Exchange-traded funds aimed at generating income have become one of the fastest-growing sectors in Europe as investors in search of yield increasingly shun costly active products, according to The Cerulli Edge-European Monthly Product Trends Edition.
Cerulli Associates, a global analytics firm, also notes that investors are increasingly using ETFs for tactical as well as strategic allocation, pointing to the lead role ETFs played in the recent resurgence of flows into emerging market funds. Cerulli believes that the trend towards negative government bond yields may further encourage the use of ETFs as investors look for vehicles that allow easy access and easy exit in the face of volatility caused by factors such as Brexit.»While the majority of assets under management (AUM) in European-based ETFs are admittedly equities, fixed-income ETFs are growing faster,» says Barbara Wall, Europe managing director at Cerulli.
Cerulli says that low-volatility ETF products are also attracting more interest from cautious investors, partly because such strategies have tended to outperform, thanks to phenomena such as the low-volatility anomaly. By combining low volatility with high dividends, providers such as Invesco PowerShares have added an extra dimension.
«Europe still has some way to go before its ETF market catches up with that of the United States. Nevertheless, income-oriented products may well offer the best growth opportunities for providers,» says Wall.