Insights from the 12th EDHEC European ETF, Smart Beta and Factor Investing Survey
Véronique Le Sourd, Senior Research Engineer, EDHEC-Risk Institute
EDHEC-Risk Institute conducted its 12th survey as part of the Amundi “ETF, Indexing and Smart Beta Investment Strategies” research chair at EDHEC-Risk Institute. The aim of this study is to analyse current European investor practices and perceptions with respect to ETFs, smart beta and factor investing strategies, as well as future plans in these domains. By comparing our results to those of our previous surveys, over more than a decade, we aim to shed light on trends within the ETF market and within the smart beta and factor investing strategy offer.
Since 2006, EDHEC has annually surveyed European investors about their views and uses of ETFs. Since 2013, when we first considered smart beta in the survey, complementary questions about smart beta and factor investing strategies have been added each year, allowing participants to describe their general use of and opinions on products that track smart beta indices, and more generally on alternative equity beta strategies. Beginning in 2016, a section of the survey was fully dedicated to smart beta and factor investing strategies. In 2018, we introduced a special group of questions dedicated to smart beta and factor investing for fixed income, and these are a particular focus of this year’s edition. This survey brings together the main vehicles of passive investment, namely ETFs – standard and very liquid products that track indices – and strategies based on the new forms of indices.
Our 182 survey respondents are high-ranking professionals within their organisations (34% belong to executive management and 42% are portfolio managers), with large assets under management (42% of respondents represent firms with AUM exceeding €10bn). They are distributed across different European countries, with 12% from the United Kingdom, 70% from other European Union member states, 14% from Switzerland and 4% from other non-EU countries.
Key findings of the latest survey include the following:
HOW DO INVESTORS SELECT AND USE ETFS?
KEY OBJECTIVES DRIVING THE USE OF SMART BETA AND FACTOR INVESTING STRATEGIES
FUTURE DEVELOPMENTS ON ETF, SMART BETA & FACTOR INVESTING PRODUCTS
46% of investors still plan to increase their use of ETFs in the future despite the already high maturity of this market and high current adoption rates.
Lowering investment cost is the primary driver behind future take-up of ETFs for 74% of respondents in 2019.
31% of respondents want to see more SRI-based ETFs, while similar proportions are interested in ETFs related to multi-factor and smart beta indices (30% and 28% respectively).
The cumulative percentage of those that already invest or are considering investing in smart beta and factor investing in the near future is still higher in 2019 (79%) than in 2018 (74%), which leaves room for further development of this investment in the near future.
When asked about the smart beta solutions they think require further development by providers, respondents cited fixed income, ESG, and alternative asset classes. There is particularly critical room for development in the fixed income asset class that is largely used by investors. They would also like more customised solutions to be developed. The development of new products corresponding to these demands may lead to an even wider adoption of smart beta solutions.
The research from which this study is drawn was produced as part of the Amundi “ETF, Indexing and Smart Beta Investment Strategies” research chair at EDHEC-Risk Institute.