Exchange traded funds (ETFs) provide investors with a single, tradable security for gaining exposure to an index. In the U.S. alone, ETF assets under management have grown to nearly $3 trillion as of the end of 2014.
A critical component of our investment process is, of course, to seek the best set of ETFs for each asset class in the investment discipline. A proprietary framework is used to examine the structural integrity and the investment metrics of each ETF in the marketplace.
We review the assets managed by the ETF, in addition to the normal dollar volume liquidity of the ETF, in the context of:
- The size of the market and the liquidity of the underlying asset class the ETF represents
- The likely size of the position we intend to establish
- The sophistication of the ETF provider
We work closely with the most sophisticated ETF providers as part of this process.