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Indexing Goes Global - International Exchanges Embrace ETFs

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Increasing numbers of international investors have gained access to low-cost passive funds through ETFs in recent years.

Although exchange-traded funds have experienced phenomenal growth in the U.S., there are actually more ETFs trading on foreign exchanges - 169 ETFs currently call an overseas exchange home, while 114 funds are listed on domestic U.S. exchanges. However, U.S.-listed ETFs hold more than 70% of the $163 billion invested in ETFs, according to industry research from State Street Global Advisors.

 

Region Number of ETFs Total Assets ($)
USA 114 118,546,650,056
International 169 44,808,480,058
Total 283 163,355,130,115

Source: State Street Global Advisors

 

The most anticipated upcoming ETF launch will take place in Australia - Gold Bullion Ltd. has developed an ETF where investors can "trade" in gold bullion on the Australian Stock Exchange (ASX). The new fund is stirring debate over whether it will make gold so easy to own that a flood of new retail investors will send the precious metal skyward.

Barclays Global Investors introduced the first U.S. bond ETFs in Europe earlier this year in May on the London Stock Exchange. The iShares Goldman Sachs $ InvesTop Corporate Bond will track an index with 100 U.S. investment-grade corporate bonds.

Europe is the home for most international ETFs, and many are listed on Euronext, a joint venture of exchanges in Amsterdam, Brussels, and Paris.

An ETF based on the FTSEurofirst 80 index is to be launched by Lyxor Asset Management on Euronext in September. It will be the first ETF based on an FTSEurofirst index, newly created in co-operation by Euronext and index provider FTSE Group. The new ETF will track an index covering the Eurozone.

The fund will be listed on NextTrack, the Euronext segment dedicated to ETFs. It currently hosts 63 ETFs based on 55 different underlying indexes. NextTrack trading activity is on the rise, with the number of transactions on ETFs up 107% year-to-date compared to last year, according to the exchange.

In Asia, Dow Jones Indexes introduced a new benchmark for blue-chip companies headquartered in Hong Kong, Singapore, South Korea and Taiwan. Dow Jones said it is attempting to license the index for use as the basis of ETFs or derivatives.

"With the launch of the Dow Jones Tiger Titans 50, Dow Jones Indexes becomes the first index provider to cover the Asian Tiger markets with a blue-chip index," said Lars Hamich, executive director of global business development. "The four markets included in the index are fast-growing economies with competitive returns in recent years, which makes the index an appealing tool for financial institutions."

The table below lists all international ETF players and their respective industry market share.

 

International ETF Managers # of Funds Assets ($)
AXA Gestion 12 393,882,965
Benchmark Asset Mgt Co 2 2,169,945
Barclays Global Investors 31 6,620,859,885
Bank of NY 1 38,851,848
Credit Lyonnais 2 514,901,880
Credit Suisse 5 1,585,519,695
Daiwa Asset Mgmt. 6 1,519,156,443
IndexChange 32 3,802,073,065
IndexCO 3 467,517,761
Merrill Lynch 2 2,167,501,824
Nikko Asset Mgmt. 2 8,223,591,473
Nomura Asset Mgmt. 7 9,923,428,571
Ofek Leumi 1 445,490,242
OM Group 1 125,339,776
Seligson 1 24,850,394
Merrill Lynch & Societe Generale LDRs 13 158,282,688
Societe Generale 5 2,979,269,907
State Street Global Advisors 21 4,684,390,417
TD Securities 4 183,728,517
UBS Asset Management Limited 11 483,530,320
CJ Investment Trust 1 11,542,289
Korea Investment Trust 1 15,679,104
Prudential ICICI 1 4,060,907
Samsung Investment Trust 1 306,343,284
NextTrack Plc 2 96,739,864
Gold Bullion Ltd. 1 29,776,994
Totals: 169 44,808,480,058

Source: State Street Global Advisors