EUROPE – European pension funds are looking to increase their investments in exchange-traded funds (ETFs) over the next 12 months, according to a survey by FinEx.
FinEx found that 38% of the 144 pension funds it canvassed were planning to increase their allocation to ETFs in the coming year, while 42% said they were likely to increase investment over the next three years.
Nearly one-fifth of ETF investors are planning to increase their exposure by more than 10%.
Respondents to the survey cited efficiency, diversification and liquidity as strong selling points, while touting the vehicle as an effective means of investing in emerging market corporate debt.
Nearly three-quarters of the 146 European institutions responding to another FinEx survey said they were planning to increase exposure to emerging market corporate debt over the next 12 months, with Russia being top of the list.
Simon Luhr, managing partner and chief executive at FinEx Capital Management, said this anticipated growth in exposure to the country was unsurprising when 46% of institutional investors expected improving corporate governance and financial reforms to support the economy over the next five years.
Additionally, FinEx pointed out that low interest rates prompted by extensive monetary easing in the US and Europe encouraged investors to seek higher returns, which in turn drove emerging market bond inflows.
The weekly average inflow of emerging market bond ETFs has increased by around 39% over the past five years, according to the asset manager.
A survey by State Street Global Advisors (SSgA) earlier this year already showed that pension professionals in Europe were looking to invest in ETFs increasingly.
However, the SSgA survey noted that nearly 40% still had no exposure to this type of strategy.
At the time, Michael Karpik, head of EMEA at SSgA, said the European ETF market was "fragmented" compared with the US and offered "huge" growth potential.
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