The recent Financial Stability Board (FSB) report on exchange traded funds will have left many industry leaders in the unit and investment trust space quietly purring with delight.
The FSB rightly decided to ask some awkward questions about the index-tracking sector and especially the collateralised baskets of stocks offered as a guarantee for payment, as well as the common practice of stock lending. Yet that attention by the regulators should prompt a much bigger question – what has gone wrong with the main competitor to the ETF sector, listed closed-ended funds and investment trusts? Surely one of the reasons the FSB (and the FSA) started looking at the index-tracking sector was concern non-sophisticated investors and advisers have started using financial in...
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