Current market turbulence is driving Exchange Traded Fund (ETF) growth as investors address the issue of risk, according to iShares.
Average global daily trading volumes of all ETF providers combined increased by 128.8% in a year, it says, from €42bn in September 2007 to €96.1bn in September this year.
The ETF arm of Barclays Global Investors (BGI) also says it reached more than €25bn in trading of its European listed ETFs, compared to €15bn in September 2007.
It says the rise in ETF popularity is due to the products' resilience in any market conditions, plus their liquidity and transparency. iShares investors are currently reducing portfolio risk by taking long-term index exposure using ETFs, as well as looking to reduce their counterparty risk exposure, it says.
In September, iShares Europe collected €2.5bn, gathering €11bn year to date, nearly twice as many assets as the previous year. It now has €39.4bn assets under management in Europe.
Andrea Morresi, head of sales for iShares in Europe says: “Recent events have driven investors to re-evaluate their use of investment vehicles with less transparency, for example with products such as swaps and futures."
Morresi says investors are "deeply concerned" about the issue of counterpart risk and the rising cost of derivatives products. He predicts global ETF assets under managements will exceed $1trn in 2009 and $2trn in 2012.
He thinks the estimates are conservative, as recent events highlight the need for investors to focus on risk management.
“The continuing outflows of mutual funds, particularly in Europe, and the substantial inflows into ETFs are an indication the tide may be turning in ETFs' favour,” he adds.IFAonline
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