Two months ago, the ETF sector was predicted to surpass assets managed by hedge funds. Earlier this month, this milestone was already passed.
The global ETF/ETP industry has under management $2.971 trillion against $2.969 trillion of hedge fund assets, according to the research group, ETFGI.
Another astonishing statistic is that this has happened in the space of 25 years, against the hedge fund sector’s 66 years in existence. Much of this growth has happened in Europe, with fears about Greece and the euro driving investors into the relative safe haven of passive assets.
The RDR has helped also. The fact that advisers are no longer paid commission on their investment recommendations and that trail is soon to be switched off has created a levelling in the advice sector.
ETFs are cheap to buy and this reduces costs for clients. They are also seen to be widely democratic - different investors can have access to the same ETF around the world.
Yet according to ETFGI, assets invested in ETFs only account for 8.4 per cent of the entire mutual fund industry. The UK investment industry has not wholly embraced these products - some platforms will still not allow ETF investments. Neither Cofunds nor Old Mutual Wealth (formerly Skandia) will allow ETFs on their platform.
The reason they give is that demand is low at present, but neither platform has ruled them out in the future.
Deborah Fuhr, managing partner of ETFGI and seen by many as the doyenne of the ETF industry thinks more should be done. More advisers need to know about how ETFs work, what their good selling points are and how they fit into a portfolio. Even good old Hargreaves Lansdown makes them difficult to find - one has to hunt around under a ‘securities’ tag to locate them.
The world is changing, and faster than perhaps we might appreciate. Clients, either through RDR or pension freedom, or simple internet reading might be wanting more for their money, and to be introduced to the best possible products. ETFs should at least be on advisers’ radar.
