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Passing the asset test
The past decade has seen unprecedented growth in Exchange Traded Funds (ETFs). Assets under management (AUM) in the global ETF market have increased from $74bn in 2000 to $2,401bn at year end 2013.
This growth has also been prevalent in Europe with AUM achieving double-digit annualised growth to reach $420bn over the same period. The key drivers of this growth have been the recognition by investors of the importance of a dynamic asset allocation policy, the tradability and low-cost characteristics of ETFs and the introduction of non-market cap weighted strategies.
Investors are using ETFs to allocate across a wider range of asset classes and regions. The tradability and low-cost nature characteristics of these funds ensure they are highly-efficient tools for accessing niche markets, such as property and single-country emerging markets. Other contributors to growth in AUM are the attractive legal structure of physically replicating ETFs, their low cost structure compared to other beta vehicles and the alternative methodologies available through this wrapper.