Exchange traded fund businesses expect to grow by nearly 18 per cent annually for the next three to five years, according to the EY Global ETF Survey 2015 ‘ETFs: a positive force for disruption’.
An exchange traded fund is a market-able security that tracks an index, a commodity, bonds or a basket of assets like an index fund. Unlike mutual funds, an ETF trades like a common stock on a stock exchange.
EY surveyed nearly 80 leading promoters, investors, market makers and service providers across the US, Europe and Asia between July and September. The respondents collectively represent issuers manag-ing more than 85 per cent of global ETF assets.
Despite an unstable economic environment, more than 90 per cent of those surveyed expect the industry to see positive net new business over the next 18 months, with 34 per cent predicting net inflows of more than 20 per cent. Almost all respondents (91 per cent) expect to achieve a cumulative annual growth rate of more than 10 per cent over the next three to five years, and 27 per cent expect annual growth exceeding 25 per cent over the same period.
The ETF industry has an ability to turn investment problems into investment opportunities
Lisa Kealy, EY Europe, Middle East, India and Africa ETF leader, said: “The ETF industry has an ability to turn investment problems into investment opportunities, so seeing this level of confidence in spite of current economic headlines is not surprising. We continue to see great energy and promise for the future. However, as it seeks to deliver growth in the short term, the ETF industry needs to keep its long-term legacy in mind and ensure it does not harm potential growth expansion over the next five, 10 or 20 years.”
US ETF providers now manage $1.95 billion of assets – four times the total for Europe and 18 times that of Asia, excluding Japan – after averaging cumulative annual growth rates of nearly 24 per cent for a decade. ETF assets still equate to less than 12 per cent of the US mutual fund market, though all US respondents expect the industry to gain net new assets in the next 18 months. Half anticipate growth of more than 20 per cent.
ETF assets grew faster in Europe than in the US or Asia during the first eight months of 2015 and survey respondents expect this performance to continue. The majority expect their own firms to expand by at least 10 per cent to 15 per cent each year over the next three to five years.
Asian ETF assets have grown at an average rate of 29.9 per cent over the past decade, though they have followed a more volatile path than in Europe or the US.
Respondents expect this growth to continue, with the majority believing their own businesses will grow by 25 per cent to 30 per cent per year over the next three to five years, despite a decline in Asian-wide ETF assets during the first eight months of 2015.