Financial advisers increased their use of exchange traded funds over the past year, according to the latest, and sixth, VanEck annual smart beta survey.
The survey of 547 financial advisers working in Australia found that 91 per cent of advisers use ETFs in their client portfolios, up from 87 per cent in 2020.
The role of smart beta
Of all the respondents that use ETFs, 56 per cent use smart beta ETFs as a substitute or replacement for active management.
Three quarters of the respondents also think that allocations to smart beta strategies in portfolios are going to increase.
“The reason for that could be that advisers are happy with their performance; with 99 per cent of smart beta users satisfied with their strategy,” VanEck chief executive officer and managing director, Arian Neiron, said.
Another indication of the popularity of ETFs is the huge increase in the market capitalisation of the ETF market, which rose by 74 per cent over the 12 months to the end of August, to $122.8 billion. The VanEck survey also found that 74 per cent of respondents had increased their allocation to ETFs over the last 12 months.
ETFs offering environmental, social and governance (ESG) investment were particularly popular, with nearly half (46 per cent) of those surveyed saying they invested in ESG strategies.
Active too expensive
Neiron believes that underperformance of more expensive actively managed funds is aiding the growth of the ETF market.
“Backing that last point, just 9 per cent of respondents said they did not use smart beta ETFs because they only use actively managed funds. The biggest reason for not using smart beta strategies stemmed from not knowing enough about them, with 44 per cent of respondents who don’t use them giving this as the reason why,” Neiron said.