According to the latest report released by Cerulli Associates, asset managers now consider ETFs (Exchange-Traded Funds) as the investment vehicle with the biggest opportunity. This marks the first time that ETFs have surpassed institutional separate accounts in terms of potential. The data for the report was collected through Cerulli’s annual Products & Strategies survey.
The survey, which was conducted from June to August, received more than 30 responses from asset managers of different sizes. Matt Apkarian, associate director of product development at Cerulli, explained that while open-end mutual funds are still the most commonly used investment vehicle for delivering investment strategies, their level of opportunity has declined in recent years.
Currently, 94% of asset managers use open-end mutual funds, but only 50% of them see them as a large opportunity. On the other hand, ETFs are viewed as a significant opportunity by 74% of asset managers that offer them. Institutional separate accounts, previously viewed as a large opportunity by 83% of asset managers in 2022, are now seen as such by 70% of them.
Interestingly, the report also revealed that 20% of managers who do not currently offer ETFs plan to build them in the next 12 months. Additionally, 50% of managers are considering offering them but have yet to formalize any plans. This indicates that ETFs are the most sought-after product among asset managers.
Moreover, the report mentioned that 65% of managers are contemplating offering ETFs as a share class of mutual funds. This would involve using a structure patented by Vanguard Group, which expired in May. However, the report notes that while several firms have filed for exemptive relief, there is still uncertainty regarding whether they will receive approval to launch such products.
The findings of this report highlight the shifting preferences of asset managers in the investment industry. It is evident that ETFs have gained considerable popularity due to their flexibility, cost efficiency, and potential for diversification. Asset managers are increasingly recognizing the benefits that ETFs can offer, and many are looking to incorporate them into their product offerings.
The rising interest in ETFs not only indicates a changing landscape within the investment industry but also suggests that these investment vehicles will continue to experience significant growth in the coming years. As asset managers explore new opportunities and adapt to evolving investor preferences, ETFs are poised to play a vital role in their strategies.
Overall, the Cerulli Associates report underscores the increasing prominence of ETFs as a preferred investment vehicle among asset managers. This trend signifies a significant shift in the industry, as managers recognize the potential and advantages that ETFs can bring to their clients’ portfolios. With ETFs positioned as the vehicle offering the most substantial opportunity, asset managers are likely to invest more resources in this area and continue to explore innovative ways to utilize ETFs in their investment strategies.