ETFs not to blame for market turbulence, says BNY Mellon
Industry will recover with global assets hitting $6tn despite recent outflows
Emma Dunkley
© FT montage
The exchange traded fund industry is being defended from accusations that it helped to cause last month’s global markets turbulence, despite a slump in investor interest and mounting scrutiny of the role played by passive investments.
Jeffrey McCarthy, chief executive of BNY Mellon’s ETF asset servicing business, said the industry would recover from the turmoil, adding: “ETFs do not cause volatility — an ETF is diversified in its investment across a wide variety of securities . . . it’s more the rise of program trading.”
His comments come after the Bank of International Settlements said on Monday that volatility-linked passive funds aggravated the stock market slide in February.
Mr McCarthy said global ETF assets are set to swell to $6tn by the end of the year, up from about $5tn in January.
A number of ETFs were halted in the US in 2015 due to “extreme volatility”, he added, and the incident “spurred looking at trading rules at exchanges . . . sometimes market volatility events can put a spotlight on rules for examination, and that can be positive”.
A handful of “inverse Vix” passive products, including both exchange-traded notes and ETFs, plunged when the volatility index soared to its highest level in two-and-a-half years as stock markets sank.
Mr McCarthy said ETNs “operated and performed how they were supposed to”.
The bulk of passive products tracking the Vix index are exchange-traded notes rather than funds, as the latter typically invests in a broader range of securities.
The scale of investor fright from ETFs was shown by fresh data from ETFGI, an ETP research company. Market volatility sparked the first ETF outflows in two years in February with some $23.5bn being pulled from funds that track US and Canadian equities.
The recent outflows have raised questions over whether the ETF market can continue to expand at the current rapid rate after it breached the $5tn barrier in January.
Mr McCarthy said global asset growth in ETFs will in part be driven by greater retail uptake in Asia over the next few years, which lags behind the more mature US and European markets, and said that he is “bullish” on growth in the region.
A sharper focus on fees paid by investors for funds and other financial products, driven by regulation such as the retail distribution review in the UK and more broadly Mifid II, is set to sweep through Asia at some point, which will drive up assets under management, he said.
Regulation has helped to separate the fees attached to investments and those charged by distributors, including independent financial advisers.
The development has benefited the low costs associated with passive investments such as ETFs, which follow an index up or down at a fraction of the price of actively managed funds run by stockpickers.
0 comments:
Publicar un comentario