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Vanguard’s European ETF survey reveals investors use ETFs for core buy and hold investing

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Asset manager and ETF provider Vanguard has revealed the results of its survey of 400 professional ETF buyers across Europe, via the independent research group Presicent, on its uses and views of ETFs.

Vanguard writes that the popularity of ETFs has exploded in recent years and Europe is a prime example, with assets under management (AUM) in the European ETF industry at USD726 billion in December 2018, having almost doubled since 2013. Given this surge in growth, the survey examines the investment use of ETFs and the buying habits of professional investors in Europe.

Nearly half (47 per cent) of those surveyed use ETFs for core buy and hold investing, while tactical use of ETFs is far from the most popular reason, with only a quarter (24 per cent) using ETFs for this purpose. The research also uncovered diverse ETF priorities across regions, with buy and hold strategies used significantly more among investors in the UK (85 per cent) and Germany (65 per cent) and the majority of Italian investors (71 per cent) still using ETFs to make shorter-term tactical adjustments.

The cost of ETFs is commonly cited as the key driver of growth, but the results of the survey reveal that when it comes to ETF selection, no single criteria is dominant. While 18 per cent of respondents said the expense ratio is their top priority, liquidity of underlying holdings (17 per cent) and tracking error (15 per cent) also emerge as the most significant factors for professional ETF buyers in choosing a product.

At a country level, German buyers emerge as the most cost-conscious (38 per cent), whereas Italian (27 per cent) and Swiss (21 per cent) buyers are more benchmark-sensitive. Among UK buyers, liquidity of the underlying (20 per cent) and spread considerations (21 per cent) are more important.

The survey found that many assume the majority of ETF buyers take a local or regional approach and are less inclined to use global portfolios. However, the results show a widespread understanding of the need for diversification, with global ETF use in Italy (80 per cent) and Germany (59 per cent) more common than regional use (59 per cent and 45 per cent). In Switzerland and the UK, even though single country exposures are more popular, a significant proportion still take a global approach with ETFs (41 per cent and 51 per cent respectively).

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