At a recent ETF conference, Vanguard CEO Bill McNabb recently called on his competitors to stop launching so many ETFs. McNabb suggested that a new ETF launches “it feels like, every 30 seconds” and analogized the pace to the introduction of new mutual funds in the 1980s, reminding the audience that “[t]hings did not end well for all those funds.” McNabb also argued that ETFs should provide investors with “basic building blocks” because “[i]f we go too far as an industry, people will have doubts about the original construct. And some categories are pretty esoteric.”
McNabb predicted that indexing will increase in popularity over the next five years, particularly in global markets. However, he did acknowledge that funds that “express a market view in a low-cost way” have a place in the industry.” In the face of market volatility, he advised investors to not seek out shortcuts, but rather “to be very disciplined over the long run” and to stick to their investing principles.