The global exchange-traded fund industry proved its resilience in the face of the Covid-19 pandemic as assets under management grew 26 per cent to $7.99 trillion at the end of December 2020 from the prior year. The growth continued in 2021 as a record level of net inflows brought global AUM to $8.56tn at the end of the first quarter.
While the ETF market is gaining strength in the Mena region, the industry is nascent and most ETFs available to Middle East investors are listed in the US, Europe or Asia. Globally, the ETF and exchange-traded product industry includes 535 providers that have listed 8,893 products on 77 exchanges.
With the market size burgeoning and a growing number of ETFs on offer, what are the key decisions for investors to consider when faced with a variety of these products?
Investors in the region have a degree of flexibility that is not available to their counterparts based in the US or Europe, thus providing them with a broader range of opportunity, but also necessitating more thought in the investment process. But it need not be overwhelming.
There are some simple guidelines to help investors navigate the selection process. For example, look at how domicile and different ETF structures can affect performance.
An ETF is an exchange-listed investment fund that may consist of stocks, bonds, commodities or other financial assets and can be bought and sold throughout the trading day. It is a cost-effective and efficient investment vehicle to gain exposure to diverse assets.
In each region, regulators set the standards and rules governing product creation and its sale outside the region. In the US and European ETF markets, for instance, regulations restrict investors in one region from investing in ETFs listed in another geography. However, this is not the case for Mena-based investors who can invest in ETFs in both markets.
There may be an ETF available in one market that has an equivalent exposure in another market, or there may be an ETF that is available in only one of these markets.
For Mena-based investors, it is important to consider which ETF is more aligned with their portfolio mandate.
Most investors focus on fees and size when deciding on ETF investments, but domicile-based factors such as liquidity, timing alignment and tax should also be considered in investment decisions.
Looking at exchange liquidity, there are fundamental differences between ETFs domiciled in the US versus those in Europe. The US market has higher on-exchange activity, driven by regulation and a higher participation of retail investors. In Europe, exchange liquidity is more fragmented, but a market-maker is always present to support the ETF.
For Mena-based investors, it is important to consider which ETF is more aligned with their portfolio mandate
While exchange liquidity is beneficial, regardless of the market, it is important to remember that ETF liquidity is primarily driven by the liquidity of the underlying assets.
Timing alignment between when the ETF trades and when underlying assets trade is another factor to consider. If an ETF is listed on a European market but the underlying assets are in the Middle East, liquidity from the trades of the underlying securities can be passed to the ETF during the overlapping trading hours.
However, when trading hours do not overlap, for instance when a US-domiciled ETF provides exposure to stocks listed in the Middle East, investors might pay a premium on orders executed immediately or risk a movement in price for orders executed the next day. Aligning trading hours to maximise flexibility, therefore, becomes an important consideration for investors.
Tax withholding on dividend distribution may seem a nuanced aspect to consider for Mena investors putting money into ETFs, but it can have a material impact on performance in the long term.
Taxes can be withheld at the portfolio level on fund investments, at the fund level on fund distributions or at the investor level on income or capital gains. Dividend distributions paid on US-domiciled ETFs with exposure to US stocks are subject to withholding tax, depending on the investor’s location.
However, a Europe-domiciled ETF with the same exposure may allow the ETF to claim back part of the withholding tax on fund distributions because of international tax treaties. Further, in Europe, dividends may not always be distributed, but rather reinvested.
For the Mena-based investor, the option of having the dividends reinvested if the dividend income is not needed becomes relevant when choosing the domicile of the ETF to avoid potential taxes.
Therefore, domiciliation becomes an important factor to consider for Mena-based investors to maximise the investment opportunities of the ETF/ETP market.
Alessio Cirillo is the EMEA sales director at Invesco.
