According to S&P Dow Jones Indices, exchange-traded funds are set to exceed hedge funds this year. Exchange-traded funds are defined by Investopedia as securities that track a commodity, index or a basket of assets like an index fund and are basically trading like a stock on an exchange. A State Street and Wharton 2008 study earlier argued that ETFs could be attractive investments due to their low costs, stock-like features and tax efficiency.

Tim Edwards, who is director of index investment strategy of S&P Dow Jones Indices, said assets that are held in ETFs could outweight hedge funds in late 2014 should the current trends continue.

Last year, ETFs saw increases in size and popularity. ETFGI research showed that global ETF and ETP (exchange-traded product) assets hit $2.4 trillion by the end of November. Fundweb.co.uk said in a separate report that this was a record high for such securities.

Edwards stated, "Once the darlings of the asset management industry, hedge funds are seeing their pre-eminent status challenged by a diametrically opposite segment of the investment spectrum, as the cheap, liquid and transparent value proposition of ETFs continues to attract substantial investment from across the globe. Taking the numbers from BarclayHedge it looks as if total ETF assets are on course to break above total hedge fund assets early in the New Year. Indeed, as these numbers are somewhat delayed in any case, they may have already done so."

Hargreaves Lansdown passive investment manager Adam Laird said that even though ETFs' prices are relatively cheap, investors could expect to see prices of such securities to continue to fall. He added, "The cost of investing is falling and investors can now access tracker funds from as little as 0.1 per cent total expense ratio. There is a lot of competition between managers of tracker funds and I predict we will see charges fall this year, which will benefit investors."