Investors opt for ETFs to provide transparency and liquidity

Investors are increasingly turning to exchange-traded funds (ETFs) over other investment vehicles such as structured products, swaps and certificates, amid concerns surrounding counterparty risk, transparency and liquidity, according to the latest Barclays Global Investors' (BGI) industry review. Investors are showing a preference for ETFs with a fund structure, especially those which invest exclusively in securities. In the first nine months of 2008, net sales of ETFs in Europe amounted to US$54.1 billion, while European domiciled mutual funds net sales were minus $302 billion, based on data by Lipper/Feri.

The review notes that ETFs with exposure to fixed income and commodity indexes have gained assets, while assets in ETFs based on equity indexes have declined through 2008. ETF trading on the Six Swiss Exchange, SWX Europe and Scoach Switzerland peaked in November with a turnover of SFr7.6 billion, marking an increase of around 95% compared with October trading. Nonetheless, the review notes that October experienced the largest number of ETF managers closing their ETFs, with Santander, Bear