Sophie Baker assesses why Exchange Traded Funds have been one of the few recent investment success stories and whether they are gaining favour with UK pension funds

The UK financial press has not been a particularly uplifting read over the last year, with the seismic effects of the credit crunch and flailing markets dominating the news. However, one ray of light has pushed through in the shape of the Exchange Traded Fund (ETF).

The product, prevalent in a number of guises as an investment vehicle traded on stock exchanges, holds assets from a variety of sources and appears to have offered investors a safer alternative to more traditional asset classes.

In March 2009, ETF Securities, an issuer of ETFs and their close relations Exchange Traded Commodities (ETCs), recorded oil ETC volumes up 400
per cent year on year.

"There has been some phenomenal growth in the ETF market," explains Manooj Mistry, head of db x-trackers UK. "The ETF market in Europe has gone from €70 billion to €110 billion, and has been the one bright spot recently."

A measure of how far ETFs have clawed their way onto the investment radar was made evident by the recent establishment of a new research chair, Core-Satellite and ETF Investment by CrÃâ

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