International Securities Finance magazine - Tuesday, October 21, 2008

Market turmoil drives ETF growth

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Exchange Traded Fund (ETF) provider, iShares has experienced exceptionally large gross trading volumes, reaching more than €25 billion in trading of its European listed ETFs versus €15 billion in September 2007.

According to iShares, the average global daily trading volumes for all ETF providers combined were €96.1 billion in September 2008. This compares to €42 billion in September 2007, representing an increase of 128.8% compared to the same period last year.

iShares strongly believe that it is the current market turmoil driving ETF growth and that the ETF market will benefit in the long term as investors will continue to address the issue of risk.

Currently, iShares is seeing investors reduce the level of risk in their portfolios by taking long-term index exposure using ETFs, as well as looking to reduce their counterparty risk exposure. In September, iShares in Europe gathered €2.5 billion, €11.0 billion year to date – nearly twice as many assets from the previous year (€5.8 billion: 2007).

Andrea Morresi, head of sales for iShares in Europe, said: "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. Investors are deeply concerned about the issue of counterparty risk and the rising cost of derivative products. ETFs are an ideal tool for navigating the current environment, continuing to offer transparency and flexibility during these unprecedented times."

He continued: "Global ETF growth projections currently estimate total assets under management in ETFs will exceed $1 trillion in 2009 and $2 trillion in 2012. We believe that these estimates are conservative, as recent events underscore the need for investors to seek out transparency and focus on risk management."

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