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More pension funds set to use ETFs

29 January 2013

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New research from State Street Global Advisors (SSgA) reveals that nearly half of European pension funds and fund managers plan to increase allocation to exchange trading funds (ETFs) over the next five years.

Of those questioned, 47% of pension professionals said they would increase their exposure to ETFs over the next five years, and 42% of fund managers said they would also do the same over the next five years..

When asked about the key benefits in investing in ETFs, 46% of the pension professionals thought that cost effectiveness was key, followed by 44% who said liquidity. This was followed by 34% who said they provide better market access.

"Our research shows that the prospects for the ETF industry remain positive, and we expect to see growth across all geographical markets over the next few years," said James Ross, senior managing director and global head of SPDR Exchange Traded Funds at SSgA.

The research, conducted as part of ETFs' 20 year anniversary, looked at 260 European corporate pension professionals and 41 active UK fund managers.

According to the survey, 32% of those surveyed currently hold between 1% and 10%, while 39% have no current holdings in ETFs at all, indicating that there is a huge potential for growth.

Despite growth in the ETF business over the past 20 years, the European ETF business remains relatively small when compared with wider mutual funds and US ETF businesses, said Scott Ebner, global head of ETF product development at SSgA.

"However, there is a positive outlook for ETFs across Europe with our recent survey finding that 46% of European investors expect their usage of ETFs to increase over the next five years," added Ebner.

The first US listed SPDR ETF launched in 1993 with only $6.5m in assets. Now the SPDR S&P 500 ETF has more than $123bn in assets under management and globally there are over 5000 ETFs covering a wealth of asset classes ranging from traditional equities and fixed income to emerging markets and alternatives.

"It's tremendously rewarding to see the SPDR ETFs recognised as one of the most investor-friendly innovations of our time and a major catalyst for the growth of the ETF industry," said Ross.

First published 29.01.2013

monique_simpson@wilmington.co.uk