ETF Industry is Growing Globally

The Exchange Traded Fund universe continues to expand globally. For U.S. based investors who are serious about diversifying outside domestic markets – and away from the sickly U.S. dollar – that’s a very good thing indeed.

The European ETF industry in particular is on fire with new fund listings. Last year, the number of ETFs listed on European exchanges reached 412 total fund offerings, “with plans afoot to launch a further 59,” according to the Financial Times.

It’s Easier the Ever to Access Offshore ETFs

There were 119 new ETFs listed in Europe last year alone. Total ETF assets under management in Europe exceeded the €400 billion (about US$580 billion) mark for the first time in 2007. The big four ETF issuers in Europe: Barclays Global Investors, Lyxor, Deutsche Bank, and Easy ETFs, account for nearly 75% of the total market, but there are over 20 smaller players introducing new funds too.

Also, the Stock Exchange of Hong Kong recently announced plans to begin rolling out more ETF offerings in Asia. Hong Kong’s main bourse is also exploring plans to cross-list existing ETFs on other Asian exchanges including perhaps Taiwan, and Korea.

Many U.S. online and discount brokers allow access to overseas exchanges, which includes the ability to buy ETFs listed in foreign markets. This provides even greater ETF investment choices for U.S. investors than ever before. EverTrade (a division of EverBank), Interactive Brokers, and E*Trade are just a few of the many brokers who can access these overseas listed ETFs for you.

But why would you to buy ETFs listed in London, Frankfurt, Tokyo, or Hong Kong when there are so many hundreds of ETFs to choose from right here at home? There are several very good reasons that I’d like to point out.

Offshore ETFs Can Give You Instant Diversification Out of the Dollar

First, like it or not, many U.S.-based investors recognize the bulk of their total wealth is tied up in U.S. dollars. I’m not just talking about stocks and bonds either. Many other assets including your business, residential or commercial real estate investments, even your pension or retirement funds, are probably denominated in dollars.

As we are all painfully aware, the U.S. Dollar Index lost more than one-third of its value just since 2001 – highlighting the danger of being too heavily dependent on dollar-denominated assets.

For this reason, many smart investors have opened offshore investment accounts where stocks and other investments can be bought and sold in a variety of foreign currencies. The rise in offshore-listed ETFs makes it even easier for you to execute a low-cost and well diversified investment strategy in your offshore investment account.

Even for U.S. based investors, buying ETFs listed on overseas exchanges makes a lot of sense. That’s because foreign ETFs can offer you a profit double-play: you can profit as the ETF itself moves higher (in local currency terms), plus earn additional bonus gains on the currency appreciation too.

Tune in to my blog again tomorrow, and I'll give you a real-world example of this profit double-play in action.