Exchange traded fund (ETF) guru Deborah Fuhr has been closely analyzing the state of the industry as managing director and global head of ETF research at Barclays Global Investors. Fuhr talks about the latest events shaping the industry.Deborah Fuhr joined BGI the day that Lehman Brothers declared bankruptcy and came on board at Barclays at a pivotal time in the industry, reports Avi Salzman for Barron’s.
Prior to the financial fallout, many people just assumed if they bought products from a large entity, it wouldn’t fail. Scrutiny over the issuer and counterparty risk is a big deal now, and people have moved away from using certificates, swaps and structured products, a shift that could potentially leave much more market share for ETFs.
As evidence, cash flows into ETFs have been more robust this year, with retail investors accounting for about 40% of ETF investment. When the markets come back and when investors have convictions that the green shoots are actually really coming, they will most likely come into the market using ETFs.
As for now, fixed-income ETFs seem to be attracting the most attention. On the global level, investors also seem to be turning their attentions to Taiwan and India. Sectors that have been popular are clean tech, infrastructure and alternative energy, along with emerging Asia.
Many investors are moving toward the ETF trend because if you can’t beat the market, why not just buy it? Using an index to gain exposure is much less risky than stock picking a few shares and hoping to benefit from the recovery.
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.