The ETF universe has been steadily expanding, with U.S.-listed ETF assets under management close to $3.3 trillion, and the growth is expected to continue as more institutional investors adopt the nifty investment tool.
According to a recent survey conducted by Ernst & Young, 97% of respondents expect institutional investors to continue to dominate ETF investing over the next three years, reports Sophie Baker for Pensions & Investments.
The survey also projected that 15% to 25% of new ETF inflows over the next three years are expected to come from new investors, equating to $250 billion in new money coming in.
Two-thirds of respondents predicted most money managers will have an ETF offering in the coming five years, with the market set to expand 73% to $7.6 trillion globally by the end of 2020. As of the end of September, global ETF assets under management was $4.4 trillion.
An increasing number of traditional active fund managers and money managers are looking into ETFs as a way to bring to market their time-tested investment strategies through the easy-to-use ETF wrapper.
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Pension funds expect to use ETFs for liquidity management going forward as well as a way to gain targeted market exposure. Hedge funds and more tactical traders will utilize leverage and inverse ETFs to execute quick, high-conviction trades, the survey found.
The survey also laid out the growing trend of falling fees associated with ETFs, with total expense ratios having fallen to 27 basis poitns from 29 basis points in the past year. Around 71% of respondents indicated margins will likely continue to fall over the next three years as providers work in an increasingly competitive environment.
Among the various strategies available, the broad passive funds would likely benefit the most from the ongoing investment trends. “ETFs should continue to benefit disproportionately” from this trend because of their low fees and intra-day liquidity, which is attractive in times of market volatility, according to Financial News London.
For more information on the ETF industry, visit our ETF performance reports category.