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EDHEC ETF survey finds investors want more transparency

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Findings from the EDHEC European ETF Survey 2015 reveal investors want more ETFs, particularly smart beta ETFs, but want more transparency on methodology and risk analytics.

 The survey found that ETFs make up an increasing proportion of portfolio holdings across the asset classes and that satisfaction has remained at high levels especially for traditional asset classes with a significant increase in satisfaction with equity ETFs, which now enjoy a satisfaction rate of 98 per cent, compared to 91 per cent in 2014.
 
The satisfaction rates for ETFs based on the most liquid asset classes are far more consistent compared to those based on illiquid asset classes, the survey found.
 
The survey says that investors recognise the high quality of ETFs when compared to competing indexing vehicles and that investors have increased their use of ETFs to invest in smart beta, with the proportion reaching 68 per cent of respondents in 2015 compared to 49 per cent in 2014.
 
ETFs based on smart beta indices represent the top concern of respondents when it comes to future developments, with 38 per cent of them hoping for further developments in this area.
 
 The survey found that cost considerations appear to be the main driver behind increasing ETF allocations. This increase is also motivated by performance, transparency and liquidity. Some 75 per cent of respondents think that smart beta indices provide significant potential to outperform cap-weighted indices in the long term and more than 81 per cent think that they avoid cap-weighted indices that are concentrated in very few stocks or sectors.
 
Transparency was a key requirement with investors. A vast majority of respondents, some 94 per cent agree that smart beta indices require full transparency on methodology and risk analytics.  The report says that transparency is not only the best protection against the risks arising from conflicts of interests, but it is also instrumental in improving the informational efficiency of the indexing industry. It also observes that there is an important gap between investors’ information requirements for smart beta and accessibility of information from providers.
 
Commenting on the results of the survey, Valérie Baudson, CEO of Amundi ETF, Indexing & Smart Beta, says, “As the No.1 European Asset Manager and a leading ETF provider, we have been developing a broad range of cost-efficient, transparent and innovative ETFs. The EDHEC Survey findings, highlighting investors’ high satisfaction rate and their expectations around Smart Beta solutions, incite us to keep on enriching our offer and guiding investors further when implementing smart beta strategies in their asset allocation.”
 
Professor Lionel Martellini, Director of EDHEC-Risk Institute, adds, “This survey confirms the relevance of ETFs in institutional investors’ asset allocation. Smart beta indices appear to be a key growth area for the ETF industry looking forward, with an ever increasing focus on improved transparency and informational efficiency.”

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