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Mar 24th, 2009 – Comment

Hi Lou, I would be interested to hear your opinion on the solvency, security or risk associated with holding ETF’s on the TSX60 (XIU) considering that they are derivative type securities provided by Barclays Bank in Canada.In other words, How secure do you consider Barclays bank to be? Thanks. Colin. Hoping for Happy Capitalism Hi […]


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Hi Lou,

I would be interested to hear your opinion on the solvency, security or risk associated with holding ETF’s on the TSX60 (XIU) considering that they are derivative type securities provided by Barclays Bank in Canada.In other words, How secure do you consider Barclays bank to be?

Thanks.

Colin.
Hoping for Happy Capitalism

Hi Colin,

Great question! Lets face it, Barclays is up to its eyeballs in grief and has been scrambling to bail out the boat.  There was some information in the datasphere recently suggesting that Barclays was looking to sell its ETF unit to raise cash and that there are lots of interested bidders.
That tells me that there may be something rotten in Denmark but it doesn’t seem to be the ETF business. Another thing you might want to consider is that an ETF is not actually a derivative. They are a pool of assets that mirror an index. In your case its the TSX 60. There are no managers buying and selling the portfolio.

I would say that the security of the assets in an ETF would have to be high given the oversight surrounding the product. The viability of Barclays depends on their ability to raise capital over the next few years and keep from having to go hat in hand to the Government of the UK for money.

Make it a great spring and Happy Capitalism!

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