Exchange-traded funds are proliferating, offering investors many new options.What does it mean for issuers and what do investor relations professionals need to know?


BY AL RICKARD, CAE E


xchange-traded funds (ETFs) have multiplied exponentially in recent years since the U.S. Securities and Exchange Commission (SEC) adopted Rule 6c-11 (the “ETF rule”) in 2019. Te rule allows ETFs that meet certain


conditions to go to market without the delay of ob- taining an exemptive order and also makes custom creation/redemption baskets available for all ETFs. According to Morningstar, ETF investments


reached $11.1 trillion in assets under management (AUM) as of December 31, 2023. ETFs represent 13% of equity assets in the United States and Statista reports there are 3,243 ETFs as of 2023, up from just 123 in 2003. Investopedia offers a succinct definition of


ETFs (see sidebar, “What Is an Exchange-Traded Fund?”), and ETFs provide investors with diver- sified, low-cost, transparent, and tax-efficient exposure to multiple holdings. To analyze the ETF trend, NIRI held a ses-


sion, “Navigating the ETF Landscape: Passive Money or Untapped Opportunity?,” at the NIRI 2024 Annual Conference. Conference Chair Patrick Davidson, Senior


Vice President, Investor Relations at Oshkosh Corporation, moderated the panel discussion that featured Jennifer Grancio, Global Head of Distribu- tion, Group Managing Director, TCW and Dana


Pros and Cons of ETFs


Investopedia notes the following pros and cons of ETFs for investors:


Pros • Access to many stocks across various industries


• Low expense ratios and fewer broker commissions


• Risk management through diversification


• ETFs exist that focus on targeted industries


Cons • Actively managed ETFs have higher fees


• Single-industry-focused ETFs limit diversification


• Lack of liquidity hinders transactions


Source: www.investopedia.com/terms/e/etf.asp


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