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Why ETFs are popular in US
Posted: November 22nd, 2006, 10:00 am
by arghya
Hi all,Can any one throw some lights on this? I know ETF is cheaper strategy to implement, can be short sold but still I believe there are certain advantages that an ETF offers to institutional clients so they prefer it. It mostly related to market micro structures, at least I believe.Any comments will be welcome. Thanks.
Why ETFs are popular in US
Posted: November 25th, 2006, 4:29 pm
by nazzdack
You touched on the primary benefits. ETF's offer diversification and can become an accepted benchmark for specialized portfolios. There might also be money kickbacks under the table for trading certain ETF's.
Why ETFs are popular in US
Posted: November 25th, 2006, 11:15 pm
by acastaldo
Closed End Funds have existed in this country since the late 1920's, but because of their many disadvantages they lost out to the Open End Funds that developed later (the 1940's). Today they account for a very small fraction of the market. ETF's are a "mutation" of closed end funds that overcomes their disadvantages (in particular they cannot go to a substantial discount because of provisions for arbitrage by large investors). This mutation appears to be successful and the ETF's are successfully carving out a niche for themselves in the financial jungle. Darwin would be proud.