Exchange traded fund products, particularly “synthetic” investments, have come under fire, but an iShares executive believes this will only help push investors to the relatively safer passive ETF investments.
Joseph Linhares, head of iShares EMEA (Europe, Middle East and Africa), stated that the company is benefiting from a “flight to quality” as investors begin to question regulatory concerns over synthetic products, reports Chriss Flood for the Financial Times. [BlackRock Calls for More Disclosure, Transparency in ETFs]
Investors like the transparency offered in “physical” ETFs that track an index instead of the “synthetic” structure that relies on derivatives.
“Transparency remains at the heart of the iShares’ philosophy. We act in investors’ best interest when they know how their investments are constructed and how they perform on a daily basis,” Linhares added. “Regulators are illuminating important issues. Clients should know what they own. We are seeing more and more scrutiny of ETFs with investors really trying to understand: ‘What am I buying? What are the exposures? Are there any hidden risks that I wasn’t aware of?'”
According to BlackRock (NYSE: BLK) estimates, the iShares EMEA division has garnered $16.5 billion in new assets this year. The company’s net new European inflows has increased 57% year-to-date. The passive ETF space in Europe has not been as competitive as the U.S. market, but the firm may see increased competition from State Street Global Advisors and Vanguard in the near future.
Linhares believes European-listed ETF assets will jump from $339.4 billion to $1 trillion within four years, noting that there is “tremendous room for growth.”
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.