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Nearly half of advisers to increase ETF use in new regulatory environment

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Some 45 per cent of advisers plan to increase exchange traded fund (ETF) use and 32 per cent plan to increase allocations to passive investment products in preparation for a new regulatory environment, according to Cerulli Associates.

Advisers believe that lower-cost investment products translate to less business risk
 
The January 2017 edition of The Cerulli Edge reveals that the shift to passive reached a new plateau during 2016, witnessing flows of more than USD500 billion.
 
These inflows come at the expense of massive outflows from active funds totalling USD310 billion. Mutual fund assets experienced modest growth in 2016, increasing roughly 6.0 per cent to USD12.5 trillion. Annual flows were net negative, losing USD90.8 billion.
 
ETFs displayed another successful year in 2016, as assets jumped 3.4 per cent in November and another 3.5 per cent in December, contributing to a total growth rate of 20 per cent. Flows were a major component, as the vehicle amassed USD287.3 billion during 2016.
 
Cerulli found in many aspects of its research last year that the search for attractive risk-adjusted returns from non-correlated sources of alpha will only intensify.
 
 Some institutional investors are beginning to question their portfolios' passive equity beta exposures after an extended period of upward momentum from larger stocks that drive the overall markets as well as relatively low equity market volatility.

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