Despite the possible shortcomings, the launch of SSB's ETF is being welcomed as a way of increasing the awareness of index investing. And the SSB offering is only the first in what is expected to be a flood of ETFs. Lazberger says the State Street ETFs will have an annual management fee of 0.3 per cent, compared with SSB's 0.95 per cent - a new low for index products offered to individual investors. If State Street is true to its word on fees, in all likelihood the managers of index managed funds will be forced to lower their fees for individual investors, which are much higher than those paid by US investors. Lazberger says the US experience with ETFs shows that their success depends on getting the larger investors to use them.
Liquidity is all important.
Lazberger says it could take several years for ETFs to become widely accepted.