According to a recent survey conducted by State Street Global Advisors, financial advisors and wealth managers are increasingly turning to sector/industry ETFs to enhance diversification and gain tactical exposures. A vast majority (85%) favoured ETFs over other investment vehicles for sector or industry exposure, while 26% reported that over 20% of their AUM are currently allocated to these funds. Nick Good, co-Head of the Global SPDR business at SSGA, commented: “The lower for longer return environment has many investment professionals taking a more precise approach to asset allocation, which favours sectors and industries over style-based investing.”

By Viktor Nossek, Director of Research, WisdomTree Europe: “It is often thought that “inefficient markets”—like Emerging Markets – are where there are great opportunities for active managers to add value. It would stand to reason that if there is a large opportunity for outperformance, there is also a large opportunity for underperformance. In other words, someone must be on the other side of the ‘inefficiencies.’”

Global research and consulting firm Cerulli Associates believes upcoming legislation MiFID II will boost Europe’s ETF market by encouraging financial advisors to increase their adoption of ETFs. Barbara Wall, Europe managing director at Cerulli, commented: “Distribution of financial products in southern Europe is firmly in the hands of banks and tied-agents’ networks–intermediaries with little interest in promoting ETFs. The ban on commissions for independent financial advisors, which is due to be introduced by MiFID II in 2018, is likely to encourage them to make greater use of ETFs.”