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ETF ETP Industry outlook from Blackrock Global ETF ETP assets on pace to exceed US$2 trillian

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ETF  ETP Industry outlook from Blackrock Global ETF  ETP  assets on pace to exceed US$2 trillian Powered By Docstoc
					ETFs Emerge as Key Indicators of Market Sentiment,   With Asset Flows in
2010 Tracking Investor Shift to Equities


  Investors Will Continue to Favor Broadly-Based ETFs To Achieve Low
Cost, Efficient Exposure to -œBeta-•      London/Sydney, February 1, 2011
- Global assets under management (AUM) in exchange traded funds (ETFs)
and exchange traded products (ETPs) are anticipated to increase by 20 to
30 percent annually over the next three years, taking the global ETF/ETP
industry to approximately US$2 trillion in AUM by early 2012, according
to BlackRock's Global ETF Research and Implementation Strategy Team.
According to a year-end industry recap and outlook produced by the
BlackRock group, the global ETF and ETP industry combined had 3,503
products with 7,311 listings and assets of US$1.482 trillion, from 168
providers on 50 exchanges around the world as of December 31, 2010. This
compares to 2,672 products with 4,856 listings and assets of US$1.156
trillion from 132 providers on 45 exchanges at year end 2009.       "The
industry grew across the board during 2010 and we expect this to continue
in 2011," said Deborah Fuhr, Global Head of ETF Research and
Implementation Strategy at BlackRock.       ETFs are index based open-
ended funds that can be bought and sold like ordinary shares on a stock
exchange. They have become popular and widely used investment vehicles to
facilitate many investment and diversification strategies - from short-
term tactical applications to longer-term strategic applications. The ETP
industry includes other product structures such as trusts, partnerships,
commodity pools and notes.      Considering ETFs separately, AUM will
reach US$2 trillion globally by the end of 2012, US$1 trillion in the US
in 2011 and US$500 billion in Europe in 2013, Ms. Fuhr projects.
Taking ETFs and ETPs together, US AUM should reach US$2 trillion in 2013,
with European AUM reaching US$500 billion in 2012.      Factors driving
expanding use of the vehicle include the number and types of equity,
fixed income, commodity and other indices covered, more fund platforms
embracing ETFs, more active marketing of ETFs by online brokers, greater
involvement by fee based advisors, the growing number of exchanges
planning to launch new ETF trading segments, and regulatory changes in
the US,Europe and many emerging markets that allow funds to make larger
allocations to ETFs, Ms. Fuhr said.      "Demand for ETFs globally has
surged as professional and retail investors alike have discovered their
unique combination of benefits, such as versatility, transparency and
significant cost advantages," Ms. Fuhr said. "The availability of cost
effective, flexible, liquid, diversified investment products that enable
rapid implementation of a comprehensive range of investment strategies
has struck a chord with investors - during both bull and bear markets."
Capital Flows Track Investors' Return to Equities      Capital flows in
2010 within ETFs demonstrate that the products are becoming key
indicators for shifts in investor sentiment between asset classes.
"During 2010, developed and emerging equity ETFs enjoyed heavy inflows,"
Ms. Fuhr said. "On the other hand, fixed income and commodity ETFs/ETPs
received smaller net new asset flows than in 2009 as some investors
adjusted their risk profiles."      In 2010, US$169.4 billion in net new
assets went into ETFs/ETPs, compared with US$176.3 billion net new assets
in 2009.       Equity ETFs/ETPs attracted US$106.3 billion in net new
asset flows in 2010, greater than the US$69.1 billion for all of 2009.
Net new asset flows into ETFs/ETPs tracking developed market equity
indices were US$64.2 billion in 2010, compared with US$34.6 billion in
2009. ETFs/ETPs tracking emerging market indices drew US$42.1 billion in
net new asset flows, compared with US$34.5 billion in 2009.       Fixed
income ETF/ETP net new assets were US$37.7 billion in 2010 compared with
US$54.3 billion for 2009. Net new assets going into ETFs/ETPs with
commodity exposure were down significantly, from US$46.2 billion in 2009
to US$22.7 billion in 2010.      Securing Broad Exposure While Managing
Risk      The challenging market conditions of 2008 and 2009 caused a
significant shift in investors' risk appetite and their desire for
liquidity. During 2010, many investors found that ETFs met their need for
greater transparency regarding cost, holdings, price, liquidity, product
structure, and risk and return related to investment alternatives, Ms.
Fuhr noted.      "ETFs make it easier for investors to participate in all
domestic asset classes, global regions and industry sectors," she said.
"Most importantly, ETFs give investors the opportunity to participate
where markets have been showing promise."       At the same time, despite
growth in the use of ETFs covering alternative asset class exposures,
investors will continue to prefer ETFs based on broad-market indices that
serve as core holdings, Ms. Fuhr said. "With today's increased market
volatility, no single sector, style, or stock consistently outperforms
its peers," she said. "Having core holdings invested in broad-market
indices not only helps reduce volatility but can also achieve competitive
returns for the overall portfolio."      "ETFs have fundamentally changed
the way both institutional and retail investors construct investment
portfolios," said Ms. Fuhr. "We expect ETFs to continue to be one of the
preferred investment vehicles for low cost beta exposure across both
retail and institutional markets."      Industry Growth Underscores
Educational Need      The industry's growth continues to underscore the
need for market-wide education regarding how ETFs and ETPs work,
different product designs, and effective applications of the product set,
Ms. Fuhr said.      "ETFs are one of the greatest financial innovations
of recent years and their future is bright - but the industry is at a
critical crossroads," said Ms. Fuhr. "Clarity is essential if the
industry is to help investors understand ETF and ETP structures and
mechanics as well as the tax and regulatory implications of using ETFs
and ETPs. In addition, agreeing on the definitions for the various
product structures is one of the pressing needs of the industry in 2011.
"Greater transparency around product structure, replication of indices,
and pricing is vital to helping investors make informed investment
decisions when considering ETFs and ETPs," she said.


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posted:11/17/2011
language:English
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