Emerging-Market ETFs On the Rise, Doubling Market Share
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Sunday, June 21, 2009
Emerging-market investors are shifting to exchange-traded funds from actively managed funds, with ETFs nearly doubling their market share over the past year, according to Credit Suisse Group.
The number of emerging-market ETFs has risen to 111 from 99 a year ago, Credit Suisse said. Of the $365 billion invested in emerging-market funds, more than 30 percent is now in ETFs, compared with less than 16 percent in February 2008, London-based analyst Alexander Redman said, citing data from EPFR Global, a Cambridge, Mass.-based fund-tracking firm.
"This is as a result of retail investor disillusionment with relatively high fees for actively managed portfolios on top of the losses they have booked over the past year, coupled with emerging market ETFs offering a cheap highly liquid source of beta for global cross-over investors without having to do their homework into individual stock selection," Redman wrote in a note to clients.
ETFs, which typically are designed to mimic the performance of market indexes, also force investors to consider investing by countries and regions rather than by industries, he wrote. Unlike mutual funds, whose shares are priced once daily after the end of each trading session, ETFs are listed on an exchange where shares are bought and sold throughout the day like stocks.
The iShares MSCI Brazil Index Fund, managed by Barclays PLC, is among the 10 most-traded ETFs in New York, with daily volume of about $1 billion, Barclays Global Investors' chief executive for Latin America Daniel Gamba said in December.
The MSCI Brazil Index has jumped 53 percent this year, compared with a 35 percent gain for Mexico's Bolsa index.
Trading in ETFs in Mexico accounts for about 20 percent of average daily volume, Gamba said.
The first Peru ETF will start trading this month on the New York Stock Exchange, asset manager Global X Management said.
