New research commissioned by ETF provider Source reveals that, on average, independent financial advisers 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 (AUM). ETFs currently account for around USD3.137 trillion (3 per cent) of AUM held in investment funds globally.
The research found that just 1 per cent of respondents expect the ETF market to shrink in terms of assets under management while 10 per cent believe that assets in ETFs will grow to between 11-15 per cent of the total investment fund market.
The research found that just 6 per cent of IFAs expect client assets in ETPs/ ETFs to decrease over the next 12 months. Just under a third (31 per cent) expect to increase their allocation, with 4 per cent looking to increase this ‘significantly’. On average, respondents said that passives/ index funds account for 9 per cent of their overall assets under management.
Lower costs were cited as the main benefit of ETPs/ ETFs over other investment funds (cited by 60 per cent of respondents), followed by better liquidity (21 per cent), innovation (11 per cent) and transparency (10 per cent).
A considerable number of respondents (32 per cent) also agreed that ETPs/ ETFs 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; a quarter (26 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, Executive Chairman, Source, says: “It is clear that Exchange Traded Products are playing an increasingly central role for financial advisers and their clients, driven by core characteristics such as lower costs and greater liquidity. It is great to see that advisers 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, given that ETFs and ETPs offer a highly competitive, compelling alternative to traditional investment vehicles and funds.”