Recently, Lee Kranefuss, CEO of Barclays’ iShares business, spoke about exchange traded funds (ETFs). In particular, he discussed the implications of the Barclays/Lehman deal on ETF nomenclature, widening of bid/ask spreads and the future of the investment tool.
In an interview with Index Universe’s Murray Coleman, Kranefuss stated iShares will rename all its ETFs to reflect the Barclays Capital name to inform investors which index a fund is tracking, indicating that transparency is of utmost importance. Fortunately for Barclays, permission was granted by the Securities and Exchange Commission (SEC) to track benchmarks that they own.
Kranefuss blames the widening of bid/ask spreads on the recent volatility of the market. Generally, the correlation between the spread for the ETF and the spread of the underlying securities is determined by the liquidity of the market; illiquidity of underlying markets widens the spread.
Although Kranefuss believes there will be a shakeout in the ETF industry, he is optimistic about its future. As mutual funds continue to lose assets and investors become better educated about the advantages of using ETFs, the market will continue to grow.
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.