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Understanding Indexes and How Funds Use Them

By Matthew Thornton

January 28, 2021

Market indexes are one of the most visible elements of investing. Numbers from the S&P 500 or the Dow Jones Industrial Index frequently feature prominently in headlines about the US stock market.

Beyond the well-known indexes that we encounter daily lie more than three million indexes designed to reflect the performance of underlying investments, from broad markets to niche subsegments. Indexes vary widely with regard to their specific objectives, the methodologies on which they are built, and the underlying investments they reflect. At the same time, they each have design, administration, and governance features that guide their creation and ongoing operations, and they are not purely objective, self-contained, predetermined constructs.

Indexes do more than serve as a proxy for market performance. For funds, advisers, and investors, they can offer a benchmark for evaluating the performance of actively managed funds, a template for constructing index funds, or even a tool for regulatory agencies.

Finally, evolving investor demands have shaped the fund and index industries in similar and interconnected ways. For instance, the rise of ESG and smart beta investing have spurred innovation and growth in investment strategies, funds, and indexes.

Increased Interest

As the connections between indexes and market activity have become more apparent, policymakers, regulators, and other financial market observers have shown an increased interest in indexes, index providers, and the ways funds and investment managers put indexes to use. Electric vehicle maker Tesla’s entry into the S&P 500 in late 2020 drew attention to index inclusion criteria and rebalancing and showed that index methodologies can be both art and science. And actions taken by index providers in response to the Trump administration’s executive order prohibiting transactions in certain Chinese securities by US persons demonstrated how emerging policy issues intersect with index providers’ work.

To properly ground discussion and examination of issues surrounding indexes, ICI published a primer to provide both investors and regulators information about indexes and the ways funds and their advisers use them.

Background Information on Indexes

ICI’s paper provides an overview of the marketplace for indexes. To aid in a general understanding of how indexes work and how they get used, it also describes:

  • Common features of indexes, illustrated with prominent examples
  • The contractual relationships between index providers and fund complexes
  • How and why an index gets created, and the role that fund advisers may play in that process

How Funds Use Indexes

The paper also details some of the principal ways that funds, advisers, and other parties currently use indexes:

  • Performance assessment—Indexes offer a convenient benchmark against which investors, fund managers, and third parties can measure the performance of a fund.
  • Regulatory purposes—Regulatory agencies such as the US Securities and Exchange Commission (SEC) require funds to use indexes in certain contexts (e.g., in certain performance presentations, or to calculate performance-based fees, for those funds that pay them) and permit funds to use them in others (e.g., a fund may use a “designated index” to comply with a leverage limit in the rule governing funds’ use of derivatives).
  • Portfolio construction, management, and investment policies—To varying degrees, indexes may influence funds’ portfolio construction and management, with indexes most significantly affecting index funds.
  • Multi-asset class portfolio construction—Certain funds such as balanced funds or funds of funds may use indexes as proxies for the asset classes contained within the funds themselves and then implement their asset allocation strategies using active or passive strategies or funds.

Read the primer on indexes and how funds use them.

Matthew Thornton is an associate general counsel at ICI.

Permalink: https://www.ici.org/viewpoints/21_view_indexprimer

TOPICS: Equity InvestingExchange-Traded FundsFinancial MarketsFund RegulationIndex Fund

Investing Basics: Saving for Retirement with a 401(k) Plan

By Christina Kilroy

September 9, 2020

The ICI Education Foundation’s Investing Road Trip ends at retirement, depicted with idyllic images of a park bench and a golf cart. But what if, in real life, your path doesn’t quite follow this tidy path? Even for workers who get a late start, hit some bumps, and take a few detours, saving for retirement is still possible. Here are guideposts for 401(k) saving as you journey to retirement.

Read more…

TOPICS: 401(k)Exchange-Traded FundsIRAInvestment EducationMutual FundSavingsShareholder

Investing Basics: Saving for Retirement on Your Own

By Christina Kilroy

August 31, 2020

A majority of workers aged 26 to 64 were active participants in a workplace retirement plan in 2017, according to ICI’s most recent tabulation of tax data. But what if you don’t have access to a workplace retirement plan? You still have great options to save for retirement with similar advantages to the 401(k). Learn more in the latest installment of ICI Education Foundation’s investing basics series.

