Three of the largest Exchange Traded Fund (ETF) issuers have welcomed ASIC’s report on the $4.3 billion sector, saying it will lift investor confidence.
State Street Global Advisors Asia Pacific head of SPDR ETFs Frank Henze said the emphasis on education was timely.
“Investors and advisers need to educate themselves about the characteristic of individual ETFs. Not all ETFs are constructed in the same way and investors need to understand exactly what exposure they are buying, whether it fits their objectives and what are the costs and benefits associated with each specific product,” he said.
BlackRock’s ETF business, iShares, echoed the need for education.
Company managing director Mark Oliver said “an unwavering commitment to education and transparency has always been at the heart of the iShares ETF offering”.
Vanguard Investments’ head of product management Robyn Laidlaw said ASIC’s focus on how to best regulate ETFs was understandable and warranted.
Much of the regulator’s focus was on the structure of ETFs with concerns around counterparty risks of synthetic structures, Laidlaw said.
“Vanguard’s seven ETFs trading on the ASX are all physically backed ETFs rather than synthetic,” she said.
“This means the ETF physically owns the assets in the representative index that the ETF is tracking and these assets are held for safekeeping by a custodian. This is the same for most ETFs quoted for trading on the ASX [Australian Securities Exchange].”
The ETF sector had co-operated with ASIC in recent months ahead of more products being launched and the number of ETF investors increasing.
“ETFs have enabled many investors to implement their investment decisions and any move by the regulator to help improve and promote investor understanding of the products in Australia is a positive step to increase the use of ETFs further,” Henze said.
iShares’ Oliver said the report was “a well-considered and balanced assessment of an industry that continues to deliver real benefits to investors amidst some of the most testing market conditions ever seen.
“The report should provide further investor confidence in the growing range of ETFs trading on the ASX. ETFs available in Australia remain largely plain vanilla,” he said.
ASIC is talking with the ASX on proposed refinements and amendments to local rules and is also in regular contact with other regulators including the US Securities Exchange Commission (SEC) and the Securities and Futures Commission (SFC) in Hong Kong.
Regulation of ETFs in Australia is in line with proposed standards set by the International Organisation of Securities Commission (IOSCO).
