ETFs

ETFplus Market Brochure

Originating in the United States in the early nineties, Exchange Traded Funds began to become available to Italian investors in September 2002, and since then they have achieved increasing success, witnessed by both the increase of exchange volume and assets managed, and by the ever-increasing number of ETFs traded in the ETFplus market, the regulated market managed by Borsa Italiana specifically dedicated to these products.

Simplicity

ETFs are passive instruments, whose exclusive investment aim is to replicate the performance of the benchmark index to which they refer, allowing investors to expose themselves to the interest market (stocks, bonds, commodities, etc.) or to objective strategy (short and leverage - accessible through structured ETFs). Operationally, due to real time through a stock exchange, ETFs can be purchased and sold as if they were stocks through one's own bank/broker.

Transparency

ETFs, replicating a well-known market index, allow for investors to be perfectly aware of the risk/profit profile of their investment, as well as the security portfolio to which they are exposed. Furthermore, the price of ETFs is updated in real time as a function of the trend of components of the reference index and therefore the investor is always aware of the valorisation of his own investment in ETFs. This is further enhanced by the daily publication of the official value of the ETF.

Flexibility

ETFs do not have expiry dates, and at the same time they are listed on a stock exchange in real time. The investor can therefore adjust the temporal horizon of the investment based opon his own objectives, which can range from very short term (intraday trading) to medium/long term. Hence, considering that the minimum trading lot is equal to only one share/unit, it is possible to take a position in the indices of the whole world, even for reduced amounts.

Economy

The policy of passive management particular to all ETFs, as well as the listing on a stock exchange, mean ETFs are far cheaper than the typical costs of active management (firms with analyst teams) and those linked to distribution, guaranteeing investors access to markets and investment strategies that otherwise would be difficult to reach at a low and accessible price point.

Reducing issuer risk

ETFs are funds or SICAVs whose assets are, by law, the exclusive property of the possessors of the ETF shares/units. Consequently, even in the possibility of insolvency of the ETF manager, administrator and promotion company, the assets of the ETF would not be harmed.

Despite its simplicity and flexibility of use, the ETF remains a sophisticated and innovative instrument in constant evolution whose characteristics need to be understood in order to comprehend both their potential and limits.