Read more…

TOPICS: 401(k)Exchange-Traded FundsIRAInvestment EducationMutual FundSavingsShareholder

Investing Basics: Understanding Fees and Expenses

By Christina Kilroy

July 30, 2020

In the ICI Education Foundation’s Investing Road Trip exhibit, a toll booth illustrates the fees and expenses that are part of investing. Every vehicle on a toll road pays and some of that money helps to maintain the road, which ultimately makes for a smoother and safer trip for everybody. Likewise, every investor pays a cost to invest but receives professional management and services in return.

Read more…

TOPICS: 401(k)Exchange-Traded FundsIRAInvestment EducationMutual FundSavingsShareholder

Investing Basics: Compound Returns and the Power of Reinvestment

By Christina Kilroy

June 29, 2020

Start saving early. You’ve heard it once, you’ve heard it a million times. There are a few reasons why that’s a good idea—to get in the habit, to manage risks to your investments and income, and to allow more time to contribute to your savings and let them grow. But the strongest case for starting early boils down to one phrase: compound returns.

Read more…

TOPICS: 401(k)Exchange-Traded FundsIRAInvestment EducationMutual FundSavingsShareholder

Investing Basics: 529 Savings Plans

By Christina Kilroy

May 7, 2020

One thing you can expect when you’re expecting a baby is to pay a lot for diapers—you might pay about $600 by your child’s first birthday. But the cost of diapers is child’s play compared to the costs that could come later when paying for college. 

To encourage people to save for these education costs, nearly every state and the District of Columbia offer 529 plans, and most offer special tax treatment for savers participating in those plans.

Read more…

TOPICS: 401(k)Exchange-Traded FundsIRAInvestment EducationMutual FundSavingsShareholder

For Funds' Use of Derivatives, a Promising New Regulatory Framework

By Paul Schott Stevens

April 22, 2020

In a promising new proposal on the use of derivatives, the SEC has consolidated cumbersome regulatory framework into a single, comprehensive rule that is carefully designed to protect investors.

Read more…

TOPICS: Equity InvestingExchange-Traded FundsFund RegulationMoney Market FundsMutual FundShareholder

Investing Basics: Tax Benefits to Encourage Saving

By Christina Kilroy

April 14, 2020

To encourage people to save, federal and state governments offer special tax treatment for savings plans for specific goals, such as retirement and education. By increasing the benefit that savers receive in the short term, the government nudges savers to take a positive action that will provide a benefit in the long term.

Read more…

TOPICS: 401(k)Exchange-Traded FundsIRAInvestment EducationMutual FundSavingsShareholder

Investing Basics: The Benefits of Mutual Funds

By Christina Kilroy

March 31, 2020

We’ve reached the halfway point in this series, and we’ve covered a lot of ground: the benefits of investing, how to think about risk, different types of investments, why diversification is important, and dollar-cost averaging. This month’s installment brings all these topics together and examines seven features of mutual funds that make them an enduringly popular investment choice.

Read more…

TOPICS: 401(k)Exchange-Traded FundsIRAInvestment EducationMutual FundSavingsShareholder

ETFs Are Passing the COVID-19 Crisis Test

By Shelly Antoniewicz

March 17, 2020

How have exchange-traded funds (ETFs) weathered the intensifying financial market fallout from the COVID-19 pandemic? So far, it looks like ETFs are healthy and robust.

Read more…

TOPICS: Equity InvestingExchange-Traded FundsFinancial MarketsFinancial StabilityIndex FundTrading

Investing Basics: Dollar-Cost Averaging

By Christina Kilroy

February 27, 2020

Emotions are the enemy of successful investing. For long-term investors, dollar-cost averaging is a smart way to take the emotion out of investing and to eliminate the difficulty and uncertainty of trying to time the market.

Read more…

TOPICS: 401(k)Exchange-Traded FundsIRAInvestment EducationMutual FundSavingsShareholder

Investing Basics: Diversification

By Christina Kilroy

January 30, 2020

Eggs play a starring role in diversification’s ubiquitous analogy—one we used in the Investing Road Trip©—and for good reason. If you drop a basket holding all your eggs, you’ll be out a lot of eggs. Spreading your eggs across several baskets is a good defense against the risks of exposing all your assets to the same risk.

