded funds (ETFs), or funds that can be traded on stock exchanges, present an attractive and advantageous alternative to traditional mutual funds. Because of their benefits, theyve become a popular option for a wide range of investors. This article will provide an introductory look at ETFs, highlight their key advantages, explain the roles of the parties involved and look at their potential into the future.
Exchange-traded funds (ETFs) are similar to mutual funds in many wayswith one key difference. As the name implies, ETFs give investors the ability to buy and sell shares on a stock exchange. The most popular ETFs are passive, which means they utilize index tracking. Passive ETFs invest in a basket of securities that replicate the performance of the index the fund tracks.
ETFs offer several notable advantages for investors looking for both long- and short-term solutions. Some of the most significant advantages include:
Tax efficiencywhereas mutual funds have serious tax implications, ETFs provide the potential to mitigate capital gains.
Transparencyevery ETF, whether passive or active, provides complete transparency to its holdings, which can be viewed on an ongoing basis.
Flexibilityunlike mutual funds, ETFs can be bought and sold like common stocks during the day on an exchange through a broker.
Lower feesETF fees are typically lower than fees for mutual fund shares.
Higher liquidityETFs typically offer higher daily liquidity than mutual fund shares.
ETFs require two key parties to facilitate the exchange process: authorized participants (APs) and lead market makers (LMMs).
Authorized participants are the capital markets facilitators of the ETF creation and redemption process. This process is a key feature that distinguishes ETFs from their mutual fund counterparts. An APs function in the ETF space is similar to that of a broker-dealer or other financial intermediary in the open-end space. In essence, the ETF distributor and the AP work together to facilitate the creation and redemption of ETF shares.
Lead market makers (LMMs) provide liquidity, per the ETFs listing exchange requirements, for the ETF shares during regular trading hours. Sometimes, the same firm will serve as both an LMM and an AP based on its internal capabilities. In other cases, these functions fall to separate parties.
Because of the benefits they provide, the popularity of ETFs will likely continue to grow. They present an attractive investment option to numerous types of investors. One client, an $8 billion fund family, was reluctant to enter the ETF market for a long period of time. The fund preferred traditional, open-end mutual funds and separately managed accounts (SMAs). However, the funds research team recently indicated it saw an overwhelming majority of asset management inflows going toward ETFs. Because of this trend, it expressed a renewed interest in exploring the ETF space.
This is just one of many examples that demonstrate a growing recognition among investors for ETFs and their potential benefits. Based on client feedback and investment trends, all signs indicate the popularity of ETFs is unlikely to diminish anytime soon.
Learn more about ETFs and whether they might be right for you. Visit us /globalfundservicesorconnectwith a global fund services expert.
U.S. Bank does not guarantee the products, services, or performance of its affiliates and third-party providers.
For small business growth, consider the international market
10 ways a global custodian can support your growth
4 ways to manage the risks of a U.S.-China trade war
Investment and Insurance products and services including annuities are:
Not a Deposit Not FDIC Insured May Lose Value Not Bank Guaranteed Not Insured by any Federal Government Agency
U.S. Wealth Management U.S. Bank and U.S. Bancorp Investments is the marketing logo for U.S. Bank and its affiliate U.S. Bancorp Investments.
The information provided represents the opinion of U.S. Bank and U.S. Bancorp Investments and is not intended to be a forecast of future events or guarantee of future results. It is not intended to provide specific investment advice and should not be construed as an offering of securities or recommendation to invest. Not for use as a primary basis of investment decisions. Not to be construed to meet the needs of any particular investor. Not a representation or solicitation or an offer to sell/buy any security. Investors should consult with their investment professional for advice concerning their particular situation.
U.S. Bank, U.S. Bancorp Investments and their representatives do not provide tax or legal advice. Your tax and financial situation is unique. You should consult your tax and/or legal advisor for advice and information concerning your particular situation.
Deposit products are offered by U.S. Bank National Association. Member FDIC. Mortgage, Home Equity and credit products offered by U.S. Bank National Association. Loan approval is subject to credit approval and program guidelines. Not all loan programs are available in all states for all loan amounts. Interest rates and program terms are subject to change without notice.
U.S. Bank is not responsible for and does not guarantee the products, services or performance of U.S. Bancorp Investments.
Investment products and services are available through U.S. Bancorp Investments, Inc., memberFINRAandSIPC, an investment adviser and a brokerage subsidiary of U.S. Bancorp and affiliate of U.S. Bank.
Insurance products are available through various affiliated non-bank insurance agencies, which are U.S. Bancorp subsidiaries. Products may not be available in all states. CA Insurance License OE24641.
Pursuant to the Securities Exchange Act of 1934, U.S. Bancorp Investments must provide clients with certain financial information. The U.S. Bancorp Investments Statement of Financial Condition is available for you to review, print and download.
The Financial Industry Regulatory Authority (FINRA) Rule 2267 provides for BrokerCheck to allow investors to learn about the professional background, business practices, and conduct of FINRA member firms or their brokers. To request such information, contact FINRA toll-free at 1.800.289.9999 or via. An investor brochure describing BrokerCheck is also available through FINRA.
U.S. Bancorp InvestmentsOrder Processing Information.