More education needed as ETF market grows

iShares, the world's number one ETF provider, believes more education about ETF products must be made available to investors in light of the rapid development of the ETF marketplace. To satisfy this requirement, iShares is undertaking a major education campaign with the theme ‘not all ETFs are created equal'. The call comes as iShares predicts global assets under management for ETFs will surpass the $1 trillion figure next year for the first time, whilst European ETF AUM, which currently stands at ~$155 billion, will cross the $200 billion barrier.

Rory Tobin, CEO, iShares Europe, said: "The European market is growing at a rapid rate. For investors, a critical question is whether they understand the key differences in the various ETFs being offered, most notably the differences in structure, cost, risk and return. For example, do investors understand the structural differences between swap based ETFs and physical based ETFs and are they aware of the various trade offs?

"We believe the reason that ETFs have grown in popularity is because of the advantages they offer over other products, such as simplicity, transparency and liquidity. iShares has worked hard to embrace these features in its product set. We are concerned that as the market evolves, the diversity of products on offer from other providers may not always reflect these values."

iShares believes that there are five key criteria to consider when evaluating an ETF and ETF product providers:

Transparency - does the investor have visibility into what they are holding in their ETF?

Client Service - does the ETF provider have a history of putting its clients first and listening to their needs?

Product Choice - does the ETF provider offer a broad suite of ETF products, across a range of different asset classes?

Portfolio Management - are the ETFs fine tuned to optimise performance?

Liquidity - does the ETF provider work proactively with all market participants in order to maximise ETF liquidity in the market place?

Tobin concluded: "iShares currently offers both physical and swap based ETFs. We believe that it is important for investors to understand the differences between the different formats when they make a decision to invest in an ETF. Today we are launching an investor education campaign to address this need. As part of this education campaign, we will be providing extensive literature and making information available online at ishares.com to aid investors in furthering their understanding of the various ETF products on offer. As the world's largest ETF provider, we believe that it is our responsibility to assist clients in this regard. We welcome this opportunity to engage with clients in developing this broader understanding of the ETF marketplace."