But perhaps we should also make the point that eggs shouldn’t be the only food in your basket. They may be high in protein, but your body needs a mix of nutrients for good health. Similarly, with investing, a better goal is to build a balanced “diet” of asset classes across industries, geographic areas, and types of securities....

Read more…

TOPICS: 401(k)Exchange-Traded FundsIRAInvestment EducationMutual FundSavingsShareholder

Investing Basics: Types of Investments

By Christina Kilroy

December 23, 2019

Two of the most common investments are stocks and bonds. Chances are if you own a portfolio of investments, those two types of assets make up a significant part—or perhaps all—of it. For those who want to start investing, it’s essential to understand these common portfolio building blocks...

Read more…

TOPICS: 401(k)Exchange-Traded FundsIRAInvestment EducationMutual FundSavingsShareholder

Investing Basics: What Is Risk?

By Christina Kilroy

November 26, 2019

You invest with the hope of earning a return on your investment. That opportunity invariably involves risk, including the possibility of losing some or all of the money you invested. Understanding these risks is an essential step toward successful investing.

The second installment of the ICI Education Foundation's blog series celebrating its 30th anniversary explores different types of investing risks.

Read more…

TOPICS: 401(k)Exchange-Traded FundsIRAInvestment EducationMutual FundSavingsShareholder

2019 Annual Report to Members: ICI's International Work

By Miriam Bridges

November 21, 2019

With the industry's interests bound ever more tightly to global trends, ICI pursues an active international agenda through its international arm, ICI Global. ICI’s international work in 2019 was a period of vigorous effort on a host of issues....

Read more…

TOPICS: CybersecurityExchange-Traded FundsFinancial MarketsFinancial StabilityGlobalICI GlobalInternationalOperations and TechnologyRetirement Policy

Investing Basics: What Is Investing?

By Christina Kilroy

October 31, 2019

This month, the ICI Education Foundation celebrates 30 years of developing, delivering, and promoting investor education. As part of our yearlong celebration, we will be sharing an ICI Viewpoints post each month that explains a basic concept of investing, drawn from the ICI Education Foundation’s Investing Road Trip.

Read more…

TOPICS: 401(k)Exchange-Traded FundsIRAInvestment EducationMutual FundSavingsShareholder

The ETF Rule: Paving the Way for Further Growth and Success

By Jane Heinrichs

October 10, 2019

For tens of millions of Americans, mutual funds and exchange-traded funds (ETFs) are the most convenient, cost-effective, transparent, and well-regulated tools available to meet their important financial goals. Both investment vehicles are governed by the Investment Company Act of 1940, but ETFs have long needed their own set of uniform regulations under the Act. 

The SEC rightly recognized this by recently adopting Rule 6c-11—otherwise known as “the ETF rule.” The SEC’s rule is the next step in the evolution of ETFs and will foster greater transparency, innovation, and competition, enabling more investors to realize their benefits.

Read more…

TOPICS: Exchange-Traded FundsFund Regulation

Even in Bear Markets, Equity Fund Investors Stay the Course

By Shelly Antoniewicz

December 21, 2018

With the S&P 500 on a downward trajectory since early October, we’ve seen many headlines in the financial press of an impending bear market in US stocks and the potential for retrenchment by investors. But just as we showed that bond investors aren’t stampeding the exits in another recent ICI Viewpoints, “Debunking Assumptions About Bond Mutual Funds’ Flows and Bond Sales,” equity fund investors’ reactions to substantial declines in stock prices are less dramatic than the popular belief would suggest....

Read more…

TOPICS: Equity InvestingExchange-Traded FundsMutual Fund

Understanding Interest Rate Risk in Bond Funds

By Shelly Antoniewicz and James Duvall

December 17, 2018

Long-term interest rates reached their lowest recorded levels in July 2016 and were on a steady upward trend until early December. Rates dipped recently, but that could be short-lived if global trade tensions ease and the outlook for economic growth remains robust. Investors should be aware of the effects rising interest rates could have on their bond fund investments....

Read more…

TOPICS: Bond FundBondsExchange-Traded FundsFixed IncomeIndex FundMutual Fund

ICI’s 2018 Annual Report: Letter from the President

By Paul Schott Stevens

December 3, 2018

A version of this letter by ICI President and CEO Paul Schott Stevens was released in the Institute’s 2018 Annual Report.

