Ernst & Young survey shows ETF sector expects robust growth in the next 3-5 years
EY interviewed 80 ETF promoters, investors, market makers and service providers globally  in 3Q 2015; and representing issuers managing 86% of global ETF assets. The survey showed that respondents expected their businesses to grow by 18% YoY for the next three to five years. The report also highlighted that the ETF investor base is broadening. The US continues to sit firmly at the centre of innovation in the sector, managing $1.9bn of the total $2.8bn invested in ETPs globally.  The US is also leading the global rush to digital distribution in asset management. EY said the hottest trend in the ETF space may be the potential crossover between automated advice and the use of ETFs to create model portfolios.

Respondents to EY’s latest survey of the global exchange-traded funds and products sector are highly optimistic about their prospects for growth.

Interviewees said they expected their businesses to grow by 18% every year for the next three to five years.

EY interviewed some 80 promoters, investors, market makers and service providers across the U.S., Europe and Asia/Pacific between July and September. Respondents included issuers managing 86% of global ETF assets.

According to the survey, the ETF/ETP industry managed 5,978 products, representing total assets of $2.8 trillion at the end of September.

At present, EY said, the U.S. industry managed $1.9 trillion of assets, or four times that of Europe and 18 times that of Asia/Pacific, excluding Japan.

Half of U.S. respondents expected 20% asset growth in the next 18 months.

The report highlighted several trends in the U.S. sector.

For one, the ETF investor base is broadening. Endowments and charitable foundations are joining corporate and public sector pension schemes, hedge funds and insurers as allocators to the sector.

Innovation has put the U.S. market at “the cutting edge of ETF product development,” according to the report. Innovation is driven by niche providers with specific sector, structural or asset expertise and by big providers seeking to offer their institutional clients a comprehensive range of products.

And the U.S. is leading the global rush to digital distribution in asset management. EY said this may be the “hottest” trend in the ETF space with the potential crossover between online or automated advice and the use of ETFs to create model portfolios.

The EY report said the U.S. industry continued to be the paradigm to which other regions aspire, and Europe and Asia/Pacific appeared unlikely to match its size and efficiency.

This means flexibility in adapting to local conditions will be key to growth in other regions.