New research1 commissioned by Source, one of the largest providers of Exchange Traded Funds (ETFs) in Europe, reveals that, on average, institutional investors predict the global ETP market will double in size over the next five years to account for 6% of global investment fund assets under management (AUM). ETFs/ETPs currently account for around $3.137 trillion2 (3%) of AUM held in investment funds globally.
Significantly, just 2% of respondents expect the market to shrink in terms of assets under management while 6% believe that assets in ETPs will grow to between 11-15% of the total investment fund market.
The research found that just 9% of respondents expect to decrease their allocation to ETPs over the next 12 months. A third (33%) expects to increase their allocation, with 7% looking to increase this ‘significantly’. On average, respondents said that passives/ index funds account for 8% of their overall assets under management.
Lower costs were cited as the main benefit of ETPs over other investment funds (cited by 53% of respondents), followed by more choice (18%), better liquidity (18%), and innovation (15%).
The research also found a significant number of respondents (43%) agree that ETPs are increasingly being used as long-term investments at the centre of portfolios as opposed to playing more tactical, short-term roles. A further 33% said that this may be the case; less than a quarter (22%) said they did not see ETFs/ ETPs being used as long-term investments at the centre of portfolios.
Speaking at the Inside ETFs conference in Amsterdam, Lee Kranefuss, Chairman, Source, commented: “It is clear that Exchange Traded Products are playing an increasingly central role for institutional investors, driven by core characteristics such as lower costs and greater liquidity. It is great to see that investors believe the market could double over the next five years and that many are recognising the fundamental role that they can play at the centre of portfolios; we firmly believe that ETPs and ETFs should account for a far higher percentage of global investment fund AUM, offering a highly competitive, overwhelming alternative to traditional investment vehicles and funds.”
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