EDHEC will be presenting the results of the EDHEC European ETF Survey 2011 at the Indexation and Passive Investment Conference in London on 27 March.
Key findings of this comprehensive survey of 174 European ETF investors conducted as part of the Amundi ETF research chair at EDHEC-Risk Institute on “Core-Satellite and ETF Investment, include:
Investors have a differentiated view on different replication methods, taking several dimensions into account such as cost, tracking error, and accessibility of broad indices, among others, when making choices on the preferred replication mechanism. Depending on the objectives at hand, different replication mechanisms are perceived to have different types of benefits.
Industry communication on the risks of ETFs has led to the counterparty risk of physical ETFs being underestimated. As a result, investors think that full physical replication is less risky than synthetic replication in terms of counterparty risk. Even though almost all physical replication ETFs engage in securities lending, investors fail to appreciate the risk of this activity, even though synthetic replication ETFs do not use securities lending directly.
Investors acknowledge that the current education on the differences between highly regulated ETFs and largely unregulated ETPs needs to improve in order to avoid confusion.
There has been increasing demand for ETFs based on new forms of indices, from 29% to 39% over the past year, which indicates growing interest in alternative-weighted indices.
ETFs remain very popular for passive investment. In terms of future use, a majority of respondents (63%) indicate that they intend to increase their allocation to ETFs in the future.
