Investors warm to ETFs
The rise of exchange traded funds has been one of the key developments in the investment world during the past 10 years. It is a popularity that has gained further impetus since the collapse of Lehman Brothers as ETFs are seen as safer and more cost efficient than their actively managed rivals.
ETFs have grown dramatically since 1999 from assets totalling $39bn to $593.3bn in February this year – a 15-fold increase, according to Barclays Global Investors (BGI).
The total amount of assets has fallen from the peaks of 2007, when the industry was worth $796.7bn – but, as markets worldwide have crashed, key data on fund flows and a rising share of trading volumes point to an industry on the up.
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ETFs now account for 25 per cent of all trading in US markets compared with 15 per cent a year ago, according to Credit Suisse.
In Europe, according to Source, ETFs managed to attract net inflows of $47bn in 2008, in spite of the financial shocks, while European mutual funds saw outflows rising close to $250bn. (Source is a specialist provider of exchange traded products set up by Bank of America Merrill Lynch, Goldman Sachs and Morgan Stanley.)
But it is in the past seven months, since the demise of Lehman in September and as volatility on the financial markets has hit levels not seen before, that investors have shown even greater interest in ETFs
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