Exchange Traded Funds become a popular choice in Europe

In the past investors have tended to prefer traditional Mutual Funds. They have been around for a long time and the overwhelming majority of money in employer-sponsored retirement plans goes into them. Recently however this trend has begun to wane. Exchange Traded Funds (“ETFs”) have gained in popularity due to their unique characteristics and transparency. At FundsLibrary we have seen a 13% increase in our ETF listings since January 2018 alone. This highlights the rapid growth in their popularity over recent months.

Investors can take advantage of many different stock strategies with an ETF, for example trading them on margin, purchasing a very small number of shares and even short-selling. Furthermore, the cost of running an ETF is usually lower than a Mutual Fund. These days a well-constructed portfolio will often include both forms of investing to accomplish an investor’s objective.

With this in mind, American Asset Manager Vanguard, the second-largest provider of Exchange Traded Funds in the world, has recently sponsored an interesting piece of research into their usage across Europe. 400 professional European ETF buyers were asked what selling points most appealed to them and how they liked to use the Funds.

Even though there is a perception that they are used for short-term trading, it seems that many investors actually recognise them as a long-term investment tool. Whilst Italians are most likely to use ETFs for short-term tactical reasons (with 71% of Italian respondents stating this was their investment strategy), UK and German ETF users (85% and 65% respectively) prefer to hold ETFs for the long-term.

Liquidity of the underlying assets (20%) and spread considerations (21%) are most important to UK consumers whilst German investors appear to be the most cost-averse (38%) when choosing an ETF. Italian (27%) and Swiss (21%) buyers are more benchmark sensitive.

The use of global rather than regional ETFs appears popular across the continent, with the highest number of consumers in Italy and Germany (80% and 59% respectively). This figure was still high in countries who typically tend to prefer single country exposure, for example, Switzerland (41%) and the UK (51%).

Exchange Traded Funds are still relatively unknown, however as more and more investors become aware of them their growth is expected to continue exponentially.

If you are interested in finding out about any of the Exchange Traded Funds that we currently list or any of our other services please contact us on +44 117 980 9994 or by email. With our proven network we can get your data where it needs to be, or get you the data you need when you need it.

Source: https://www.institutional.vanguard.co.uk/portal/site/institutional/uk/en/articles/research-and-commentary/topical-insights/three-etf-myths-explained

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All figures correct as at 30.06.2019.