STEPHEN CRANSTON: Exchange traded products useful for the astute
Many intermediaries prefer the familiarity of traditional unit trusts to exchange traded products, writes Stephen Cranston
It is humbling to see how small SA’s financial markets are in global terms. The exchange traded products (ETPs), along with hedge funds, are probably the least-developed product classes here. The Middle East and Africa region has just US$6bn of ETP assets, small even by the standards of emerging market ETP assets of US$253bn, and tiny compared with the global total of more than $3,6trillion. The hugely popular NewGold range puts SA on the map when it comes to commodities, but only just, as Africa accounts for barely 1% of commodity ETPs. BlackRock provides a useful monthly snapshot of ETPs, which encompass exchange traded funds (ETFs), which must track their underlying indices, and exchange traded notes (ETNs), which are just promissory notes, typically from a bank. ETPs should offer an efficient way to trade as they are repriced throughout the trading day. But they have proved a hard sell to most intermediaries, who prefer the familiarity of traditional unit trusts. It is an arcane...
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