Are ETFs the next CDOs?

Regulators are comparing ETFs with collateralised debt obligations, but do the two seemingly different products share any common ground? Helen Fowler reports.

If regulators were caught napping by the last financial crisis, they look determined to avoid a repeat this time around. For many, however, they are barking up the wrong tree in suggesting that ETFs could serve as a transmission mechanism in the same way collateralised debt obligations once did. ETF providers point out that, beyond sharing three-letter acronyms for titles, the two products have little else in common. “It comes down to a question of collateral,” said Christopher Aldous, chief executive of Evercore Pan-Asset Capital Management, a firm that invests most of its £500m asse...