With news that iShares is due to launch swap-based ETFs "imminently" and with other providers hinting they too will start to offer synthetically replicated funds in the near future, it seems the industry as a whole is now more broadly willing to embrace this model.
This marks a significant departure from the polarised debate that has been waged between ETF issuers on the merits and drawbacks associated with traditional and synthetic funds. This latest development suggests ETF providers might now focus less on exploiting the structural differences between funds, and will perhaps instead concentrate on promoting ETFs as an efficient investment vehicle, to the benefit of the whole industry.
Moving into the swap arena is an interesting tactical shift for certain providers, and implies some of the greater efficiencies swaps offer in tapping particular regions or sectors, such as the emerging markets and commodities.
A step further down the line is the multi-swap counterparty model. As the market grows, it will be interesting to see if new distributors launch their business with multi-swap funds, along with investment banks who want to partake without having to set up their own ETFs. In this edition, Helen Fowler looks at the multi-swap model, which is dubbed the next generation in ETFs, and explores to what extent this type of arrangement already exists.
Perhaps the next generation to fully emerge will be active ETFs. BlackRock has recently filed with the US Securities and Exchange Commission to launch active ETFs, which will provide exposure to fixed income and US equities. However, whether active ETFs will ever take root and grow in Europe remains to be seen.
Emma Dunkley, Editor
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