Glenn Freeman: I'm talking with Alex Zaika about the exchange-traded funds sector and he tells us what he thinks goes into making a good ETF.

Alex Zaika: Before an investor, whether it's professional, retail, institutional client, trades in ETF, they need to go through a few steps to determine whether or not it is the right ETF for their portfolio. And normally, we see them follow five steps.

So, the first one is, have a think about the manager that you are partnering with, does the manager have size, scale and expertise because ultimately, to deliver low-cost ETFs it is very much about a scale game.

What's the exposure of the ETF? I think this is the most important thing people should think about. So, does the ETF provides exposure to global equities or global fixed income? Am I looking for U.S. equities, European equities, Japanese equities? Because ultimately, that will be the biggest driver of returns in your portfolio, the exposure of the ETF.

The cost of the ETF is very important, because if investors are holding the ETF for a long period of time in the portfolio, like I mentioned before, the impact of fees will magnify over time.

The structure of the ETF is important. Is it physical or is it synthetic? So, a synthetic ETF will actually use derivatives to seek its exposure and that can introduce counterparty risks. So, we would prefer ETFs that are physical, so they physically hold the securities, whether equities or bonds. So, for the iShares ETFs here in Australia, they are all physical.

And then the final one, which is also very important, is liquidity. Can you trade when you want to in, but probably even more importantly, can you trade out? And so, really have a look at how well the liquidity is supported by the ETF issue or how many market makers do they actually partner and work with here in Australia or globally.