More from Neighbourhood Watch:
MEYDAN CARD
6.30pm Al Maktoum Challenge Round-1 Group One (PA) US$65,000 (Dirt) 1,600m
7.05pm Handicap (TB) $175,000 (Turf) 1,200m
7.40pm UAE 2000 Guineas Trial Conditions (TB) $100,000 (D) 1,600m
8.15pm Singspiel Stakes Group Two (TB) $250,000 (T) 1,800m
8.50pm Handicap (TB) $135,000 (T) 1,600m
9.25pm Al Maktoum Challenge Round-1 Group Two (TB) $350,000 (D) 1,600m
10pm Dubai Trophy Conditions (TB) $100,000 (T) 1,200m
10.35pm Handicap (TB) $135,000 (T) 1,600m
The National selections:
6.30pm AF Alwajel
7.05pm Ekhtiyaar
7.40pm First View
8.15pm Benbatl
8.50pm Zakouski
9.25pm: Kimbear
10pm: Chasing Dreams
10.35pm: Good Fortune
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MATCH INFO
Manchester United 2
(Martial 30', McTominay 90 6')
Manchester City 0
ENGLAND SQUAD
Joe Root (c), Moeen Ali, Jimmy Anderson, Jonny Bairstow, Stuart Broad, Jos Buttler, Alastair Cook, Sam Curran, Keaton Jennings, Ollie Pope, Adil Rashid, Ben Stokes, James Vince, Chris Woakes
The biog
Title: General Practitioner with a speciality in cardiology
Previous jobs: Worked in well-known hospitals Jaslok and Breach Candy in Mumbai, India
Education: Medical degree from the Government Medical College in Nagpur
How it all began: opened his first clinic in Ajman in 1993
Family: a 90-year-old mother, wife and two daughters
Remembers a time when medicines from India were purchased per kilo
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Fixtures
Wednesday
4.15pm: Japan v Spain (Group A)
5.30pm: UAE v Italy (Group A)
6.45pm: Russia v Mexico (Group B)
8pm: Iran v Egypt (Group B)
UAE currency: the story behind the money in your pockets
Killing of Qassem Suleimani
HWJN
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The specs
- Engine: 3.9-litre twin-turbo V8
- Power: 640hp
- Torque: 760nm
- On sale: 2026
- Price: Not announced yet
The Facility’s Versatility
Between the start of the 2020 IPL on September 20, and the end of the Pakistan Super League this coming Thursday, the Zayed Cricket Stadium has had an unprecedented amount of traffic.
Never before has a ground in this country – or perhaps anywhere in the world – had such a volume of major-match cricket.
And yet scoring has remained high, and Abu Dhabi has seen some classic encounters in every format of the game.
October 18, IPL, Kolkata Knight Riders tied with Sunrisers Hyderabad
The two playoff-chasing sides put on 163 apiece, before Kolkata went on to win the Super Over
January 8, ODI, UAE beat Ireland by six wickets
A century by CP Rizwan underpinned one of UAE’s greatest ever wins, as they chased 270 to win with an over to spare
February 6, T10, Northern Warriors beat Delhi Bulls by eight wickets
The final of the T10 was chiefly memorable for a ferocious over of fast bowling from Fidel Edwards to Nicholas Pooran
March 14, Test, Afghanistan beat Zimbabwe by six wickets
Eleven wickets for Rashid Khan, 1,305 runs scored in five days, and a last session finish
June 17, PSL, Islamabad United beat Peshawar Zalmi by 15 runs
Usman Khawaja scored a hundred as Islamabad posted the highest score ever by a Pakistan team in T20 cricket
The specs
Engine: 3.0-litre flat-six twin-turbocharged
Transmission: eight-speed PDK automatic
Power: 445bhp
Torque: 530Nm
Price: Dh474,600
On Sale: Now
10 tips for entry-level job seekers
- Have an up-to-date, professional LinkedIn profile. If you don’t have a LinkedIn account, set one up today. Avoid poor-quality profile pictures with distracting backgrounds. Include a professional summary and begin to grow your network.
- Keep track of the job trends in your sector through the news. Apply for job alerts at your dream organisations and the types of jobs you want – LinkedIn uses AI to share similar relevant jobs based on your selections.
- Double check that you’ve highlighted relevant skills on your resume and LinkedIn profile.
- For most entry-level jobs, your resume will first be filtered by an applicant tracking system for keywords. Look closely at the description of the job you are applying for and mirror the language as much as possible (while being honest and accurate about your skills and experience).
- Keep your CV professional and in a simple format – make sure you tailor your cover letter and application to the company and role.
- Go online and look for details on job specifications for your target position. Make a list of skills required and set yourself some learning goals to tick off all the necessary skills one by one.
