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Global ETF assets pass $1tln, up 45% from 2008 - report from BlackRock Gobal ETF Research Strategy Team

Wednesday, January 13, 2010
Opalesque Industry Updates - BlackRock, Inc. announced thatGlobal Exchange Traded Funds (ETFs)1 assets hit an all time high of $1 trillion (US$1,032 Bn) at the end of December 2009 - 45.2% above US$710.9 Bn at the end of 2008, according to the latest figures from BlackRock published today in its ETF Landscape Year End 2009 preview report. The global ETF industry had 1,939 ETFs with 3,775 listings, and assets of US$1,032 Bn from 109 providers on 40 exchanges around the world at the end of December 2009. Year-To-Date (YTD) assets have risen by 45.2%, which is more than the 27.0% rise in the MSCI World Index in US dollar terms.

The challenging market conditions of 2008 caused a significant shift in investors' risk appetite in their evaluation of counterparty risk and their desire for liquidity. During 2009 many investors found that ETFs met their desire for greater transparency in relation to the issues of cost, transparency of holdings, transparency of price, liquidity, product structure, risk and return as they relate to investment alternatives.

ETFs are index-based2 open-ended funds that can be bought and sold as quickly and easily as ordinary shares on a stock exchange - they have become popular and widely used investment vehicles to achieve many investment strategies:

- to gain diversified exposure to a market

- for core/satellite investing

- for buy and hold investing

- for active traders who wish to take advantage of market movements

- for investors wishing to hedge the market

- as an alternative to futures and other institutional investment tools.

"In a world where investment products come and go with the blink of an eye, ETFs might be considered one of the most innovative financial products in the last two decades. They have fundamentally changed how both institutional and retail investors construct their investment portfolios.

ETF providers have continued to expand their product ranges in more specialised areas to cater for the growing number of professional and retail investors using ETFs as advanced portfolio construction tools. With the increasing availability of these highly-specialised ETFs across the full spectrum of equities, fixed income and alternative investments, investors can use ETFs to help instantly reallocate capital to take advantage of new investment opportunities.

Over the past decade the compound annual growth rate for ETF assets globally was 56.3%, it was 58.1% in the United States, 53.1% in Canada and 90.5% in Europe, and there are no signs that investor interest in ETFs is fading. Investors are finding that ETFs are products that work well in every market environment," said Deborah Fuhr, Global Head of ETF Research & Implementation Strategy at BlackRock.

Capital flows this year within ETFs also demonstrate how these innovative investment products have become important bellwethers to gauge shifts in investor sentiment between asset classes. During the year, fixed income, equity and commodity-based ETFs enjoyed heavy inflows as some investors adjusted their risk profiles. In the beginning of the year given rising levels of risk aversion, ETFs tracking equity markets perceived as higher risk suffered much of the capital outflow, notably Asian and global (excluding US) equities.

After the markets turned in March, and kept rising through year-end, investments moved back into areas that had been shunned for the preceding year and a half. The changes in investor sentiment are shown in the net new asset data into ETFs tracking corporate bond, inflation, aggregate indices, international and emerging market indices and commodities...


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