Fund industry watchers will remember this year as one of important policy developments, including some that have been the subject of years of debate. The Investment Company Institute has been deeply engaged in this wide range of issues, working on both legislative and regulatory fronts to promote advantageous outcomes for regulated funds and their shareholders....

Read more…

TOPICS: Exchange-Traded FundsFinancial MarketsFund RegulationGlobalIDCOperations and TechnologyRetirement Policy

SEC Commissioner Michael Piwowar: A Commitment to Markets, Shareholders...and Facts

By Rachel McTague

May 24, 2018

SEC Commissioner Michael Piwowar responded with candor to questions posed by ICI President and CEO Paul Schott Stevens during a lively discussion at the final day of ICI’s General Membership Meeting. Piwowar’s announced July 7 departure from the agency offered the outspoken commissioner the opportunity to reflect on fund regulation during his five-year tenure....

Read more…

TOPICS: Exchange-Traded FundsFinancial StabilityFund RegulationGMMMutual Fund

Pointing Fingers at Index Funds Won’t Explain Market Volatility

By Shelly Antoniewicz

February 14, 2018

With all the recent volatility in the US stock market, two questions are frequently being asked:

  • Are fund investors fleeing the stock market?
  • Are index funds causing market turbulence?

The short answer to both questions is no.

Experience and research show that investor flows to and from mutual funds and exchange-traded funds (ETFs) tend to track market returns. ...

Read more…

TOPICS: Equity InvestingExchange-Traded FundsFederal ReserveFinancial MarketsFinancial StabilityIndex FundInterest RateInvestor ResearchMutual FundTrading

Americans Rely on Stocks to Meet Their Financial Goals as Much as Ever

By Sean Collins

January 17, 2018

The following ICI Viewpoints is a letter to the Wall Street Journal by Sean Collins, ICI chief economist, in response to an article published on January 4, 2018:

Are America’s individual investors missing out on one of the biggest bull markets in history? No. The Wall Street Journal’s account (“As Dow Tops 25000, Individual Investors Sit It Out,” January 4) is based on anecdotes and selective use of data.

Read more…

TOPICS: Exchange-Traded FundsFinancial MarketsFinancial StabilityMutual FundSavings

New ICI Paper Helps Readers Understand ETF Listing Processes and Standards

By Jane Heinrichs and Kenneth Fang

August 10, 2017

Exchange-traded funds (ETFs) have been a part of US markets for more than 20 years, and they remain some of the most highly regulated financial products, subject to multiple and sometimes overlapping statutory schemes.

Read more…

TOPICS: Exchange-Traded FundsFinancial MarketsFund RegulationInvestment Education

Funds Actively Seek Companies’ Sound Management

By Paul Schott Stevens

July 3, 2017

The following ICI Viewpoints is a letter to the Wall Street Journal by Paul Schott Stevens, president and CEO of the Investment Company Institute, in response to an editorial published on June 22, 2017.

In their muddled and inconsistent arguments, the authors of “Index Funds Are Great for Investors, Risky for Corporate Governance” (op-ed, June 22) rely on unfounded assertions while ignoring clear legal requirements placed on registered funds, their boards, and their advisers...

Read more…

TOPICS: Exchange-Traded FundsFund GovernanceFund RegulationIndex FundMutual FundShareholder

Top Investment Strategists Sound Optimistic Notes amid Headwinds

By Rob Elson

May 25, 2017

Opportunities abound in today’s market and macroeconomic environment, and it’s up to fund managers to help their investors capitalize on them. That’s the outlook from a panel of world-class investment strategists sharing their insights at ICI’s 59th annual General Membership Meeting, held earlier this month in Washington, DC.

Read more…

TOPICS: EventsExchange-Traded FundsFinancial MarketsGMMInternationalMutual Fund

Average Expense Ratios for Index ETFs Have Declined

By Shelly Antoniewicz, Sean Collins, James Duvall, and Morris Mitler

May 24, 2017

In yesterday’s ICI Viewpoints post, we noted that our annual report on the asset-weighted average expense ratios of funds—“Trends in the Expenses and Fees of Funds, 2016”—showed that expenses for long-term mutual funds continued to decline in 2016.

