Why International Investors Tap U.S.-Listed ETFs
September 4th 2013 at 11:15am by Tom Lydon
Exchange traded funds are gaining a greater following abroad as many foreign investors find that U.S.-listed offerings provide a more efficient means to access international markets.
According to ETFGI, institutions in over 50 countries utilize U.S. ETFs in their investment portfolios, reports Jackie Noblett for Ignites.
“Global institutions are looking for non-local exposure and they are using ETFs to get that exposure,” Daniel Gamba, head of Americas iShares institutional business at BlackRock, said in the article. “It’s the preferred vehicle because it’s a very transparent vehicle, and these [pension] plans are highly regulated. They like the fact that ETFs are regulated by the SEC but they are also regulated by the exchange where they are listed. And they like the fact that they are very liquid.”
About 17% of BlackRock iShares’ $561 billion in ETF assets under management comes from international markets, but 75% of the fund provider’s flows from Latin America and Asia are into U.S.-listed products.
State Street Global Advisors calculates that around 9%, or $135 billion, of total assets in the U.S.-listed ETF market are from non-U.S. entities.
Emerging market pension plans are trying to diversify from locally listed equities, taking on exposure to international markets. For instance, pension funds in Chile have $16 billion in U.S.-listed ETFs, according to ETFGI data.
Moreover, locally listed ETF markets in emerging economies are far less developed. According to BlackRock, there are 36 Latin America-listed ETFs with $12.3 billion in assets.
Meanwhile, ETF providers are expanding into developing economies to capitalize on the emerging middle class. Some sponsors are cross-listing U.S. ETFs on a local bourse and are teaming up with local distribution partners to sell products.
For more information on the ETF industry, visit our current affairs category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.