Four out of five (82%) institutional investors and wealth managers believe exchange-traded funds are shifting from short-term asset allocation strategies to core portfolio holdings, according to research from Carne Group.
Respondents agree that ETFs will increase market share dramatically over the next three years. Almost two thirds of investors expect active ETF assets to grow from around 2% market share of total ETF assets in Europe today to between 6% and 9% before the end of the decade.
The research also showed investors are using active ETFs to access new asset classes.
One quarter of respondents say they invested in crypto for the first time following innovation in the ETF market, while more than half (56%) say they increased their allocation to the asset class. More than one in 10 (13%) investors say they are likely to increase allocations to esoteric asset classes via the ETF market.
However, Carne Group said there is concern that some ETFs are not living up to their active labels. Nine out of 10 (88%) of the investors surveyed say that managers operating ‘shy active’ funds that follow a benchmark-aware approach, meaning they deviate less from the benchmark index than traditional active mutual funds, are misleading the market.
Patrick O’Brien, managing director, business development at Carne Group, said: “Active ETFs will provide the momentum for the next stage of the ETF growth story to take flight. Unlocking the opportunity in this highly competitive space requires careful consideration and speed of execution which is why we are seeing managers increasingly partner with third parties.”
He added: “We share concerns about the risk of ‘shy active’ ETFs which can be problematic for investors because they often operate under the guise of active management while closely hugging a benchmark index. Fund managers need to be sure they are transparent about the strategies they offer.”
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