Benefits of ETFs Debated                                       Page 2

ETF educational seminars such as the one conducted at the Dow Jones Indexes Asset Allocation Conference are becoming more frequent as investor curiousity toward ETFs grows, and several studies examining ETFs and investor perceptions of ETFs are being published or currently carried out by analyst groups. For example, the Boston Research Group (BRG) in late September released a public opinion survey about investor attitudes toward ETFs. BRG conducted market research with 204 individual investors with a minimum of $100,000 in household income, as well as 201 financial intermediaries with a minimum of $50 million in client assets under management. The research was sponsored by Barclays Global Investors.

The study found that 67% of financial intermediaries are aware of ETFs, compared with only 17% of individual investors. Part of the study also examined the perceived benefits of ETFs, and individual investors and financial intermediaries were asked which features of ETFs were most valuable on scale of 1 to 5 (1 represents "not at all valuable, and 5 represents "very valuable"). The table below illustrates which percentage of the subjects responded to the benefit as "very valuable."

Perceived benefit Percentage Individual Investors who replied "very valuable" Percentage Financial Intermediaries who replied "very valuable"
Tax efficiency by minimizing capital gains to share holders
53%
41%
Lower management fees
48%
46%
Intra-day pricing
43%
42%
Able to purchase through any brokerage firm
39%
42%
Behave like stock - can buy on margin and sell short
18%
26%
Source: Boston Research Group

Of the individual investors surveyed, 57% said they were likely to consider ETFs for their next investments.

In addition to the BRG study, the Boston-based Financial Research Corporation recently released a study entitled "The Future of ETFs - An Emerging Alternative to Mutual Funds," which was quoted above by BGI's Brad Zigler.

It appears that investors' cries for more information about ETFs are finally being heeded. Wiesenberger, a Thomson Financial company, releases the "Exchange-Traded Funds Weekly Review," and the Equity Derivatives and Quantitative Research division of Lehman Brothers has begun printing a similar weekly, "The Exchange-Traded Fund Monitor."

For more information about ETFs, please visit our ETFzone.

11/02/2000