First ETFs Launched in Europe


Riding a wave of popularity in the United States, the first exchange-traded funds (ETFs) to be based in European markets were launched. The new ETFs track indexes in Germany and the United Kingdom.

In mid-April, the European Exchange Traded Fund Company launched two listed diversified return securities (LDRS) on the German Deutsche Borse. These funds are co-managed by Merrill Lynch and track the Dow Jones Euro Stoxx 50 and Stoxx 50 indexes.

The first ETF in the UK became available to investors on April 28. The fund, called iFTSE 100, was launched by iShares and is managed by Barclays Global Investors (BGI), a San Francisco-based company that dominates the market in World Equity Benchmarks (WEBs). John Demaine, Director of iShares, said, "Today marks the beginning of a change in the investment landscape in the UK. iShares are giving investors what they want: transparency, ease of access and value."

First launched in the U.S. in 1993, ETFs have recently become popular with investors because they combine the cost efficiency and diversity of an index fund with the flexibility of a stock. ETFs can be traded intraday, bought on margin, and sold short like a stock.

The new funds signal the future launch of more ETFs in Europe as well as others abroad. State Street Global Advisors, the Boston bank that launched the US Spiders (SPDRs), recently announced its intention to initiate several ETFs throughout Europe.

Barclays Global Investors and Standard & Poor's (S&P) Index Services have also announced they are jointly exploring listing ETFs in Japan on the Tokyo Stock Exchange. BGI and S&P are considering developing ETFs that will track the S&P/ Tokyo Stock Price Index (TOPIX) 150 and the S&P Global 100 stock indexes as well as other popular indices. Kazuhisa Okamoto, head of BGI in Japan, said, "Introducing these products to the Japanese market will, we believe, fill certain long- and short-term needs of market players in a uniquely efficient manner."

This year, BGI will launch 11 WEBs-which track Morgan Stanley Capital International indexes-for Brazil, Greece, Indonesia, South Korea, Portugal, South Africa, Taiwan, Thailand, and Turkey. Staff