New fund in demand with investors
The market’s first Exchange Traded Fund (ETF) allows investors to take a view on the performance of 20 companies, which include the main banks, CRH, Eircom and IAWS, giving them a diversified investment that is more convenient than buying all 20 stocks separately.
The fund saw strong demand yesterday, with units worth over €40 million traded. It is aimed at both retail and institutional investors and will increase in value as the share prices of the underlying companies grow. ISE chief executive Tom Healy said the launch of ETFs gave investors exposure to Ireland’s top stocks at a lower cost. “It means that they will be able to invest via a single security in a broad range of equities at very low cost and with the knowledge that there will be a fully transparent and liquid market for their investment,” he said.
ETFs are popular with fund managers that seek to track the performance of a stock market index or a given group of stocks. They differ from other index-tracking products because their prices fluctuate during a trading day. Most other products are priced on the basis of the closing price of the underlying stocks. Mr Healy said institutional investors, stockbrokers and investment banks had indicated a “clear demand” for an ETF-type product. The ETF will buy and sell shares in the top 20 firms, as measured by market capitalisation and liquidity, but may not invest more than 20% of its entire asset base in any one company. The fund will be managed by NCB Stockbrokers but will exist as a company in its own right. Its board will be chaired by former Central Bank governor Maurice O’Connell.
The fund can be bought and sold through any stockbroking member of the ISE and will attract similar fees to ordinary share dealing. The ISE has also nominated a dedicated market maker to ensure there will always be a party willing to buy or sell units in the fund.
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