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Past performance becomes a bigger feature of ETFs

ETF_screenInvestors are attaching greater importance to past performance when choosing which exchange-traded funds (ETFs) to invest in.

Brown Brothers Harriman (BBH), a custody bank that researched 300 ETF investors globally, said this is the first time investors have given equal consideration to historic returns and costs.

BBH, which has surveyed ETF investors including institutional investors and asset managers for the past six years, said investors are looking beyond the lowest-cost products.

Shawn McNinch, global head of ETF services at BBH, said: “We are seeing global ETF investors giving historic returns equal consideration to cost when selecting an ETF.  That’s in stark contrast to last year when investors in the US and Europe stated cost was the top factor.”

As well as this, BBH found out what proportion of portfolios are invested in ETFs and that ETF investors were becoming more defensive.

Almost three quarters (73%) of investors in Europe now have more than 10% of their assets under management in ETFs. This compares to 79% of US investors in the survey wit h10% or more in ETFs, and 80% in Greater China.

Also, just under 90% of respondents in Europe confirmed they will increase or maintain their investment in ETFs this year. Globally, 61% said they would increase allocations.

BBH said the defensive nature of ETF investors was reflected partly in the importance given to past performance, and also in the increased demand for actively managed, fixed income and smart beta products. McNinch said this reflected a cautious approach to mitigate volatility

Another finding was that there was a rise in Asian and Latin American investors who find the Ucits features around ETF disclosure and protection attractive.

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