The flexible alternative

Exchange traded funds (ETFs) can be an effective tool for both active and passive institutional managers and for retail investors. They are a flexible tool that are not derivatives but which allow investors to react quickly to short- and long-term needs or opportunities. As such, they are an alternative to futures, trading baskets of shares trades and the use of traditional active and passive funds. The growth in the use of ETFs has been fuelled partially by investors' attempts to avoid accounting, earnings and other stock-specific risk. They can be bought and sold at market, limit or as...