A survey of 180 European investors has found increased usage of exchange-traded funds (ETFs) to invest in smart beta, as well as a hope that there will be further developments in this area.
The EDHEC-Risk Institute found that ETFs now make up an increasing proportion of portfolio holdings across asset classes and investor satisfaction is at a 98% level, up from 91% in the previous year. In addition, 68% of investors said that they had increased their use of ETFs to invest in smart beta in 2015, up from 49% in 2014. The survey found that cost considerations weighed strongly with investors, followed by performance, transparency and liquidity.
Another finding is that 75% think that smart beta indices have significant potential to outperform cap-weighted indices in the long term, while 94% agreed that smart beta indices require full transparency on methodology and risk analytics. EDHEC-Risk Institute director, Lionel Martellini, said: “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.”