Investors embrace ETFs

Exchange-traded funds are taking off as both risk management tools and investment vehicles. By Naomi Humphries

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Last November, UBS Global Asset Management initiated an innovative trade with a major European institutional investor using Fresco Index Shares – a type of exchange-traded fund (ETF). The mandate was to design a hedge for the MSCI World Index, and while the trade size was not very significant – Sfr7 million ($4.8 million) – the trade itself represented an important breakthrough in a key use of ETFs – combining ETFs in a basket to hedge another index. “We achieved this by using a weighted

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