Comment: ETF-bashing continues - so what are the critics hiding?

The City hates Exchange Traded Funds (ETFs) - Why? The simple answer is that they are disruptive and threaten the cosy world of fund management.

ETFs tilt the odds back into investors' favour by offering cheap, efficient, transparent, well spread investments which are also available direct, cutting out pricey City agents.

The level of hatred for them can be seen in reports on the latest alleged rogue trader within UBS who managed to lose $2 billion (£1.26 billion) on his trading desk which, among other things, dealt in ETFs.

There is no evidence as yet of what precisely he was trading; this fact does not seem to matter. What UBS and other banks should be questioning is the practices and lack of safeguards that allowed him to perpetrate such a fraud.

It could easily have been he was simply exposed to the swiss franc before its fall, and anyway the underlying ETF investors are completely unaffected since they still hold exactly the same assets as they did before.

When Nick Leeson brought down Barings via speculating in Japanese stock futures, would it have made sense to close down all index futures? It might be more sensible to look at risk controls within investment bank trading desks.

Current self-interested debate on the dangers of ETFs would seem about as fair and impartial as the Salem witch trials. As an investment vehicle, like all investment vehicles, ETFs are not the right choice for all investors. The debate over synthetic exchange funds has missed the point that numerous other retail products have similar risks - namely more than 50% of unit trusts, most structured products, the entire spread-betting industry and most physical exchange funds.

I believe in using the best physical and the best ETFs, whether synthetic or physical, available with the highest transparency standards. Our investors have the security of knowing their synthetic ETFs are backed by well over a 100% collateral disclosed daily.

The reason we like ETFs is that they offer the following advantages:

More performance, due to less fees - an index will, over the long term, always produce a higher return than the vast majority of traditional funds. Statistically, the chance of a traditional, active fund manager beating their benchmark three years on the trot is just 4%. This is in part due to the fact that the more a fund manager charges, the more the client loses. The fees within ETFs are much less. The average ETF charges just a third of the typical unit trust. By paying 0.5% a year rather than 1.5% a year would save an investor 10.5% of their capital over 10 years.

Less risk - putting money in a well spread index is safer as investors are less exposed to one stock or bond. There are an average of 239 holdings within an ETF against 110 within a unit trust. The average daily volatility of a fund is significantly higher than the index.