Study: ETFs Are Honing In On Their Benchmarks

As the ETF world has continued to grow over the past few years, funds have stretched beyond the typical benchmarks such as the S&P 500 or the DJIA and into more exotic or extensive indexes. While this has been welcomed news for investors seeking further diversification, there has also been a downside to this expansion as well. These more unique benchmarks are much harder targets for ETF issuers to hit, and as a result tracking error for ETFs has surged higher in recent years–hitting 0.84% in 2009. However, recent data suggests that ETF issuers are increasing their accuracy and are becoming better at matching their benchmark’s returns. According to a report from Morgan Stanley Smith Barney, tracking error declined significantly in 2010 for all U.S.-listed ETFs, down to just 0.57%. Meanwhile, in the international fund segment, where it can be more difficult to match benchmarks thanks to timezone differences and [...] Click here to read the original article on ETFdb.com. Related Posts: ETF Investors Are Embracing Low Cost Options…Or Are They? For ETF Investors, The Details Matter (Part II) Ten New Years’ Resolutions For ETF Investors ETF Tax Efficiency Report Card ETFs For The Forgotten Asset Classes