This will allow them to pursue a fund's investment objective, and to understand the risk-and-return drivers of the strategy before investing.
Future developments
How far can developments go in the exchange-traded product space? Lamont states: "ETFs have played their part in the democratisation of finance".
What he means by this is that retail investors can now invest, seemingly effortlessly, in corners of the market that were previously off limits to them.
For example, ESG-based ETFs allow investors to put their money where their morals are, while others, such as battery technology ETFs, allow investors to easily bet on specific long-term thematic ideas.
Lamont clarifies: "It should also be stated that not all ‘smart beta’ funds offer more risky return profiles. For example, minimum volatility strategies select the least risky stocks when building their portfolios.
"Many of the more esoteric and concentrated passive funds should only ever take up a small portion of an investor’s overall portfolio."
Morris comments: "As alluded to, ETFs can invest in almost any asset class. This includes the ability to replicate assets such as currencies, or alternatives such as gold, without needing to hold the physical asset.
"This includes cryptocurrency and is why we are seeing them as an increasingly popular way of investing in this asset class. I use the terms ‘investing’ and ‘asset class’ loosely. After all, most crypto investors are under age 35 and may have little investment experience."
He says he recently read that around three-quarters of these young crypto investors have not previously invested in traditional assets and more than half do not have a pension.
However, he adds: "Saying that, with a market cap of around £600bn, bitcoin can no longer be ignored as an outlier. The ability to access cryptocurrencies through a more traditional wrapper, where there is less risk of fraud and risk to the financial system, can only be positive."
Morris's argues that as well as making them a mainstream asset class, such a move will likely introduce the younger crypto investors to more mainstream investments.
"The fact an ETF can use leveraging means fund managers can reduce the volatility of cryptocurrency through derivatives. And hopefully will mean we see less examples of people chasing the next crypto that will 'go to the moon'," he adds.
But it is not just about 'esoteric' or 'exotic' investments. Bailey says there is a growing trend of active managers using the ETF wrapper in the US.
This been made possible by a change in SEC regulations no longer requiring ETFs to publish their holdings every day.
