EUROPE – An EDHEC-Risk Institute survey has shown increasing demand from institutional investors and asset managers for actively managed ETF products, which have become more transparent in the wake of new EU guidelines.
According to EDHEC's European ETF Survey – conducted as part of the Amundi ETF research chair at the institute – ETFs remain investors' preferred choice for passive investment, with a majority of the 212 respondents being satisfied with this type of product.
While 81% of investors think ETFs should remain beta-producing products, 17% believe they should become more actively managed, EDHEC said.
It said this interest in actively managed ETFs was due mainly to increased levels of disclosure and transparency resulting from ESMA's recently unveiled industry guidelines.
These guidelines require actively managed ETFs to inform investors in their prospectuses and marketing documents how they are actively managed, and disclose how they will meet their stated investment policies, including the intention or not to outperform an index.
EDHEC stressed in its survey that investors had welcomed ESMA's recommendations, with 77% agreeing the guidelines had achieved their stated aim of improving investor protection.
According to Valérie Baudson, managing director at Amundi ETF, the results of the survey show that the level of satisfaction towards such products remains "extremely high", with the vast majority of investors planning to increase their usage.
"The positive changes in investor perception regarding risks and transparency are significant developments for the industry," she said.
However, EDHEC argued that the increased interest for actively managed ETFs could also be attributed to confusion surrounding such products, and the difficulty some investors have in making a clear distinction between active and passive products.
It said this confusion would stem from the emergence of strategy indices and smart-beta ETFs based on alternative and increasingly sophisticated index-construction methods.
The institute also pointed out that there are a number of interpretations of what constitutes an actively managed ETF.
While Morningstar says an ETF that does not state a benchmark index is actively managed, the US Securities and Exchange Commission classes a passive ETF as one that immediately reflects the changes in the stock weightings of the reference index, whereas actively managed ETFs can wait a trading day.
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