After significant initial interest followed by rapid progress in Europe, exchange-traded fund products are now being fine-tuned to fit the needs of a more sophisticated market.
In recent years, exchange-traded funds (ETFs) have been one of the fastest growing areas in the European asset management industry. While these products have been available in the US since 1993, their introduction in Europe only started from 2000.

Since then, assets under management in this new and innovative investment vehicle have risen to almost US$20bn. (See Chart 1.) The largest ETFs in terms of assets are those concentrated on either the DJ Euro Stoxx 50 or local indices (FTSE100, DAX, SMI and CAC40), together accounting for approximately 60 per cent of the European ETF industry.

Whichever way they are put to work, and at whatever level, derivatives have an important role to play in any investment portfolio.

Equity derivatives are the multi-purpose tool for the high net worth investor. They can be used speculatively, for risk management or to provide an extra boost to income. They are cheaper to trade than stocks.

And they just got better. Thanks to changes at the exchange level, end users can reap the benefits of more efficient trading – bringing with it more cost effective products – as well as a standardisation and simplification that inevitably reduces risk.