PwC global ETF survey predicts European industry to outperform the US and grow by 21 per cent to reach USD2.5tn by 2025
The latest global survey of 60 firms in the ETF industry by PwC reveals that global ETFs are set to continue the high levels of growth that have been experienced by the industry since this time last year.
The firm found that 80 per cent of respondents predict that the global ETF industry will grow to over USD12 trillion by June 2025 representing a 14 per cent compound average annual growth rate (CAGR) over the next five years.
The research was carried out in Europe, the US, Canada and Asia Pacific and the findings revealed that Europe was the most bullish on predicted growth rates, with 85 per cent of European respondents predicting that ETF assets under management will reach at least USD2.5 trillion by 2025 representing a 21 per cent CAGR.
PwC notes that while the US is by far the most mature ETF market, 90 per cent of respondents predict that the US will reach USD9 trillion by 2025, representing a 16 per cent CAGR over the next five years.
Marie Coady, Global Head of ETFs at PwC, says: “The expected projected growth for ETFs is not surprising. This is an industry with enormous potential. With prevailing low interest rates, investors continue to look for alternative places to invest to maximise returns. The features of ETFs liquidity, market access, low cost, transparency and, increasingly, diverse investment exposure mean ETFs are a very compelling product for investors.”
The results of the survey also indicate that the pandemic is expected to have a positive impact on ETF growth as both European and Canadian respondents feel that the pandemic will, in fact, accelerate the rate of ETF growth over the coming years as a result of the resiliency shown by ETFs during the volatile market conditions on 2020.
According to the survey, new ETF issuers are expected to enter the market over the next two years as changes in regulation globally in relation to portfolio transparency facilitates more active managers using an ETF wrapper.
The survey also highlights the significant divergence geographically in the segments that are driving demand for ETFs. For example, US respondents indicate that demand will primarily be driven by financial advisors and retail investors. Whereas in Europe, respondents feel that private banks and financial intermediaries and brokers will play the most prominent role. Asia-Pacific results differ again, with hedge funds and online platforms featuring highest.
As a product set, the respondents to the survey indicate that they expect investor demand around the world to surge for ESG focused ETFs over the next few years. In Europe, 100 per cent of respondents expect to see significant investor demand for ESG focused ETFs over the coming years. European ETF managers also indicate that 75 per cent of their ETF product pipeline will have an ESG focus over the next three years.
And it's not just the European results to the survey that had a strong ESG focus, there was a significant change in sentiment compared to the previous survey in relation to ESG in some geographies, PwC writes.
The US results changed dramatically within the year, the firm comments, with the previous survey revealing that one in 10 (13 per cent) respondents had indicated that they expected investor demand for ESG ETFs to rise, to seven out of 10 (70 per cent) in this year’s survey.
The survey also highlighted the challenges that ETFs will face in relation to new ESG regulation in Europe where both the obtaining and maintaining of relevant