ETF custodian and fund administrator Brown Brothers Harriman & Co, working with research firm Inside ETFs, have published the results of their ‘2016 European Investor Survey’, which gauges the sentiment of investors toward ETF product and distribution strategies.
The survey’s respondents confirmed that as the European ETF landscape matures investment priorities are changing. The two firms write: “As a result, product innovation is a core aspect of the industry’s evolution and the participants can only expect demand for non-traditional products to increase. Traditionally, investors have used core index products in their portfolios, but this year’s data suggests that investors are now attracted to additional options that are weighted toward factors such as income or low volatility, rather than just market-cap.
“According to the survey results, smart beta, socially responsible investment strategies and multi-asset investing are asset classes where managers may seek to differentiate their products to reflect the rapidly growing importance and popularity of these criteria with investors. Respondents also highlighted investor education and robo-advisor platforms as potential areas of focus for distribution strategy. This data indicates that while the market has continued to add traditional passive products, a new wave of growth is likely to come from smart beta and active ETFs as advisors look for excess returns in Europe.
“In recent years, ETFs have enjoyed significant growth and are quickly becoming a sizeable portion of the overall global mutual fund market, says Andrew Craswell (pictured), Vice President and Head of European ETF Business Development at BBH. “As European ETF AUM sets to pass USD550 billion, the market is poised for a period of accelerated growth as new entrants come in and the market surpasses a point of scale. With the pace of demand set to increase, the European ETF market will remain a key strategic focus for many of the world’s largest asset managers.”
"This year's survey confirms that the demand for new ideas in the ETF space is accelerating," says Matt Hougan, Chief Executive Officer of Inside ETFs. "Investors are looking ahead to a market characterized by the potential for both higher volatility and lower returns, and they are demanding more out of ETF product development to solve those challenges. It's an exciting time for the market."
Key findings include the fact that socially responsible ETFs are en vogue: 52 per cent of respondents consider ESG factors when making a new investment. Smart beta is gaining traction, with 78 per cent of respondents having less than 5 per cent of their portfolio in smart beta, yet 49 per cent view it as an alternative to active strategies.
In terms of erceived investor criteria for investing in ETFs: 68 per cent of respondents will invest in an ETF with a track record of less than one year; only 20 per cent of respondents will invest in an ETF with less than EUR50 million in AUM.
Finally, robos help, not hurt traditional financial advisors: 54 per cent of respondents see robo-advisors as an opportunity for their business.