SPDR research reveals growing popularity of sector investing and sector ETFs among UK wealth managers
New research from SPDR ETF, surveying over 50 UK wealth managers, reveals that over half (53 per cent) use sector ETF investment strategies, with one in five saying they are using them more today than they were 12 months ago and 44 per cent expecting sector ETFs to be used more over the next 12 months.
When choosing a sector ETF, 40 per cent of wealth managers interviewed cited liquidity as the most important selection criterion. 31 per cent cited the financial strength of the provider as the most pivotal factor, with an equal quantity stating that the total expense ratio (TER) of the ETF as the key consideration and 6 per cent describing the longevity of the ETF as ‘most important’ input to their buying decision.
Wealth managers cited healthcare as the most attractive sector, selected by 47 per cent of investors. This was followed by technology (43 per cent), energy and utilities (both scoring 35 per cent).
Among those wealth managers who are already using sector investment strategies, two in five (41 per cent) say that they do so because, compared to other investment styles, discrete sector exposures offer a wider dispersion of returns.
“The Trump election was a watershed moment for European investor attitude to sector ETF investing,” says Claire Perryman, UK Head of SPDR ETF at State Street Global Advisors. “The market quickly identified potential winners and losers emerging from the changing political landscape, and assets flowed into ETFs accordingly. At that time healthcare, infrastructure and financials were the standout sector investment opportunities.”
“Today, the sector winners and losers have changed but the dispersion opportunity remains. Since November 2016, we have seen a 47 per cent increase in assets in sector UCITS ETFs compared to a 30 per cent growth in the overall ETF market. As wealth managers seek to build targeted exposures with less concentration risk than single stocks, we expect this trend to continue throughout 2018 and beyond.”