Special Reports » EXCHANGE-TRADED FUNDS

— Manooj Mistry, head of db x-trackers in the UK, an arm of Deutsche Bank

Liquidity and ease of use are just two reasons why ETFs are becoming increasingly popular. Ceri Jones reports on the latest developments in the market.

— Daniel Draper, Lyxor ETFs

Exchange-traded funds, or ETFs, remain hugely popular, garnering particular interest from multi-managers. Gerry O’Kane explains why ETFs manage to excel, despite scepticism.

— Tim West, iShares

Institutions looking to access the ETF structure no longer need to go as far afield as the US – not with Dublin and Luxembourg as favoured European domiciles. Gerry O’Kane reports.

Exchange-traded funds (ETFs) have grown in popularity over recent years and are fast becoming part of the investment mainstream. There are now over 400 ETFs available on a multitude of indices, ranging from straightforward country index trackers to more exotic products offering exposure to emerging market or reverse indices and other asset classes.

Exchange-traded funds (ETFs) might have started as a mere speck on investors’ horizons when the first 3 products appeared in the US in 1993 valued at $0.81bn, but their growth worldwide over 14 years sees assets under management standing in excess of $746bn.

— Tim West, iShares Europe

Exchange-traded funds have discovered a silver lining to this summer’s difficult markets. Their liquidity is attracting interest from Europe’s fund managers, as Ceri Jones reports.

— Manooj Mistry, Head of equity ETF structuring

The exchange-traded fund market in Europe is set for strong expansion, spurred by regulatory changes. Manooj Mistry, head of equity ETF structuring at Deutsche Bank explains.

— Goltz: predominately equity funds

The limited nature of bond ETFs means that equity ETFs are leading the way. Christine Senior looks at a new study into the asset class and determines how the market is growing, what products are in the pipeline and the hurdles for potential investors.

— Danièle Tohmé-Adet: co-head of the EasyETF platform at BNP Paribas Asset Management

Danièle Tohmé-Adet, co-head of the EasyETF platform at BNP Paribas Asset Management Paris, guides you through the best performers and the safest bets in the growing ETF market.

Exchange-traded funds are evolving, with new products appearing across a broad range of asset classes. Specialists are emerging in what is becoming a concentrated market. Paula Garrido reports.

— Tohmé-Adet: ETFs are less expensive than traditional funds

Daniele Tohmé-Adet, co-head EasyETF platform and head of ETFs and indexed funds business development structured and indexed investments, explains how exchangetraded funds have evolved to become appealing to a wider range of users.

— Deborah Fuhr, Morgan Stanley

Europe has been busy buying into the ETF market this year owing to growing interest from the pension fund market which views them as an investment product that can reduce risk, while offering a good geographic exposure. Gerry O’Kane reports.

This year has produced some interesting statistics for the global exchange-traded fund (ETF) market, showing that Europe has arrived as a player. Figures from Morgan Stanley reveal that while worldwide assets under management for ETFs increased by 1.7 per cent since the beginning of 2005, this was largely due to European activity in the market.

It is all fanfares at Deutsche Börse as it celebrates its fifth year of exchange trade fund business in Europe. The London Stock Exchange may feel somewhat piqued since it was only two days behind the Frankfurt-based exchange but has yet to match the volumes and breadth of product offering found on XTF, DB’s segment for ETF trading.

— Juergen Fritzen, HVB

The most crucial opportunity to reduce the holding costs is to lend the long position of ETFs back to a broker or a hedge fund who is short in the products. Juergen Fritzen explains how.

Although exchange-traded funds (ETF or tracker) should be familiar to nearly all professional participants in the equity and bond markets, the excellent applications offered are still underestimated. While an increasing number of institutional investors such as asset managers, insurance companies, banks, pension funds or other players are discovering and using ETFs for active portfolio management purposes, the applications can be more multifunctional than many portfolio managers think.

— Fuhr: ‘providers must educate investors on existing products’

European demand for ETFs is expected to grow in 2005 as investors seek low-cost exposure to new asset classes. Paula Garrido reports.

For the last few years the market for exchange traded funds (ETFs) has been experiencing continuous growth. According to a report by Morgan Stanley, assets under management in the sector were $260bn (€194bn) at the end of October 2004, with 326 different ETFs listed on 29 exchanges across the world and managed by 38 managers. From January to the end of October 2004, ETFs have managed to attract more than $1bn from investors, representing a 5 per cent growth of assets under management. More interestingly, the European ETF market experienced a 15.7 per cent rise in assets since the beginning of 2004.

— Bourcier: offering ETFs based on eurozone government bonds indices was a natural progression but not without risks

Lyxor AM’s launch of the first ever ETFs based on eurozone government bond indices has gone down particularly well in France and Italy.

It is a staggering fact that the European-listed ETF market in 2000, consisted of only six funds, while there are currently 111 listed funds valued in excess of $30bn (€22bn).

While the industry is slapping itself on the back for creating some profitable new business, many people missed a small revolution in the exchange traded fund sector. In February last year the first ever European ETF, based on a bond index, was launched.

It was not a fact missed by asset management company Lyxor AM, a wholly-owned subsidiary of the Société Générale group. Already a leader in the European market and responsible for more than 25 per cent of all assets gathered in ETFs.Lyxor AM is competing fiercely for the first place position with the global giants of ETFs, Barclays Global Investors’ subsidiary iShares.

As a result of education and publicity Deutsche Börse finds that German retail interest in exchange traded funds is growing strongly.

Continued good news from the exchange traded fund (ETF) market over the past 12 months must have had shareholders in Deutsche Börse rubbing their hands in glee. Yet again its XTF segment, created especially for exchange traded funds, dominated the European market and for once in the financial industry, left the London Stock Exchange coming well back in the race.

— East end: Bruce Lavine, head of iShares in Europe, announces the launch of the UK's first exchange traded funds providing access to China and Japan In September 2004

ETFs can offer portfolio managers a cheap, prepackaged product closely tied to a benchmark, that is easy to use in short-term asset allocation shifts.

Chris Sutton mulls over the concept that at some point in the future the ETF market could take sales from the passive mutual funds, as institutional investors recognise its benefits. He will not be drawn specifically, but simply says things are looking good for the ETF business.

As chief executive of iShares for Europe and Asia (ex Japan), Mr Sutton has good reason to be looking optimistically to the future.

At the same time that iShares, the ETF arm of Barclays Global Investors, continues on its role of evangelising ETFs and educating the institutional investor to the ins and outs of ETFs as efficient and cost-effective investment tools, their average daily trading volume has passed the $13.4bn (e10bn) mark globally.