Data shows the global exchange-traded fund market grew just 3.2 per cent last year, as falling asset prices and the ongoing debate about the safety of swap-based products weighed on growth.
Data from Deutsche Bank, a leading ETF provider, shows that the total size of the market rose 3.2 per cent, well down on the previous year's annual growth of 30 per cent, and also below initial growth targets. Analysts at Deutsche Bank put the stagnation in growth down to falling asset prices. But independent analysts said that the debate in the second half of the year, highlighting the risks associated with synthetic funds, also had an impact.
As market participants await the European Securities and Markets Authority rules on ETFs at the end of this month, they also agree that the market is likely to focus on UCITS funds and securities lending. Gordon Rose, ETF analyst at Morningstar, said: “Synthetic ETFs had a rough ride in 2011 because of the debate around counterparty risk. However, the next step in the market is likely to be people looking at securities lending more closely and the UCITS-frame in general.” Synthetic funds have come under increasing fire from high-profile figures in the financial industry because of their use of derivative contracts.
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