At this week’s Index Universe “Inside ETFs” Conference in Florida, some exchange traded fund providers revealed their increasing concern over the complex, synthetic ETFs and their perceived affect on the rest of the industry. Still, the business has yet to form a unified strategy, and regulators may be forced to make one for them.
Fund providers and regulators are both concerned that investors are holding ETF products they don’t understand, reports Jessica Toonkel for Reuters. There are 1,400 U.S.-listed ETFs and 900 future offerings filed with the Securities and Exchange Commission.
“I always worry about the reputation of the industry,” Bill Belden, managing director, head of product development at Guggenheim Investments, said in the Reuters article. “All it takes is one issue to create a shadow on the entire industry.”
There are reports that long-term investors have been holding leveraged and inverse ETFs, which were designed for short-term allocations. Last year, spurious reports cropped up that blamed leveraged products on the heightened market volatility, causing renewed speculation on more regulation.
BlackRock‘s iShares ETF business suggested a new ETF moniker system that would label derivatives-based ETFs as exchange traded instruments, or ETIs. [What’s in an ETF Name?]