The New Model Index Fund

Abstract

This research paper provides a brief introduction to Exchange-Traded Funds (ETFs), and describes the features that distinguish ETFs from other investment instruments (such as index mutual funds, active mutual funds, listed investment companies/trusts and share baskets).

The paper explains how ETFs overcome the drawbacks associated with conventional mutual funds and listed pooled investment vehicles. The dual-trading structure of ETFs - whereby investors create or redeem ETF shares - is also discussed. Finally, there is a discussion of the so-called active ETFs that have recently been launched in Germany (by Die Wertpapier Spezialisten) and Australia (by BNP Paribas).

Keywords: Exchange-traded funds, managed funds

JEL Classification: G23, K22