Exchange Traded Funds (ETFs)

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“An exchange-traded fund (ETF) is an investment fund traded on stock exchanges. An ETF holds assets such as stocks or bonds and trades at approximately the same price as the net asset value of its underlying assets over the course of the trading day. Most ETFs track an index, such as the S&P 500 . ETFs may be attractive as investments because of their low costs, tax efficiency, and stock-like features and the fact that you can trade them on margin.

An ETF combines the valuation feature of a mutual fund or unit investment trust, which can be bought or sold at the end of each trading day for its net asset value, with the tradability feature of a closed-end fund, which trades throughout the trading day at prices that may be more or less than its net asset value. Closed-end funds are not considered to be ETFs, even though they are funds and are traded on an exchange. ETFs have been available in the US since 1993 and in Europe since 1999. ETFs traditionally have been index funds, but in 2008 the U.S. Securities and Exchange Commission began to authorize the creation of actively managed ETFs.”

The European ETF market has over 800 produts from 34 providers traded on 18 exchanges. The total assets to day are worth $217.9bn and their US counterparts are worth £821bn.

These values are expected to rise especially in the European market as it is a lot younger than the US ETF industry which is over 20 years old. New products come out all the time. Some for the intitutional investors and some for the retail or individual investor/trader.

Today Black Rock released some up to date figures for the “Top Five European ETF providers by average daily US dollar turnover, as at the end of Januray 2010″.

i shares
Lyxor AM
db x-trackers
XACT Fonder
Credit Suisse AM
Others
32.9%
27.3%
21.6%
4.5%
2.1%
11.7%

note: iShares parent company is Black Rock.

One Response

  1. Aleen Aasby says:

    Thanks for this great post dude! Keep on posting nice articles.

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