5 Tricks and Treats In Store for ETF Investors

Investing in ETFs offers a multitude of treats for investors who play their cards right, but there's the odd trick too

Ben Johnson 29 October, 2010 | 2:03PM
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Halloween is upon us once again, so whether you're preparing to douse yourself in facepaint and stock up on goodies, or to barricade yourself behind the front door and spend Sunday evening in silence with the lights off, we've got four treats and a solitary trick for you to add to your exchange-traded funds cauldron.

1. Treat: Transparency. ETF providers such as iShares and Credit Suisse have demonstrated a commitment to full transparency by disseminating the composition of the collateral baskets held by their swap-based funds on a daily basis. While investors will in many cases not be able to make sense of the composition of these baskets--as they often bear little resemblance to the funds’ reference indices--regular disclosure will allow for greater scrutiny of the assets backing these funds. Independent research groups such as Morningstar will no doubt scour these new disclosures and try to provide a better sense of the collateral portfolios’ safety. Read more here.

2. Treat: On-exchange liquidity is on the rise. Year-to-date GBP turnover for exchange-traded products on the London Stock Exchange has risen 43.6%. Increasing turnover bodes well for the future direction of exchange-traded products trading costs.

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Ben Johnson

Ben Johnson  is director of passive funds research at Morningstar.