Enable Independent can help you decipher overly complex financial derivatives.
“Despite concerns about their role in the financial crisis, many experts are worried about the re-emergence of increasingly opaque investment products”, says File on 4. “Warren Buffett famously called them weapons of mass destruction and policymakers damned them for their part in the 2008 crash. But in Britain and elsewhere, complex financial derivatives are once again thriving. Take one of the fastest growing and most popular ways for people to invest their savings, the "exchange traded fund" (ETF).
ETFs began as a simple enough product - a cheap and convenient way for individuals or pension funds to invest in the performance of a stock market index such as the FTSE100. Early ETFs needed little financial engineering. Investors bought shares in an ETF, and the ETFs' managers bought shares of the companies in the index their ETF had promised to track. Just over half the ETFs sold in Britain are still like that.
In the trade these are known as "plain vanilla". Saker Nusseibeh Head of investment, Hermes
But, following the 2008 crash, large investment banks - mostly European - started heavily promoting ETFs of a very different flavour, called "synthetic" ETFs. To all appearances, synthetic ETFs look much the same as the original kind. But inside, they are completely different because they are based on complex derivatives. At Hermes Fund Managers, one of the biggest pension fund advisers in Britain, the head of investment Saker Nusseibeh told File on 4, "I think synthetic ETFs look too good to be true".
If something “looks too good to be true”, it usually is, Enable, an IFAin Bishop’s Stortford have the experience to help you make educated financial decisions about all financial matters.
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