ETFs use set to increase, Edhec-Risk survey says

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There is room for growth in the use of the ETF products by European asset managers in the near future. That is the main conclusion of an annual survey on European ETF conducted by the Nice-based Edhec-Risk institute between October and November 2014.

The results of the 2014 survey have been presented by Felix Goltz, head of Applied Research at Edhec-Risk institute, during the opening session of the Edhec-Risk Days Europe conference in London.

A total of 222 responses of European ETF users, coming from 27 countries and representing €3,350bn of AUM, has been recorded. Almost half (47%) of the respondents were based in the UK, Switzerland and France.

Among the trends it highlights, the survey points out that around 60% of the ETF users have plans for increasing ETF use. This figure tends to be a stable trend since 2011.  In 2014, almost 40% of respondents will maintain their level of usage of ETFs. Only 3% of the surveyed asset managers said they would decrease their use.

The survey reveals that for 64% of the respondents, the increase in the use of ETFs will serve as a substitute to the use of active managers and for 42%, as a substitute to the use of other index products.

When asked on the motivations to this replacement, respondents have placed costs first (70%) followed by performance (45%). Liquidity (38%) and transparency (37%) come last.

In the group of respondents thinking the increase in the use of ETFs will serve as a substitute to the use of active managers, 27% of them are investing in products tracking smart beta and 40% of them are considering this option.

On the whole sample, the survey found that 25% of the respondents were already investing in products tracking smart beta, 40% considering this option and 35% not investing and not considering investment in such products.

Asked about the type of ETF products they would like to see developed in the future,  surveyed assets managers have responded “equity emerging market ETFs” (43%), “ETFs based on smart beta indices” (37%), “ETFs based on factor indices” (31%).

Goltz underlined that among the six biggest priorities seen by investors, four concern indices relating to smart beta approaches (smart beta equity, equity factor, equity style and  smart beta bonds).

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