- Don’t be afraid to reach outside your immediate friends and family to other acquaintances and let them know you are looking for new opportunities.
- Make sure you’ve set your LinkedIn profile to signal that you are “open to opportunities”. Also be sure to use LinkedIn to search for people who are still actively hiring by searching for those that have the headline “I’m hiring” or “We’re hiring” in their profile.
- Prepare for online interviews using mock interview tools. Even before landing interviews, it can be useful to start practising.
- Be professional and patient. Always be professional with whoever you are interacting with throughout your search process, this will be remembered. You need to be patient, dedicated and not give up on your search. Candidates need to make sure they are following up appropriately for roles they have applied.
Arda Atalay, head of Mena private sector at LinkedIn Talent Solutions, Rudy Bier, managing partner of Kinetic Business Solutions and Ben Kinerman Daltrey, co-founder of KinFitz
Apple%20Mac%20through%20the%20years
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Tearful appearance
Chancellor Rachel Reeves set markets on edge as she appeared visibly distraught in parliament on Wednesday.
Legislative setbacks for the government have blown a new hole in the budgetary calculations at a time when the deficit is stubbornly large and the economy is struggling to grow.
She appeared with Keir Starmer on Thursday and the pair embraced, but he had failed to give her his backing as she cried a day earlier.
A spokesman said her upset demeanour was due to a personal matter.
FIXTURES
Fixtures for Round 15 (all times UAE)
Friday
Inter Milan v AS Roma (11.45pm)
Saturday
Atalanta v Verona (6pm)
Udinese v Napoli (9pm)
Lazio v Juventus (11.45pm)
Sunday
Lecce v Genoa (3.30pm)
Sassuolo v Cagliari (6pm)
SPAL v Brescia (6pm)
Torino v Fiorentina (6pm)
Sampdoria v Parma (9pm)
Bologna v AC Milan (11.45pm)
THE SIXTH SENSE
Starring: Bruce Willis, Toni Collette, Hayley Joel Osment
Director: M. Night Shyamalan
Rating: 5/5
UK-EU trade at a glance
EU fishing vessels guaranteed access to UK waters for 12 years
Co-operation on security initiatives and procurement of defence products
Youth experience scheme to work, study or volunteer in UK and EU countries
Smoother border management with use of e-gates
Cutting red tape on import and export of food
WOMAN AND CHILD
Director: Saeed Roustaee
Starring: Parinaz Izadyar, Payman Maadi
Rating: 4/5
The specs: 2018 Peugeot 5008
Price, base / as tested: Dh99,900 / Dh134,900
Engine: 1.6-litre turbocharged four-cylinder
Transmission: Six-speed automatic
Power: 165hp @ 6,000rpm
Torque: 240Nm @ 1,400rpm
Fuel economy, combined: 5.8L / 100km
'Project Power'
Stars: Jamie Foxx, Joseph Gordon-Levitt, Dominique Fishback
Director: Henry Joost and Ariel Schulman
Rating: 3.5/5
THE%C2%A0SPECS
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FA Cup quarter-final draw
The matches will be played across the weekend of 21 and 22 March
Sheffield United v Arsenal
Newcastle v Manchester City
Norwich v Derby/Manchester United
Leicester City v Chelsea
UAE currency: the story behind the money in your pockets
UAE currency: the story behind the money in your pockets
Which honey takes your fancy?
Al Ghaf Honey
The Al Ghaf tree is a local desert tree which bears the harsh summers with drought and high temperatures. From the rich flowers, bees that pollinate this tree can produce delicious red colour honey in June and July each year
Sidr Honey
The Sidr tree is an evergreen tree with long and strong forked branches. The blossom from this tree is called Yabyab, which provides rich food for bees to produce honey in October and November. This honey is the most expensive, but tastiest
Samar Honey
The Samar tree trunk, leaves and blossom contains Barm which is the secret of healing. You can enjoy the best types of honey from this tree every year in May and June. It is an historical witness to the life of the Emirati nation which represents the harsh desert and mountain environments
More coverage from the Future Forum
Scorline
Iraq 1-0 UAE
Iraq Hussein 28’
MATCH INFO
What: India v Afghanistan, first Test
When: Starts Thursday
Where: M Chinnaswamy Stadium, Bengalaru
