Structural Risks in ETFs / Hedge Fund Redemptions Slow

ETFs

No news yet on the sale of iShares, but that is pretty much all I have been working on for the past week.  And its been fun!

I was reminded of a recent article written by Paul Amery of IndexUniverse.eu.   I got to know Paul while I was at ICAP and he brings valuable practical market experience to his journalism.

ETFs are an increasingly important tool used by investors and in my view will continue to grow in prominence.  Paul’s article examines the structural risks in ETFs and is cleverly entitled “Structural Risks in ETFs”.

Paul answers the following questions:

• What Happens If The Swap Provider Fails In A Swap-Based ETF?
• What Happens If A Borrower Of Securities Defaults?
• What Happens If An ETF Custodian Bank Fails?

You can access the article here.  I hope you find it as interesting as I did.

Hedge Fund Redemptions

The FT carried a story today that gives some anecdotal evidence that hedge fund redemptions are slowing, being cancelled or reversing.  It seems that investors have finally realised that although they may have been disappointed that the hedgies' returns weren't completely uncorrelated to the overall market performance, that the group as a whole outperformed traditional asset managers.  And continue to do so. 

This isn't the end of redemptions and there are still funds that will undoubtedly shut in the days and weeks ahead.  However it does show the beginning of some equilibrium returning to the market.  Bring it on!