| Key stability on the $306.5 billion global ETF market |
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| The global Exchange Traded Fund (ETF) market continues to grow, with nine new ETFs launched in January - four in Israel, three in Europe and two in the US. A further sixty new ETFs are planned this year - fourteen in Europe (including the first Irish ETF), forty-four in the US and two in China, says Deborah Fuhr. |
AAnnounced plans for new ETFs• At the end of January 2005, there were 345 ETFs with assets of $306.5 billion, managed by 42 managers on 30 exchanges around the world. The US has the largest number of products and assets under management (AUM) - 154 ETFs and $224.1 billion, followed by Europe with 117 ETFs and $34.5 billion and Japan with 15 ETFs and $29.8 billion.
• Year to date (YTD), ETF AUM worldwide has decreased by -1.0 per cent which is less than the -2.3 per cent decrease in the MSCI World index in USD terms. The US listed ETFs decreased by -1.6 per cent and Japan by -1.5 per cent, while Europe increased by 1.6 per cent.
• Investors are increasingly using ETFs to gain exposure to international benchmarks. As the job of most portfolio managers has become broader and deeper, covering all the developed and emerging markets as well as looking at sectors and countries, we have found that many are admitting that they do not have the time nor resources to try to add value in all markets and are embracing the use of ETFs to gain international market exposure. This allows them to pick stocks in the markets that they feel can they can add value in. In other cases, these ETFs are used to equitise cash or to establish an over- or underweight position.
• Barclays Global Investors (BGI) is the largest ETF manager globally with assets of $128.08 billion or 41.78 per cent market share, followed by State Street Global Advisors (SSgA) with $80.63 billion or a market share of 26.30 per cent. In terms of number of products, BGI is ranked first with 129 ETFs, more than three times the number of ETFs that second ranked SSgA manages.
• ETF trading volumes are up 29.3 per cent since the beginning of the year based on average daily volumes ($). At the end of January 2005, the average daily trading volume in ETFs was $16.19 billion or 265.3 million shares. The largest percentage increase was in Israel, followed by Australia and US.
• There are 75 options and five futures on ETFs listed on exchanges in the US, Europe and Canada. The first option on an ETF - the MidCap SPDR - began trading about five and a half years ago on November 16, 1998 in the US on the American Stock Exchange. In the US there are 63 options on ETFs, which means that 41 per cent of US listed ETFs have options.
• ETFs possess characteristics that make them alternatives to futures and stock based portfolios for investors seeking to gain or reduce country, regional, sector or style exposure. ETFs are mutual funds and not derivatives. They trade and settle like single shares and are backed by baskets of securities designed to track indices. In the US trades that involve shorting ETFs are exempt from the up-tick rule. ETFs offer diversified exposure and lower expense ratios than traditional funds.
• During January, nine ETFs have been launched - four in Israel, three in Europe and two in the US and none have been delisted.
• Sixty ETFs are planned: fourteen in Europe, forty-four in the US and two in China.
• Lyxor International Asset Management (Master Units)/ /is the largest manager of ETFs in Europe in terms of AUM with $8.2 billion, which is 23.8 per cent of the market; IndEXchange AG is second with assets of $7.98 billion and 23.1 per cent; followed by BGI (iShares) with $7.65 billion or 22.2 per cent of the AUM.
Year to date (YTD), ETF AUM in Europe have increased by 1.6 per cent which is significantly more than the -1.9 per cent decrease in the MSCI Europe index in USD terms. Three ETFs in Europe have an AUM of over $3 billion and eight have assets over $1 billion.
Three of these eight ETFs are tracking the Dow Jones Eurostoxx 50 index.
In Europe, ETFs providing exposure to Regional Eurozone are the most popular with 34.3 per cent of the assets followed by ETFs covering European Country indices with 32.8 per cent of the assets.
Three new ETFs were launched during 2005 and none delisted. There are plans to launch fourteen ETFs during 2005.
There are now ETFs with official listings on 1 2 exchange segments in Europe. During December, the XTF segment of the Deutsche Boerse captured 48.8 per cent market share. Euronext, which has three segments trading ETFs -Amsterdam, Brussels and Paris - ranked second at 18.0 per cent. The London Stock Exchange came in third, capturing 11.5 per cent. |
Deborah A. Fuhr is executive director, Global Exchange Traded Fund Research, Morgan Stanley & Co.
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| Article appeared in the March 2005 issue.
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