Read more…

TOPICS: Bond FundEquity InvestingExchange-Traded FundsFixed IncomeIndex FundInterest RateMutual Fund

Average Expense Ratios for Long-Term Mutual Funds Continued to Decrease in 2016

By Morris Mitler and Sean Collins

May 23, 2017

ICI recently released its report on the expense ratios of mutual funds: “Trends in the Expenses and Fees of Funds, 2016.” This is ICI's first report that also summarizes expense ratios for exchange-traded funds (ETFs). 

Read more…

TOPICS: Bond FundEquity InvestingExchange-Traded FundsFederal ReserveFixed IncomeInterest RateMoney Market FundsMutual Fund

Mutual Funds and ETFs’ Share of the Corporate Bond Market: What’s the Right Answer?

By Shelly Antoniewicz

January 19, 2017

Participation by mutual funds and exchange-traded funds (ETFs) in US corporate bond markets was a topic of discussion during several sessions held at the American Economic Association Meetings in Chicago earlier this month. Panelists and presenters alike cited “statistics” on the share of corporate bonds held by funds. The funny thing was, they all cited different numbers, running the gamut from 18 to 35 percent.

Read more…

TOPICS: Bond FundBondsExchange-Traded FundsFinancial StabilityFund RegulationMutual FundPolicy Research

A Proposal that Should Be Popped

By Paul Schott Stevens

December 15, 2016

The following ICI Viewpoints is a letter to the editor by Paul Schott Stevens, president and CEO of the Investment Company Institute, in response to an op-ed published on December 7, 2016, in the New York Times, “A Monopoly Donald Trump Can Pop.”

Millions of Americans could lose the low costs and broad diversification of fund investing under the dangerous proposal outlined in the op-ed by Posner, Weyl, and Morton.

Read more…

TOPICS: Bond FundEquity InvestingExchange-Traded FundsFinancial MarketsFund RegulationMutual FundTrading

The Liquidity Provided by ETFs Is No Mirage

By Todd Bernhardt

June 20, 2016

The article above ignores fundamental information about ETFs, the behavior of investors, and the effects of market structure on the ETF product.

Read more…

TOPICS: Bond FundBondsEquity InvestingExchange-Traded FundsFinancial MarketsFinancial StabilityFixed Income

SEC Chair White Expects Continued ‘Bright Spotlight’ on Asset Management

By Rachel McTague

May 20, 2016

The U.S. Securities and Exchange Commission (SEC) is contemplating several new initiatives governing registered funds, in addition to adopting rules this year on reporting modernization, liquidity management, and the use of derivatives, SEC Chair Mary Jo White announced at the opening session on the final day of ICI’s annual General Membership Meeting (GMM).

Read more…

TOPICS: CybersecurityEventsExchange-Traded FundsFinancial MarketsFinancial StabilityFund RegulationGMMInternationalMutual FundShareholder

High-Yield Bond ETFs: A Source of Liquidity

By Shelly Antoniewicz

December 22, 2015

The high-yield bond market has been buffeted recently, as market participants reassessed the risks of this sector and sent prices for many such bonds tumbling.

Read more…

TOPICS: Bond FundExchange-Traded FundsFinancial MarketsFinancial StabilityInterest RateMutual FundTrading

Traders, Start Your Engines: After August 24, Exchanges Need to Coordinate

By Jennifer Choi and George Gilbert

November 30, 2015

The extraordinary volatility in U.S. equity markets on August 24, 2015, exposed a significant deficiency in the rules governing these markets’ structure: a lack of harmonization across securities exchanges for reopening trading after a “limit up–limit down” trading halt in a security.

Read more…

TOPICS: Equity InvestingEuropeExchange-Traded FundsFinancial MarketsFinancial StabilityFixed IncomeFund Regulation

U.S. Bond ETFs Resilient on August 24

By Shelly Antoniewicz

November 20, 2015

Some observers have suggested that equity market volatility on August 24, 2015, spilled over into other markets and products, in particular to bond exchange-traded funds (see, for example, Bank of England Financial Stability Paper, no. 34, October 2015, pages 26 and 27). In our analysis of the events of that morning, we conclude that U.S. bond ETFs were resilient and largely immune to the turmoil in the equity markets.

Read more…

TOPICS: Bond FundBondsEquity InvestingEuropeExchange-Traded FundsFinancial MarketsFinancial StabilityFixed IncomeFund Regulation

The Wall Street Journal’s Dangerous Disservice to Investors

By Mike McNamee

September 22, 2015

For 75 years, mutual funds have successfully met their regulatory obligation to fulfill redemption requests within seven days, meeting investor demands and delivering on their investment objectives through good markets and bad.

