Too much of a good thing

The risks created by complicating a simple idea

ANY industry would be proud of an average annual growth rate of 34% over ten years and of a global reach from Austria to Taiwan. But the headlong expansion of exchange-traded funds (ETFs), which by May this year controlled almost $1.5 trillion of assets (not far short of the $2 trillion in hedge funds), has become a matter for concern among financial regulators. Could ETFs be the next source of financial scandal, or even of systemic risk?

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Related paper: Bank for International Settlements (BIS) -“Market Structures and Systemic Risks of Exchange-Traded Funds”