Exchange-traded funds: Appetite, Understanding and Use - Morningstar's survey results now available

31 March 2011

Morningstar has released the results of its second online survey of UK investors into the appetite, understanding and use of exchange-traded funds. 691 individual investors and 116 professional investors responded.

Key findings:

• Investors are still hungry for ETF education

• Professional investors are increasingly familiar with the key points

• Investors are showing less preference for country and sector-specific equity ETFs, with a growing interest in other varieties coming through

• Results show little bias towards GBP-quoted ETFs; USD and Euro denominated ETFs are also popular

• Physically-replicated funds are strongly preferred over synthetic alternatives

• Low costs of ETFs are still an influencing factor; counterparty risks are still a major concern

• ETFs are typically representing up to 20 per cent of current users’ portfolios

• ETFs are the third most accessed investment type

• ETFs are typically trading infrequently, once every few months

• Specialist financial media is the most common source of ETF information

Morningstar’s director of European ETP research, Ben Johnson, comments:

“There is still a great deal of hunger for information about ETFs. Individual investors are particularly in need of further assurance and information before stepping into this asset class, although signs of growing interest have emerged. Professional investors, meanwhile, are considerably more on board with the ETF concept today compared with our previous survey. Broadly, therefore, interest is now a little more certain, and choices a little more varied. The increased coverage of this investment type – perhaps in the run up to a leveler playing field post the Retail Distribution Review – is gradually showing some effect.”

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