Liquidity remains one of the biggest concerns from investors when dealing with ETFs, despite the immense education efforts by the fast-growing sector's providers this year, but that now is changing according to ETF Securities head of Australia and New Zealand Danny Laidler.
"Advisers and investors are starting to get there [and] the key thing is continuing to educate the Australian market to understand this concept," Mr Laidler told InvestorDaily.
"We are trying to get Australian advisers and investors to realise that with an ETF or ETC, you need to look through the ETF to what the underlying liquidity is.
According to Mr Laidler the important consideration with an ETF or an ETC is understanding that on-screen volume isn't the indicator of the liquidity that's available. New issuers and products in the sector this year had helped "kick start" further interest to the point where investors felt they could realistically use ETFs.
But despite the growth in the sector, ETF liquidity remained an area of confusion as advisers and investors were used to trading equities and assumed the process was the same with ETFs.
"With an equity, the thinking is, 'what I see onscreen is the liquidity' but with an ETF or an ETC, they are totally open-ended.
"For example, you could do a trade today on the Australian Stock Exchange on ETFS Wheat for $110 million and that would be less than 10 per cent of the underlying future, so it would have no impact on price as the depth of liquidity is huge," Mr Laidler said.
