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ETF sales surge down to price pressure and ethics

ETF sales surge down to price pressure and ethics

A desire to capitalise on ever-lower charges, and a surge in interest in ethical investments are key to what is likely to be another strong year for exchange traded funds, according to Adam Laird, head of ETF Strategy at Lyxor.

Data released yesterday (22 August) from IHS Markit indicated 2017 will be another record year for ETFs, with flows of $380bn (£296bn) this year to date, which is already $2bn (£1.56bn) more than the total for 2015, which was itself a record year. In 2016, $345bn (£269bn) went into the products.

Mr Laird attributed the strong demand forETFs in 2017 firstly to the greater levels of political certainty, particularly in the Eurozone following the election of Emmanuel Macron.

The analyst added that lower charges, which have been a factor of the ETF market for some time, continue to be a major positive for investors.

Mr Laird said: “It has now got the point where developed market equity ETF charges have dropped below 0.1 per cent in a lot of cases. The data shows that a lot of the capital that has been going into ETFs is new money, not people pulling money from active strategies, and I think pricing is part of the reason for that.”

He added that several new ETF products which are focused on social and ethical investing have come to market in recent years, and this has contributed to the growth, as they have proved to be extremely popular.

Claire Walsh, an independent financial adviser at Brighton firm Aspect8, said she continues to favour active funds and believes the extra charges are usually worth paying. As a consequence, relatively few of the portfolios used by her clients contain ETFs.

The passive exposure in her client portfolios tends to be in tracker funds that are not ETFs, something decided by the investment specialists working within her firm.

David.Thorpe@ft.com