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EDHEC-Risk Institute has announced the results of the EDHEC European ETF Survey 2015, a comprehensive survey of 180 European ETF investors, conducted as part of the Amundi ETF, Indexing & Smart Beta research chair at EDHEC-Risk Institute on “ETF and Passive Investment Strategies”. EDHEC-Risk Institute has conducted a regular ETF survey since 2006, thus providing a detailed account of the perceptions and practices of European investors in ETFs and trends over the past decade.
Key findings of the 2015 survey included the following:
INCREASING APPETITE FOR ETF USAGE
- ETFs make up an increasing proportion of portfolio holdings across asset classes
- Satisfaction has remained at high levels especially for traditional asset classes with a significant increase in satisfaction with equity ETFs, which now enjoy a satisfaction rate of 98%, compared to 91% in 2014. The satisfaction rates for ETFs based on the most liquid asset classes are far more consistent compared to those based on illiquid asset classes
- Investors recognise the high quality of ETFs when compared to competing indexing vehicles
- Investors have increased their use of ETFs to invest in smart beta, with the proportion reaching 68% of respondents in 2015 compared to 49% in 2014. ETFs based on smart beta indices represent the top concern of respondents when it comes to future developments, with 38% of them hoping for further developments in this area
DRIVERS FOR ETF DEMAND
- Cost considerations appear to be the main driver behind increasing ETF allocations. This increase is also motivated by performance, transparency and liquidity
- 75% of respondents think that smart beta indices provide significant potential to outperform cap-weighted indices in the long term and more than 81% think that they avoid cap-weighted indices that are concentrated in very few stocks or sectors
EVALUATION CHALLENGES
- A vast majority of respondents (94%) agree that smart beta indices require full transparency on methodology and risk analytics. Transparency is not only the best protection against the risks arising from conflicts of interests, but it is also instrumental in improving the informational efficiency of the indexing industry
- There is an important gap between investors’ information requirements for smart beta and accessibility of information from providers
Commenting on the results of the survey, Valérie Baudson, CEO of Amundi ETF, Indexing & Smart Beta, said, “As the No.1 European Asset Manager and a leading ETF provider, we have been developing a broad range of cost-efficient, transparent and innovative ETFs. The EDHEC Survey findings, highlighting investors’ high satisfaction rate and their expectations around Smart Beta solutions, incite us to keep on enriching our offer and guiding investors further when implementing smart beta strategies in their asset allocation.”
Professor Lionel Martellini, Director of EDHEC-Risk Institute, added, “This survey confirms the relevance of ETFs in institutional investors’ asset allocation. Smart beta indices appear to be a key growth area for the ETF industry looking forward, with an ever increasing focus on improved transparency and informational efficiency.”
A copy of the EDHEC-Risk Institute survey can be found here:
