All change as investors favour ETFs over futures

The use of futures to gain long equity index exposure is no longer the efficient play it once was, thanks to stubbornly high roll costs and the flight of arbitrageurs from the market. ETFs are being touted as a cheaper alternative, but is there more to the debate than meets the eye?

asia markets
High roll costs and inefficient tracking spark shift to ETFs

A regime change is threatening to topple futures from their perch as the go-to instrument for institutional investors seeking long exposure to equity indexes. Higher costs, largely driven by regulatory constraints on banks' equity derivatives desks, have seen an increasing number of investors seek exposure using exchange-traded funds (ETFs).

Until now, the debate has been dominated by aggressive pitches from ETF providers keen to tout their wares as more cost-efficient. But the evidence is

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