Physical ETFs: A viable alternative for EM investors?

PHYSICAL ETFs

Most ETFs offering emerging market exposure are synthetic. However, a new generation of physical products is set to alter the landscape, writes Armelle Loeb-Darcagne, director of ETF distribution at HSBC Global Asset Management ETFs.

The use of ETFs to gain emerging market exposure has become popular in recent years. In 2010, emerging market ETFs accounted for 40% of net inflows into European equity-based ETFs and 25% of total inflows into European-domiciled ETFs. In 2011, however, European emerging market ETFs had net outflows (£645m) while all inflows into European ETFs went into German and US equity or gold exposures. This year has gotten off to a far more favourable start as risk appetite resumed. For the first two months of the year, 88% of net inflows into European ETFs went into emerging market ETFs which attr...