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Safety of Australian ETFs

05-06-2011 09:55 AM CET | Business, Economy, Finances, Banking & Insurance

Press release from: Blackrock

BlackRock’s (NYSE: BLK) exchange traded fund business, iShares, said today that Australia’s young exchange traded fund (ETF) market and stringent regulatory system are keeping Australia’s ETFs relatively simple and straightforward.

There are 50 ETFs currently trading on the Australian Securities Exchange (ASX) – the majority are based on the traditional ETF structure of a fund of physical stocks, in comparison to more complex ETF structures such as derivatives-based, leveraged and inverse ETFs trading in some overseas markets.

Mark Oliver, Head of iShares Australia, said: "It is encouraging that ASIC, the RBA and ASX are applying close scrutiny to Australia’s ETF industry, with particular emphasis on transparency and liquidity, as more providers and different types of ETFs enter the market. iShares believes that recent local commentary highlighting possible risks of derivatives-based ETFs are unnecessary alarmist. The overwhelming majority of ETFs listed on the ASX have no derivative exposure whatsoever.

"Being one of the younger ETF markets, Australia has the benefit of learning from overseas markets in terms of regulation-setting and product structures. ETFs have been trading on the ASX for ten years and almost all are built to the original, tested model. They offer a cost-effective way to gain diversified exposure to various sectors of the Australian and international sharemarkets and give investors a full view of all stocks in their fund and the liquidity to trade at any time that the ASX is open.

"However as the choice of ETFs expands it is important for investors to do their homework to decide which ETFs are right for them. This may include examining the index on which the ETF is based, the support and commitment of the provider and the differences between seemingly similar ETFs".

"Globally, on the basis of AUM, iShares has proven to be the primary choice by investors when it comes to ETFs. We believe this is because we have the highest quality, most dependable ETF products, a 10-year track record in the ETF business and a commitment to investor education and superior client service".

BlackRock’s Global Head of ETF Research and Implementation Strategy, Deborah Fuhr, said no Australian ETFs rely heavily on derivatives, although providers have filed some requests here to list leveraged or inverse ETFs. "We see some public filings to launch leveraged and inverse ETFs, however, at this stage, no heavily synthetic ETFs are traded in Australia."

Currently ETFs listed in Australia are using the original ETF product model, backed by securities, transparent in their underlying holdings, cost efficient, and providing easy diversification that is matched to benchmarks. They also have the advantage of multiple brokers involved in creation and redemption," Ms Fuhr said.

Further information is available at www.iShares.com.au

BACKGROUND INFORMATION
About iShares iShares is a global product leader in exchange traded funds with over 470 funds globally across equities, fixed income and commodities, which trade on 19 exchanges worldwide. In Australia, iShares has 23 ETFs listed on the Australian Securities Exchange (ASX), across both domestic and international indices. The first iShares ETF was listed on the ASX in October 2007. The iShares funds are bought and sold like common securities on securities exchanges. The iShares funds are attractive to many individual and institutional investors and financial intermediaries because of their relative low cost, liquidity and trading flexibility. Investors can purchase and sell shares or units (as the case may be) through any brokerage firm, financial adviser, or online broker, and hold the funds in any type of brokerage account. The iShares customer base consists of the institutional segment of superannuation plans and fund managers, as well as the retail segment of financial advisers and individual investors. Visit iShares.com.au for further information.

About BlackRock BlackRock is a leader in investment management, risk management and advisory services for institutional and retail clients worldwide. At December 31, 2010, BlackRock’s AUM was US$3.561 trillion. BlackRock offers products that span the risk spectrum to meet clients’ needs, including active, enhanced and index strategies across markets and asset classes. Products are offered in a variety of structures including separate accounts, mutual funds, iShares (exchange traded funds), and other pooled investment vehicles. BlackRock also offers risk management, advisory and enterprise investment system services to a broad base of institutional investors through BlackRock Solutions Headquartered in New York City, as of December 31, 2010, the firm has approximately 9,100 employees in 25 countries and a major presence in key global markets, including North and South America, Europe, Asia, Australia and the Middle East and Africa. For additional information, please visit the Company's website at www.blackrock.com.

iShares
c/- BlackRock Asset Management Australia Limited
PO Box N43
Grosvenor Place
Sydney NSW 1220

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