European ETF provider Source has revealed that, on average, institutional investors predict the global ETF market will double in size over the next five years to account for 6 per cent of global investment fund assets under management. ETFs/ETPs currently account for around USD3.137 trillion (3 per cent) of AUM held in investment funds globally.
The firm writes that just 2 per cent of respondents expect the market to shrink in terms of assets under management while 6 per cent believe that assets in ETPs will grow to between 11-15 per cent of the total investment fund market.
The research found that just 9 per cent of respondents expect to decrease their allocation to ETPs over the next 12 months. A third (33 per cent) expects to increase their allocation, with 7 per cent looking to increase this ‘significantly’. On average, respondents said that passives/ index funds account for 8 per cent of their overall assets under management.
Lower costs were cited as the main benefit of ETPs over other investment funds (cited by 53 per cent of respondents), followed by more choice (18 per cent), better liquidity (18 per cent), and innovation (15 per cent).
The research also found a significant number of respondents (43 per cent) agree that ETPs are increasingly being used as long-term investments at the centre of portfolios as opposed to playing more tactical, short-term roles. A further 33 per cent said that this may be the case; less than a quarter (22 per cent) said they did not see ETFs/ ETPs being used as long-term investments at the centre of portfolios.
Speaking at the Inside ETFs conference in Amsterdam, Lee Kranefuss, Chairman, Source, says: “It is clear that Exchange Traded Products are playing an increasingly central role for institutional investors, driven by core characteristics such as lower costs and greater liquidity. It is great to see that investors believe the market could double over the next five years and that many are recognising the fundamental role that they can play at the centre of portfolios; we firmly believe that ETPs and ETFs should account for a far higher percentage of global investment fund AUM, offering a highly competitive, overwhelming alternative to traditional investment vehicles and funds.”
