Exchange-traded fund industry tipped to gain $8bn

One exchange-traded fund (ETF) provider believes the ETF industry will likely gain an additional $8 billion in investment this year against a backdrop of low stock market returns.

Van Eck Australia managing director Arian Neiron said investors are looking to ETFs to diversify from traditionally owned assets, such as mining companies and banks.

“ETF investors have always had the benefit of diversity that overcomes single company risk,” he said.

Mr Neiron added that strategic beta is set to play a large role in investors’ portfolios throughout 2016 – “it better meets their needs in achieving cost effective outperformance”, he said.

However, while the ETF sector is expected to grow in 2016, the industry does face multiple headwinds.

Mr Neiron said these include challenging markets, reinforcing the need to make asset allocation and diversification a central aspect of portfolio construction.

He also signalled the need for further investor education, especially when considering the increasing range of ETFs now available and more that are set to come in 2016.

Van Eck noted that in 2015, 34 new exchange-traded products (ETPs) were launched, taking the total number of listed products to 138.

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