(March 29, 2013) — Investors have reported increasing levels of satisfaction with exchange-traded funds (ETF) and have demanded more strategies using the passively managed method according to an annual European survey.
The Edhec Risk Institute found satisfaction levels for ETFs using a range of asset classes had, in the main, increased among a large group of investors since 2006 when the survey began.
Equity funds have enjoyed satisfaction rates of over 90% since the start of the survey and in 2012, the results showed this to have reached over 95%. This asset class was closely followed by government and corporate bond ETFs, which both received satisfaction levels of around 90% last year.
Satisfaction rates for ETFs tracking real estate and hedge funds have been less consistent, however, with dramatic peaks and troughs over the six-year period. Hedge fund ETFs continue to underperform with just over a 50% satisfaction level last year.
Overall though, investors want more of these products, the survey said. Some 49% of respondents said they wanted to see more emerging market products and while others demanded some dedicated to smart beta strategies.
A report on the survey said: “We can also see that there is strong interest amongst investors for development of ETFs based on new forms of indices with 37% of investors interested in further product development in this area despite the fact that there have recently been a significant number of ETF launches, which track new forms of indices (also known as smart beta).”
The exchange-traded product (ETP) market has grown exponentially since the middle of the last decade, and ETFs are the largest component of this universe. In January, BlackRock reported that assets held in ETPs had reached a record $2 trillion, boosted by record inflows in 2012. Assets at the end of the year had grown by 27%.
Overall, the answers of the Edhec survey participants suggested that despite the broad range of available ETF products, investors still wanted more product development to better address their specific needs.
Active managers can take solace that 81% of respondents thought this type of passive investing should only be used to produce beta. However, 17% of respondents wanted to see actively managed strategies targeting outperformance, an increase from 11% who thought the same a year earlier.
To access the full report, click here.
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