State Street predicts ETF growth in Europe, as it celebrates 20 years of ETFs

Close to half of European pension funds and fund managers plan to increase allocation to ETFs in the next five years, according to research published by State Street Global Advisors.

The finding comes as the provider of SPDR ETFs celebrates 20 years since its first ETF product was launched.

The positive outlook for growing sales across Europe is based on the views of 260 European corporate pension professionals, and 41 active UK fund managers.

Among the pension professionals, the research found that:

   • 39% of pension professionals interviewed across Europe currently said that the funds they manage do not have any allocation to ETFs at the moment. Some 29% have between 1% and 10% of their assets in ETFs, and a further 12% has between 10.1% and 20%.

   • However, over the next five years 47% said that they would increase their exposure to ETFs, with only 1% saying that it would fall.

   • 45% said that their exposure to equity ETFs would increase between now and 2018, and only 2% said it would fall. The corresponding figures for fixed income ETFs were 28% and 7%.

   • When asked about what they think are the key benefits of investing in ETFs, 45% of the pension professionals interviewed said cost effectiveness, followed by 41% who said liquidity. This was followed by 35% who said they provide market access.

   • In terms of how pension professionals use ETFs for their funds, 53% said as tactical investments to access specific markets. Some 17% said as core holdings, and 19% said core/satellite building blocks.

Among the pension professionals, the research found that:

   • 37% of fund managers interviewed said that the funds they manage do not currently have any allocation to ETFs. 42% have between 1% and 10% of their assets in ETFs, and a further 18% have between 10.1%and 20%.

   • Over the next five years 42% said that they would increase their exposure to ETFs, with only 8% saying that it would fall

   • 42% said that their exposure to equity ETFs would increase between now and 2018, and only 8% said it would fall. The corresponding figures for fixed income ETFs were 19% and 13%.

   • When asked about what they think are the key benefits of investing in ETFs, 57% of the fund managers interviewed said liquidity, followed by 49% who said cost effectiveness. This was followed by 32% who said they provide market access.

   • In terms of how fund managers use ETFs for their funds, 73% said as tactical investments to access specific markets. Some 11% said as core holdings and 14% said core/satellite building blocks.

 

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