iShares, an arm of Barclays Global Investors, has brought out the iShares FTSE Eurotop 100 exchange traded fund (ETF). This brings the number of EFTs in their range up to 12.
It gives investors the chance to track the FTSE Eurotop 100 index, the largest 100 companies in Europe including the UK. The index is made up of companies such as Volkswagen, L'Oreal, Tesco, Barclays and Nestle.
ETFs are tracker funds that blend the characteristics of individual shares with that of unit trusts and investment trusts. Like unit trusts and investment trusts, they invest in a range of shares, which gives them the advantage of diversity. But unlike unit trusts and investment trusts, ETFs can be traded on the stock exchange at any time like shares.
This enables investors to gain exposure to large, well-known European companies easily if they feel that the market looks good. They can also get in and out of the market quickly because the shares are traded on a daily basis.
The FTSE Eurotop 100 fund may interest sophisticated investors with a medium- to high-risk profile, who understand how stockmarkets work. Tracking an index is risky when, as has recently been the case, stockmarkets are falling. But the worst seems to be over and the Eurotop 100 index has risen over the last three months from 2685.98 points on November 31, 2001 to 2799.58 points on January 31, 2002.
However, ETFs are still a new concept for UK investors and it may take time for them to catch on as they have done in the US.