The global exchange traded fund (ETF) industry is set to explode, with assets projected to reach US$...
The global exchange traded fund (ETF) industry is set to explode, with assets projected to reach US$1trn and double in 2010, data from Barclays Global Investors (BGI) reveals.
Although the continuing economic downturn has harmed some of the market, which is down 4.1% in the year to date, to $764bn, this compares favourably with the MSCI World Index.
The rapid predicted growth of the assets was based on the changing ways institutional investors and managers view the asset class and the increasing acceptance of ETFs as a mainstream investment tool.
Manooj Mistry, head of equity ETF structuring at db x-trackers, said the growth of ETFs was part of a wider trend towards investors using index-based products.
Mistry said: “I would agree that market will continue to grow. In Asia, the market hasn’t really taken off yet. It’s where Europe was about five or six years ago. But we are seeing greater appetite from investors. There is a lot of potential for the ETF market to grow globally.”
“There’s an increased trend of people using index products, not just ETFs. In Europe, ETF use compared to total assets is less than about 2%, while in the US it’s somewhere between 5-6%, so the penetration is still relatively low. The range and variety of ETFs has also increased, and what that does is give investors a ‘toolkit’ for their for investment plans. There are a lot of products out there.”
BGI said in particular, regulatory changes, the opening of access to new asset classes and the increasing trend to cheap beta were seen as factors driving growth.
BGI added it was likely new providers would enter the market, such as Julius Baer, which recently launched six gold exchange traded commodities (ETCs) on the Swiss bourse (ETFMonline.com; 31 October 2008).
The number of ETFs also grew, from 1,171 last year to over 1,500 this year.
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