EUROPE – Pension professionals in Europe are looking increasingly to invest in ETFs, although nearly 40% still have no exposure to this type of strategy, according to a study by State Street Global Advisors (SSgA).
Michael Karpik, head of EMEA at SSgA, said the European ETF market was "fragmented" compared with the US and offered "huge" potential of growth.
Nearly one-third of respondents to the study – conducted among 260 European corporate pension professionals and 41 active fund managers in the UK – currently allocate 1-10% of their portfolios to ETFs, while 39% have no holdings in these products whatsoever.
However, 47% of the pension funds surveyed said they would increase their exposure to ETFs over the coming five years, while 42% of UK fund managers said they would adopt a similar approach.
Eleanor Hope-Bell, head of the UK Intermediaries Business Group at SSGA, said the easiest and quickest way for pension professionals to start using ETFs was as a tactical tool.
"But those same investors often realise they can use ETFs for other purposes and diversify their strategy, with 17% of pension professionals using ETFs as core holdings and 19% using those products as core/satellite building blocks," she said.
According to Hope-Bell, the key factors for pension professionals when it comes to investing in ETFs are cost effectiveness followed by liquidity, whereas fund managers most value liquidity.
The study also found that 45% of pension professionals and 42% of fund managers surveyed are seeking to increase their exposure to equity ETFs over the next five years, while 28% and 19% of them, respectively, will increase exposure to fixed income ETFs.