BOSTON-State Street Global Advisors, the investment management group of State Street Corp., and Morgan Stanley Capital International have shaken hands on a deal to bring exchange-traded funds to Europe. The funds will be based on MSCI indices and cover products based on MSCI’s European regional and sector indices, including technology, telecommunication services and health care. The program is designed to allow SSgA to create what it hopes will be the first comprehensive group of European ETFs for institutional and retail investors.

ETFs are similar to mutual funds in that they offer investors access to the performance of an index by buying shares in a single fund. But they differ from mutual funds because like equities, ETF shares are listed on an exchange and can be bought or sold via a broker. Tracking an index helps to diversify risk and exposes investors to a wider range of companies, insiders explain.

In Europe, ETFs are in their infancy, explain SsgA executives. The offering is geared to provide European investors with an alternative investment opportunity. In the US, more than 78 ETFs currently exist with total assets of $49 billion.

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