Push to market Gulf's first exchange-traded funds

Roadshows aim to lift awareness and boost slack demand

The world's largest provider of exchange-traded funds (ETFs), iShares, is conducting roadshows in the Gulf to try to raise awareness amid slack demand for the investment vehicle in the region. Trading volumes have so far been low for the first ETFs launched in recent months on the Abu Dhabi Securities Exchange (ADX) and Saudi Arabia's Tadawul All-Share Index. Market analysts have pointed to the lack of a campaign to raise awareness about the product as a weakness in the launch of Abu Dhabi's ETF.

"When any ETF launches there's no guarantee that it will get massive turnover from day one," said Robert Broadwell, the vice president and regional business director for iShares. "If you look at the largest ETF in the world now, the SPDR S&P 500, which is worth about US$70 billion (Dh257.11bn), when it launched in 1993 you'd have said that there's not much trade volume. ETFs don't grow to be that big overnight."

However, ETFs are among the fastest-growing investment vehicles in many markets, including the US, Europe and Asia. ETFs are a type of open-ended investment fund that tracks a specific index, usually stocks or commodities. ETFs trade like shares. They can represent a wide range of asset classes, regions and investment themes. Individual investors in the Gulf, though, are still familiarising themselves with the product. Some independent financial advisers and private banks also need to learn more about ETFs, Mr Broadwell said.

"There is still low awareness about ETFs in certain categories of investors in the Gulf, the local ETFs will hopefully help to change that," he said. However, a small but significant number of institutional investors in the region have been using ETFs since their inception in the US. Institutional asset managers, insurance companies, mutual fund managers and treasurers at local banks are among investors who already used the product, he said.

This month, iShares held the latest of its ETF roadshows in the region, offering guidance to Union of Investment Companies on how to best use index tracking products such as ETFs in portfolios. In March, it offered advice to the sovereign wealth fund Kuwait Investment Authority and plans another roadshow in the UAE in September, having previously met investors in Saudi Arabia and Qatar. Stock exchanges and ETF sponsors need to ensure investors are familiar with the different exchange-traded products which include notes and commodities as well as funds, Mr Broadwell said.

The UAE's first ETF, the NBAD OneShare Dow Jones UAE 25, was listed on the ADX in March. [e-mail]