Big asset managers, and particularly leaders in the ETF business, are some of the most well-respected names in the financial world. However, they do little market commentary or forecasting. Well, that does not apply today as Invesco, one of the biggest ETF providers in the world, has just warned that investors are blindly pouring money into indices, setting the market up for huge losses. The president and CEO of Invesco, Martin Flanagan, says that market cap weighted ETFs (by far the majority) are setting up investors for huge trouble as they will inflate losses when the market declines. Flanagan says he is worried that many investors don’t understand the high concentrations of stocks they are buying into with market cap-based ETFs.
FINSUM: Invesco is smart-beta focused, but they do run a very large market-weighted ETF (QQQ), so these comments are not in their interest, making them more important.