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EghtesadOnline: The value of exchange-traded funds stood at 254.4 trillion rials ($1.7 billion) at the end of the first month (March 21-April 20) of the current fiscal, according to the Central Securities Depository of Iran.

An ETF is a type of fund that owns underlying assets (shares, stocks, bonds, oil futures, gold bullion, foreign currency, etc.) and divides ownership of those assets into shares. 

According to CSDI, there are 38 ETFs operating in the capital market.  Arman Parand Mapna project fund is the largest ETF valued at 77.93 trillion rials ($517.4 million).

This is followed by Etemad Afarin Parsian Fund with 24.1 trillion rials ($161.79 million), Amin Yekom Farad Fund with 20.3 trillion rials ($136.77 million), and Arman Ati Kosar Fund 18.826 trillion rials ($126.59 million), Financial Tribune reported.

In a past study of the performance of ETFs in Iran compared to their international peers, the Tehran Stock Exchange had a negative rating on the performance of the funds. 

Delving into drawbacks of the ETFs, TSE said the fund’s performance fall far short of expectations despite the fact that on the global and regional level they continue to expand both in value and variety. 

TSE ascribes the shortcomings to a variety of factors, namely a huge gap between net asset value and  closing prices, lack of after-hours trade in the capital market and ETFs not being indexed. 

 

Own Merit

Likewise, lack of after-hours trading for most indexed ETFs in the capital market makes it difficult for tracking indexes.  After-hours trading has the merit of attracting groups of dealers who wish to avoid the risk of daily volatility in equity prices.  

The fact that most ETFs in the domestic capital market are non-index is another drawback. Only 2 of the active ETFs in the country are indexed, and in terms of value, the index fund accounts for only 3% of the total value of funds. This is while the number of index funds in the US capital market is ten times higher than the non-index peers.

Data show that since inception in 1990, the value of ETF assets across continents reached $4 trillion by April 2017 and exceeded $5 trillion by the end of January 2018, indicating their increasing popularity. 

The US has the biggest ETF market in the world, holding 71% of the total value of ETF assets followed by Europe and Japan with 17% and 6% respectively. 

 

Iran Central Securities Depository value ETFs exchange-traded funds