Bloomberg Columnist Michael Sesit warned last week that mutual funds and hedge funds better watch out for an invasion by ETFs.  He quotes one expert as describing ETFs as “The Blob” from the 50’s sci-fi movie that consumes everything its in path.

He picks up on a theme espoused by his late colleague, Chet Currier in a December 2006 column on how mutual funds may someday become “obsolete”, when he observes:

“To some degree, index-linked products are already eating active managers’ collective lunch. Based on the almost $1 trillion invested in index-based products in the U.S. — up 2,610 percent since 1993 — the active-management community is losing about $12 billion a year in management fees, [Adam] Sussman [of the Tabb Group] says.”

But throughout the column he paints hedge funds with the same brush:

“Lower expenses, the failure of most active-mutual fund managers to beat their benchmarks, the growing number of thematic and specialty ETFs, and the funds’ flexibility suggest they will attract investment that otherwise would flow to actively managed mutual and hedge funds.”

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