More than nine out of 10 (92 per cent) senior professionals working in the hedge fund industry expect to see the volume of Exchange Traded Funds (ETFs) used by hedge funds to increase by the end of 2017.
That’s according to new research commissioned by Source, one of the largest providers of ETFs in Europe.
On average, hedge fund professionals expect the volume to rise to USD55 billion by the end of this year, up from around USD44 billion at the end of 20162, with almost a fifth (19 per cent) forecasting it could rise to over USD70 billion. The study found that, on average, respondents expect the volume to hit USD100 billion by early 2021.
The prime motivation cited for using ETFs in hedge fund strategies were low holding costs and management fees, according to two thirds (66 per cent) of respondents. Other primary reasons include excellent liquidity (64 per cent); easy access to sector exposure (46 per cent); ability to trade on exchanges (46 per cent); the growing choice of ETFs (42 per cent); and flexibility over long and short positions (42 per cent).
More than half (53 per cent) of respondents said they believe greater numbers of hedge funds – especially smaller ones – will use ETFs to reduce their costs and fees, thereby becoming more competitive.
Chris Mellor (pictured), Executive Director, Equity Product Management at Source, said: “Hedge fund managers are sophisticated investors and it is clear they are increasingly seeing the benefits that ETFs provide them, such as a cost-effective means to execute their strategies. We are seeing strong demand from hedge funds and expect this to escalate as ETFs play a progressively core role in investment strategies.”