Mutual Funds
    SAVE   |   EMAIL   |   PRINT   |   RSS  
Barclay ETF assets spike in 2005
Barclays iShares chief on growth and new funds.
December 16, 2005: 11:52 AM EST
By Jon Birger, Fortune

NEW YORK ( - Assets under management in Barclays Global Investors' iShares unit have grown $44 billion in 2005, said Lee Kranefuss, who runs the iShares operation for Barclays.

The firm's ETF assets now total $160 billion.

The $44 billion in new money is slightly below the $46 billion in assets iShares took in last year, but it still ranks the growth of the Barclays' ETF unit third among U.S. mutual fund companies, according to Barclays.

And for the second year in a row, Kranefuss expects Barclays to have sold more index funds than Vanguard.

What's new for 2006?

Kranefuss hopes to build on the early success of Barclays' first commodities ETF, COMEX Gold Trust (Research), which has grown to $340 million under management since being launched on Jan. 21, 2005.

Barclays has filed applications with the Securities and Exchange commission to launch a new silver ETF as well as a commodities ETF that will mimic the Goldman Sachs Commodities Index. GSCI currently has a 77 percent weighting in energy, which means the Barclays GSCI ETF would give individual investors a very direct way of investing in energy-related commodities without having to master the intricacies of futures trading.

"The futures market is a very inconvenient way for individual investors to access [energy]," says Kranefuss. "It's often not that convenient for institutional investors either."

Right now, all ETFs are structured as index funds. But Kranefuss thinks actively-managed ETFs are on the horizon.

First, though, the industry must solve what he calls the disclosure problem. Under SEC rules, ETFs must disclose their holdings on a daily basis, as compared to every six months for traditional mutual funds.

"With an active fund, you really don't want to reveal your holdings," says Kranefuss. "If you really did reveal your holdings every day, you'd have hedge funds looking at what you're trading and trying to get ahead of you."

In other words, a hedge fund would see a big ETF adding a new stock and then start buying that stock on the assumption -- probably a correct one -- that the ETF will continue buying that stock in days to come. This kind of front-running would likely drive up the price the ETF is paying for its shares.

"There's another issue you'd run into as well," Kranefuss says. "Suppose you have a strategy and you spend all the research on it, you run it, and you start publishing [the holdings]. Well, someone could come along and just clone it-'thanks for doing the research, we're just going to copy your trades everyday.'

"Trying to square this is where a lot of effort and research has gone in the last few years."  Top of page

Follow the news that matters to you. Create your own alert to be notified on topics you're interested in.

Or, visit Popular Alerts for suggestions.
Manage alerts | What is this?