Lee Kranefuss, chief executive officer of BGI's iShares business, recently took time to discuss with IndexUniverse's Murray Coleman the future of exchange-traded funds and recent developments relating to the industry's dominant product line.

IU: Barclays recently renamed the Lehman-based bond indexes to the Barclays Capital moniker. Will the iShares Lehman ETFs change?

Kranefuss: Barclays Capital completed its acquisition of Lehman Brothers' North American Investment Banking and Capital Markets businesses. As part of the transaction, Lehman Brothers' indices have become part of Barclays Capital. The Lehman indexes are now Barclays Capital indexes. iShares will be renaming those ETFs. It's our practice to include the index provider in the name of the funds; we think that transparency is important for investors. People ought to know which index a fund is following.

IU: BGI's market share as a percentage of assets under management has dropped in 2008 by more than 5% through October. At the same time, State Street Global Advisors and Vanguard have recorded more than 1% gains. What do you attribute this to?

Kranefuss: You've really got to look at these pieces of data over time. SSgA's ETF assets, for instance, are concentrated in a couple of large funds that have huge swings in assets due to a large institutional base and general market sentiment.

Eight out of every $10 in ETFs have flowed into iShares for several years. We built the industry, and that obviously invited competition. One wouldn't expect that sort of concentrated asset gathering to continue. In the long run, we're still the leading ETF provider by far in the U.S. and globally. And competition is a good thing for a new product category. ETFs are a relatively new product to a lot of people. So more assets coming into the industry is good for BGI and everyone else. It validates what we're doing with ETFs and keeps us on our toes.

IU: BGI has 24 ETFs in registration that haven't come out yet. Do you expect most of those to still launch?

Kranefuss: While I'm very limited in what I can say about funds in registration, we are committed to building out the product line in the U.S., which currently has 178 ETPs. We expect that to include equities and especially fixed income, which only represents about 20% of our lineup right now. We've got lots of room for many new products, particularly in areas of the market that are traditionally more difficult for retail investors to access. ETFs are a huge democratizing force in the marketplace.

1 | 2 |