The exchange-traded funds (ETF) seem to be very popular among the existing investment vehicules and ETFs are perhaps one of the greatest financial innovations of recent years, as they combine the advantages of mutual funds and common stocks. But, what really tells the data? Let's consider the results of the latest EDHEC European ETF and Smart Beta and Factor Investing Survey, which represents a comprehensive survey of 163 European ETF and Smart Beta investors.
This survey was conducted as part of the Amundi research chair at EDHEC-Risk Institute on "ETF, Indexing and Smart Beta Investment Strategies". Existing since 2006, it aims to provide insights into European investors' perceptions, practices and future plans in the domain of ETFs and Smart Beta.
To summarise, investors show a significant interest for Fixed-Income Smart Beta solutions and plan to increase their investment in them, but they do not consider there to be enough research in the area. This year, the survey includes a special focus on Smart Beta product development, considering specific client demand in the fixed-income field and survey results reveals that investors show a significant interest for Fixed-Income Smart Beta solutions and plan to increase their investment in them, but they do not consider there to be enough research in the area.
The survey also shows that:
► Since 2006, the increase in the percentage of investors using ETFs in traditional asset classes has been spectacular: in 2006, 45% of respondents used ETFs to invest in equities, compared with 92% in 2018. As for governments and corporate bonds, the results grew from 13% and 6% in 2006, to 62% and 66%, respectively, in 2018.
► Appreciation has remained at high levels, especially for traditional asset classes, with a significant increase for equity ETFs and government bonds which now enjoy rates of 97% and 92%, respectively.
► About two-thirds of respondents (67%) used ETFs to invest in Smart Beta in 2018, a considerable increase compared to 49% in 2014.
► Despite this strong motivation, more than 80% of respondents invest less than 20% of their total investments in Smart Beta and Factor investing strategies.
► 50% of investors still plan to increase their use of ETFs in the future despite the already high maturity of this market and high current adoption rates. Top concerns for the respondents are the further developments of Ethical / SRI ETFs, emerging market equity and bond ETFs and Smart Beta ETFs, including multi-factor and smart bond indices.
ETFs are increasingly regarded by institutional asset owners as key investment vehicles in the implementation of strategic asset and factor allocation decisions. The new frontier now is the development of meaningful smart factor investment solutions in the fixed income space. More academic research is needed in this area [...]”, Lionel Martellini, Director at EDHEC-Risk Institute explains.