Yet the Wall Street Journal seems determined to ignore this established history and the circumstances surrounding it. It has created a liquidity “measure” of its own devising—a test that no regulator has endorsed and no informed market participant would credit. The newspaper uses its self-invented process to imply that bond mutual funds are “pushing the limits” of Securities and Exchange Commission (SEC) guidelines governing fund liquidity.

Read more…

TOPICS: Bond FundBondsEquity InvestingExchange-Traded FundsFinancial MarketsFinancial StabilityFixed IncomeFund GovernanceFund RegulationMutual Fund

SEC Chair White Affirms Agency Has Tools to Address Risks in Industry

By Rachel McTague

May 8, 2015

The U.S. Securities and Exchange Commission (SEC) has the tools it needs to address systemic risks to the extent they exist in the asset management industry, said SEC Chair Mary Jo White at the opening session on the final day of ICI’s annual General Membership Meeting (GMM). White also announced that David Grim—who had been serving as acting director of the SEC’s Division of Investment Management—has just been named director of the division. White said she is thrilled that Grim, a 20-year veteran of the SEC in the investment management area, is taking the reins at a time when the Commission is moving forward to implement proactive regulations for the industry.

Read more…

TOPICS: BondsCybersecurityEuropeEventsExchange-Traded FundsFederal ReserveFinancial MarketsFinancial StabilityFund RegulationGMMGovernment AffairsInterest RateInternationalMutual FundShareholderTreasury

More Unfounded Speculation on Bond ETFs and Financial Stability

By Shelly Antoniewicz and Mike McNamee

April 13, 2015

A recent column in the Financial Times warns of “another accident in waiting” in the growth of fixed-income exchange-traded funds (ETFs)—described as “financial alchemy” that converts illiquid bonds into “baskets” that “trade moment to moment on the stock exchanges.” This “illusory” ETF liquidity will disappear, the author warns, when investors “want to move en masse, and quickly, when the going gets less good.”

Read more…

TOPICS: Bond FundBondsExchange-Traded FundsFinancial MarketsFinancial StabilityFixed IncomeInterest RateTrading

Does Liquidity in ETFs Depend Solely on Authorized Participants?

By Shelly Antoniewicz and Jane Heinrichs

March 16, 2015

ICI recently conducted a survey of its members that sponsor exchange-traded funds (ETFs) to collect information on authorized participants (APs)—typically market makers or large institutional investors with an ETF trading desk that have entered into a legal contract with an ETF to create and redeem shares of the fund.

Read more…

TOPICS: Exchange-Traded FundsFinancial MarketsFinancial StabilityTrading

Simple Answers to the Federal Reserve’s Quandaries

By Mike McNamee

February 24, 2015

The Federal Reserve System can’t get past its perplexities on the role of mutual funds in financial stability. Time and again, the Fed’s governors, regional presidents, and staff return to the same hypothetical risks and speculative scenarios in which mutual funds somehow pose a threat to the financial system.

Read more…

TOPICS: Bond FundBondsExchange-Traded FundsFederal ReserveFinancial MarketsFinancial StabilityFixed IncomeMutual Fund

Plenty of Players Provide Liquidity for ETFs

By Shelly Antoniewicz

December 2, 2014

A recent article in the Financial Times’ FT Alphaville blog (“Lies, Damned Lies, and Liquidity Expectations”) focused on a paper published by the Committee on the Global Financial System, an organization that monitors developments in global financial markets for central bank governors.

Read more…

TOPICS: Exchange-Traded FundsFederal ReserveFinancial MarketsFinancial StabilityInternationalTrading

Bloomberg Ignores the Evidence on Bond ETFs

By Mike McNamee

September 26, 2014

In response to “Pimco ETF Probe Spotlighting $270 Billion Market Vexing FSB,” we posted the following comment on Bloomberg News’ website:

Read more…

TOPICS: Bond FundBondsExchange-Traded FundsFederal ReserveFinancial MarketsFinancial StabilityFund RegulationInterest RateInternationalTrading

A Look Inside ETFs and ETF Trading

By Rochelle Antoniewicz and Jane Heinrichs

September 23, 2014

Investors in exchange-traded funds (ETFs) are trading shares with each other far more than they are turning to authorized participants to create or redeem shares.

