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Exchange Trader Funds (ETF) Analysis
What is ETF? Print E-mail
Exchange Traded Funds | Introductions | Written by Oil N' Gold | Sat Mar 13 10 14:36 ET

An exchange-traded fund (ETF) is a structural investment representing a collection of securities that track a market, sector or index. ETFs trade like stocks in exchanges.

Since the first ETF was introduced in the US in 1993, the number of ETFs and the assets under management have grown substantially all over the world. In April 2000, iShare brought this new kind of investment in Europe as they launched the iShare DJ Euro Stoxx 50. While the European ETF market has then been expanding dramatically, average daily turnover remained small, at $2.3B in 2009, compared with $45.8B in the US.

The ETF industry is highly concentrated. According to SSgA, in 2009, 39% of total industry assets and 60% of notional trading volume were in 10 ETFs, while 84% of industry assets and 80% of trading volume were concentrated in 3 biggest providers.

The most common types of ETFs are index ETFs, currency ETFs, bond ETFs, commodity ETFs, leveraged ETFs and actively managed ETFs. Normally, investors expose to ETF investments in order to benefit from the flexibility in trading (similar to stocks), portfolio diversifications, precise market exposure, tax efficiency and relatively low investment costs.