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Volatile markets have sapped some of the enthusiasm for active management, while the tax advantages of ETFs have grown more apparent.
Advisors and clients have learned that ETFs are less likely than mutual funds to generate tax bills for reinvested capital gains distributions.
As a result, U.S. ETF assets, barely over $100 billion in 2002, reached nearly $2.1 trillion at the end of this year?s first quarter, with some of that 20-fold increase coming from mutual funds.
?We have moved a large percentage of our equity mutual fund holdings to ETFs over the last decade in order to get ETF benefits,? said Kevin Reardon, a CFP and president of Shakespeare Wealth Management in Pewaukee, Wis. ?ETFs have greater tax control than mutual funds, greater liquidity and the ability to hedge.?
ETF tax advantages also were cited by Vern Sumnicht,...