June 13, 2011

ETF Survey by State Street Global Advisors

State Street Global Advisors which is the Investment Management arm of State Street Corporation and Knowledge@Wharton, the online business journal of The Wharton School at the University of Pennsylvania, conducted a joint study in 2008 to research the impact Exchange Traded Funds had on the Financial advisory industry - What are ETFs? As part of the study, a survey sponsored by State Street and SPDR University - State Street's online educational resource - was conducted that included 840 Investment Professionals. In the survey 67% identified Exchange Traded Funds as the most innovative investment vehicles of the past two decades, and 60 percent reporting that ETFs had fundamentally changed the way investment portfolios were put together. Anthony Rochte, a Senior Managing Director of State Street Global Advisor at the time the survey was conducted, in an article by businesswire.com titled, ETFs changing the Way Advisors Do Business, According to State Street and Wharton Study, was quoted as saying, “By incorporating exchange-traded products into sector rotation, core-satellite, tax management, and portfolio completion strategies, advisors are simultaneously managing costs and risk, which helps underscore their value proposition and strengthen relationships with clients.” When the Investment Professionals involved in the survey were asked about the greatest potential growth area for ETFs, 43 percent thought 401(k) retirement plans while 27 percent of the respondents cited actively managed ETFs.

Asked what the most appealing characteristics of ETFs were, the top five reasons given, ranked in order:
1) Low Cost
2) Liquidity
3) Intraday Trading
4) Tax Efficiency
5) Investment Style Purity

When asked what they thought the greatest disadvantage to ETFs were, 69 percent of the survey respondents cited the "unknown or untested indexes and/or portfolio methodologies" or the "overwhelming number of ETF choices."

Additional revelations from this ETF study / survey included:

  • A majority of financial advisors (76 percent) identified themselves as light-to-moderate users, indicating that less than 50 percent of their portfolios utilize ETFs
  • 4 percent report they do not use the instruments at all.
  • Nearly 60 percent of respondents knew what exchange traded notes (ETNs)
  • 29 percent said they plan to increase their use of ETNs in the future
  • Only 31 percent of advisors are currently using inverse ETFs - these allow investors to bet against a market index.
  • Nearly 40 percent reported they plan to increase their use of inverse ETFs in the future

More About SPDR® University

SPDR University is a FREE online educational resource designed to provide investment professionals with the education and training in order to stay ahead of the market and be precisely in turn with their clients. Log on to SPDR University to access rich Downloadable educational client-ready materials, webcasts, interactive presentations, audiocasts, research papers and more. To register, go to www.spdru.com today and start earning CE credits anytime, from anywhere. To register, visit the SPDR University website at www.spdru.com. If you aren't an Investment Professional, the website is still useful because it offers rich information that can be accessed without having to register.

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