Read more…

TOPICS: Exchange-Traded FundsFinancial MarketsFinancial StabilityMutual FundTrading

Sizing Up Mutual Fund and ETF Investment in Emerging Markets

By Chris Plantier

August 18, 2014

In coming decades, emerging market (EM) economies will need substantial new capital to accompany and sustain their rapid growth.

Read more…

TOPICS: Bond FundBondsEquity InvestingEuropeExchange-Traded FundsFinancial MarketsFinancial StabilityFixed IncomeFund RegulationICI GlobalInternationalMutual Fund

ETFs Don’t Move the Market—Information Does

By Shelly Antoniewicz

March 11, 2014

There they go again.

Read more…

TOPICS: Bond FundBondsExchange-Traded FundsFinancial MarketsFixed IncomeInterest RateTrading

IDC Paper Assists Boards in Oversight of ETFs

By Annette Capretta

October 19, 2012

The Independent Directors Council (IDC) has issued a new paper, Board Oversight of Exchange-Traded Funds in order to assist directors of exchange-traded funds (ETFs) in performing their oversight responsibilities. The demand for ETFs has grown markedly as investors—both institutional and retail—increasingly turn to ETFs as investment options in their portfolios. With the increase in demand, sponsors have offered more ETFs with a greater variety of investment objectives. Our paper also may be useful for directors who do not currently oversee ETFs but wish to be more familiar with a board’s oversight role, including those whose fund groups may currently invest in ETFs or intend to launch ETFs in the future.

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TOPICS: Exchange-Traded FundsFund Governance

Key Data Undercut Critics’ Arguments on ETFs and Intraday Volatility

By Rochelle Antoniewicz

April 19, 2012

Over the past year, several news stories have focused on stock market volatility, particularly the price swings that occur in the hour prior to the U.S. market’s 4:00 p.m. close. “What’s Behind That Wild Final Hour of Trading?” asked CNNMoney last November.

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TOPICS: Exchange-Traded FundsFinancial Markets

The (Dis)Connection Between ETFs and Market Volatility

By Rochelle Antoniewicz

February 23, 2012

In the past year, many commentators have charged that exchange-traded funds (ETFs) are responsible for driving stock market volatility to unprecedented extremes.

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TOPICS: Exchange-Traded FundsFinancial Markets

Proposal to Implement the Volcker Rule Raises Deep Concerns for U.S. Registered Funds

By Paul Schott Stevens

February 14, 2012

Congress enacted the provision of the Dodd-Frank Act known as the Volcker Rule to restrict banks from using their own resources to trade for purposes unrelated to serving clients—something known as “proprietary trading.”

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TOPICS: Exchange-Traded FundsFinancial MarketsFund Regulation

ETF Basics: The Creation and Redemption Process and Why It Matters

By Mara Shreck and Shelly Antoniewicz

January 19, 2012

One benefit of exchange-traded funds (ETFs) is that they give investors access to a range of strategies and indexes, with the flexibility of transacting throughout the trading day at prices that typically approximate the value of the fund’s underlying portfolio. To see how ETFs accomplish this, one must understand how ETF shares are created and redeemed.

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TOPICS: Exchange-Traded Funds

ICI Adds to Educational Resources on Exchange-Traded Funds

By Mike McNamee

December 16, 2011

ICI Adds to Educational Resources on Exchange-Traded Funds.

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TOPICS: Exchange-Traded Funds

ICI Responds to Hearing on Excessive Speculation

By Stephanie Ortbals-Tibbs

November 3, 2011

ICI issued the following statement in response to today’s hearing, “Excessive Speculation and Compliance with the Dodd-Frank Act,” before the Senate’s Permanent Subcommittee on Investigations.

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TOPICS: Commodity InvestmentsExchange-Traded FundsFinancial MarketsFund Regulation

ICI Responds to Hearing on Exchange-Traded Funds

By Stephanie Ortbals-Tibbs

October 19, 2011

ICI issued the following statement in response to today’s hearing in the Senate Banking Subcommittee on Securities, Insurance, and Investment, “Market Microstructure: Examination of Exchange-Traded Funds.”

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TOPICS: Exchange-Traded FundsFinancial MarketsFund Regulation

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