Concerns that thinly traded securities will create liquidity problems for ETFs and, vice versa, that ETFs will exacerbate liquidity problems for thinly traded securities underline a general misunderstanding of the benefit ETFs provide through their unique structure. Essentially, critics are apprehensive that ETFs tracking illiquid securities, most notably high-yield bonds and senior loans, will experience a liquidity crisis when interest rates rise. Although issues may arise in heavily depressed markets where investors are scrambling for an exit, this scenario is not confined to ETFs. Far from it, ETFs generally facilitate increased trading and liquidity and promote price discovery and trading efficiency.

The exponential growth of assets invested in exchange-traded funds has been one of the most significant developments in financial markets in recent years. In Europe, however, wide acceptance of ETFs in the investment community has not translated into wide acceptance in collateral management. According to Markit, over 55% of delegates at their recent Securities Finance forum stated they didn’t accept or post ETFs as collateral, despite many of these ETFs being tied to assets which are readily acceptable as collateral. Improving the use of ETFs as collateral in Europe has the potential to reduce fees, increase liquidity and reduce bid-offer spreads.

Solactive, a Germany-based index provider, has launched the Solactive Swiss Equal-Weight Net Total Return Index, an index tracking the performance of an equally weighted allocation of Swiss large-cap stocks. The index, which has been licensed to UBS, has been constructed so as to be suitable to underlie index-linked investment products such as exchange-traded funds and structured products. Steffen Scheuble, CEO of Solactive, commented: “We are pleased to fill in another gap in the market for UBS, with the launch of this equal-weight index following the Swiss market via its top 20 blue chips, which offers a new approach to a well-known market.”

US stocks are overvalued by most metrics, according to smart beta specialists Research Affiliates. Whilst this may come as worrying news for investors in US equity ETFs such as the $177 billion SPDR S&P 500 ETF (SPY) or the $12.6 billion iShares Russell 1000 ETF (IWB), this does not mean that they might not appreciate further. While the valuation metrics are useful in estimating the long-term return of the market, Research Affiliates warns that they can’t tell us with any accuracy when market prices will be heading up or down: “Simply knowing a market is overvalued tells us nothing about when it is expected to revert to reality.”

Stoxx, a leading European index provider, has announced the launch of the iStoxx MUTB Japan Quality 150 Index tracking the performance of profitable Japanese companies with low leverage and sustainable cash flows. This index can be used for performance measurement and provide the basis for exchange-traded funds (ETFs). “The Japanese government’s efforts to stimulate the economy includes the motivation of companies to improve their return on equity. With the newly launched iSTOXX MUTB Japan Quality 150 Index we offer local as well as international market participants an innovative, rules-based tool to participate from the performance of such companies,” said Hartmut Graf, Chief Executive Officer of Stoxx.

Deloitte has released a report investigating the rise of “robo-advisors” and the threat they pose to traditional wealth advisors. The report quantifies the explosive growth seen in 2014, with AUM for the top 11 players rising from $11.5bn in April to $19.0bn by end the year. The growth rates may be impressive, but, according to Deloitte, “these new market entrants are still nascent and represent a trivial amount relative to the $25+ trillion retail investable assets in the United States. Their lack of distribution has likely contributed to difficulties in reaching a large number of potential customers. But this may be about to change with large wealth management firms now joining the fray, including Charles Schwab and Vanguard, bringing both investment dollars and distribution to the robo-advice space.”

The multi-asset research team at Source, one of Europe’s largest providers of exchange-traded funds, has published sector research suggesting that US and European bank ETFs present a buying opportunity. Improving economic conditions, a robust housing market and a steepening yield curve are offered as the main driving forces behind their assessment. Paul Jackson, Head of Multi-Asset Research at Source, said: “We remain fully committed to financial on both sides of the Atlantic and we are overweight all subsectors, including banks, financial services, insurance and real estate.”

Listed private equity ETFs have enjoyed a strong year so far, with the Lyxor Privex UCITS ETF (PVX), PowerShares Global Listed Private Equity UCITS ETF (PSSP) and iShares Listed Private Equity UCITS ETF (IPRV) posting returns of 18.0%, 7.1 %, and 7.7% respectively in the period from 1st January 2015 to 23rd July 2015, far exceeding the S&P 500 index’s return of 1.9%. These ETFs invest in a combination of listed private equity asset managers that oversee a collection of funds investing in different forms of private equity, as well as listed private equity funds.