In spite of its stellar performance at the end of 2012, Pakistan’s capital market is in dire need of innovation and in order to facilitate the introduction of new products the Securities and Exchange Commission of Pakistan (SECP) has been spearheading new legislation to ensure the development of a more dynamic capital market. In March 2012, the SECP approved regulations governing exchange traded funds (ETFs) for the Karachi Stock Exchange. ETFs have gained great popularity internationally as this type of investment product provides an inexpensive and expedient way of buying a large range of assets. ETFs allow people to buy shares across an array of classes and sectors which were traditionally accessible to institutions or very wealthy investors only.
Globally, ETFs are among the fastest growing investment products which are being adapted to cover specific regions, sectors, stocks, commodities, bonds, futures and other asset classes.
The Financial Times recently reported on the rise in popularity of ETFs which set a new record last year with assets in exchange traded funds and products reaching the $2 trillion mark. Speaking to The Financial Times, Mark Wiedman, global head of iShares (the ETF arm of BlackRock, the world’s largest fund manager), said: “Despite an environment dominated by changing risk-on and risk-off market conditions, we are seeing ETFs being used as a go-to product for all types of investors globally, from capital market participants looking for deep liquidity to investors seeking specialised exposures, as well as growing numbers using ETFs as buy-and-hold investment vehicles.” In fact, BlackRock is increasing its ETF presence in Europe with the purchase of Credit Suisse’s $17.6 billion ETF unit.
BlackRock held the leading position in 2012 among ETF managers with its iShares business making $87 billion last year, an increase of 62% from 2011. State Street Global Advisors, the second largest manager, registered a rise of 78.1% in inflows to $38.3 billion but was surpassed by Vanguard, the third largest global player, which drew in $54.2 billion, registering a 50.8% increase. The three largest players have strengthened their hold on the ETF industry, taking 67.8% of global inflows last year compared with 65.3% in 2011.