Morningstar.co.uk today announced the results of our first exchange-traded funds survey. We spent six months quizzing professional and individual investors about their attitude towards, understanding of and experience in ETFs, and will be asking the same questions at six-month intervals to build up a picture of how this relatively new asset class is being used and viewed by UK investors over time.
Over 1,000 investors responded to our first survey, 15% of which were professional and 85% individuals, and we were surprised to see few surprises in the results.
Exchange-traded funds are known for their low costs but trading too often can quickly turn this low cost into a high one—something we had feared some investors may have been unsuspectingly tempted into. Instead, it seems that current ETF investors are not using them for fast-trading, risky bets, but instead as longer-term allocations to overweight a specific sector, country, or inflation protection.
Overall, the number of individual investors and advisers across Europe who use ETFs is still extremely low, and of those who remain wary of this asset class our survey revealed more education is in high demand.
Of professional investors who are unsure whether they want to invest in ETFs, 67% cited a lack of information about exchange-traded funds as the primary reason for their caution. Among individual investors, it was an incredible 77%.
Having trawled through the data and analysed the results, Morningstar’s associate director of European ETF research, Bradley Kay, commented that there is a stark split between respondents who are in need of more information about ETFs and those already familiar and the product’s key features. “Even among active investors, we found ETFs are being used in quite a passive way, for example to overweight in a particular asset class and with infrequent trading thereafter.”
We’re certainly encouraged to see that investors are already putting ETFs to sensible use in their portfolios, but— as expected — there’s an ongoing need for further information and education…something Morningstar is only too happy to accommodate!
If you’d like to know more, you can download the synopsis of our first ETF survey results here, and participate in the second ETF survey here.