More than two thirds of ETF specialists expect the majority of asset managers will need to offer an in-house product within the next five years, according to an EY survey of the sector.
The accountancy firm, which interviewed 70 leading promoters, market makers and service providers, said it expects ETF assets to reach $7.6 trillion (£5.7 trillion) by 2020, from $4 trillion this year.
ETF specialist at the business Lisa Kealey said: ‘ETFs can no longer just be cheaper or more liquid than actively managed mutual funds.
‘The industry will need to innovate around investors, refine investor journeys and reduce investor costs to remain competitive.’
Around a quarter of the anticipated inflow to the sector over the three years – or around $250 billion – will be committed by investors who do not currently hold passive funds, EY added.
Interviewees near unanimously (97%) predicted that institutional buyers would continue to dominate sector flows. The majority (71%) said they believed pricing had not found its long-term lower bound, saying there was still room to reduce the current costs of ownership.
Legal & General Investment Management (LGIM) entered the exchanged traded fund (ETF) market earlier this month with the acquisition of ETF Securities’ platform, Canvas, for an undisclosed sum.
The deal will provide LGIM with 17 products with $2.7 billion of assets under management, as well as the infrastructure to launch additional funds in both the UK and Ireland. The ETF Securities platform also has listing arrangements on multiple European stock markets and distribution arrangements in 14 countries.