Investors Take Refuge in Corporate Credit ETFs

Corporate credit exchange-traded funds (ETFs) are replacing commodity ETFs, reflecting the plunge in commodities prices compared with last year, Dan Draper, head of global ETFs at Lyxor Asset Management, told CNBC.

"ETFs are becoming concurrent indicators of where investors' money is moving," he said.

In 2008, ETFs benefited from the downturn in hedge funds and have been forecast to grow from around $700 billion at present to $2 trillion by 2011, according to a report by Morgan Stanley.

"There was a toxic combination of high volatility and high correlation among asset classes and sectors, and in that role it was very difficult to be a stock picker in 2008," Draper said.

In a market where "liquidity became a primary focus, making a turn to index-based products is natural," he added.

When asked about ETFs becoming vulnerable to lack of liquidity in their turn, Draper said "the ETF is as liquid as the underlying market that it covers."

"In terms of nominal amounts, Europe is a quarter the size of the US market, but the growth rate for ETFs in Europe is twice that of the US," Draper said.

The reason he gave for this is the huge "movement from derivatives, certificates, and structured products to exchange based products."

The U.S. had 583 ETFs at the end of December, with assets totaling $550.2 billion, while Europe, the second-largest market, had 412, with $134.8 billion in assets, according to the Morgan Stanley report.

But investors should not jump blindfolded into this market, Draper warned.

"There is a lot happening with ETFs, and there is a need for improving the transparency," he said. "For the general public, a lot of education remains."