ETF allocation grows almost 6% since 2008, says Cerulli

Allocations to ETFs in fee-based portfolios have grown almost 6% since 2008, according to new research from Cerulli Associates, the Boston-based research firm.

In its latest 3Q issue of “The Cerulli Edge – Managed Accounts Edition”, data shows that allocations to ETFs has increased from 2.8% in 2008 to 8.7% at the end of the second quarter of this year, increasing ETF market share from 7.4% to 19%.

Total assets under management in the ETFs have increased from $532bn to $1.16trn. In managed accounts, ETF assets have increased from $39bn to $220bn.

Patrick Newcomb, senior analyst at Cerulli, says: “Advisors are allocating more to ETFs than ever before. In a little over four years, we have seen nearly 6% growth in ETF allocations, which is a notable jump.”

“There is a significant increase in the use of passive investments, which is helping to fuel the rapid growth of ETFs in managed accounts. The lower fees associated with ETFs compared to mutual funds has been a strong influence in the increased advisor adoption of ETFs,” Newcomb says.

The report also includes analysis of the increasing need for due diligence teams to vet asset managers, as more are launching active ETFs. “This means that more products are making their way onto broker/dealer platforms. This vetting process wasn’t necessary for passive investment products.

“Another result of the increase in ETF allocations industry-wide can be seen in the increase in the number of ETF strategists employed by broker/dealer firms to assist with implementing tactical investing in their client portfolios,” Newcomb says. “ETF strategists are growing their assets faster than any other managed accounts segment.”

“The opportunity for asset managers interested in gaining ETF distribution is to really understand the advisor segments actively using ETFs and the role ETF strategists play,” the report says.

“ETF strategists will continue to play a crucial role in helping broker/dealer firms educate advisors on implementing tactical strategies into their clients’ portfolios, which will help maintain the current level of growth.”


 

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