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More than 50% of UK Investors Use ETFs

The latest Morningstar ETF survey shows more than half of respondents invest using ETFs

Morningstar 2 May, 2012 | 10:17AM

Morningstar’s fourth online survey of UK investors reveals that more than half of all respondents are investing using exchange-traded funds (ETFs). Of those respondents who currently invest in ETFs, the majority own a small amount of ETFS relative to the value of their overall portfolio. Investors tend to have less than 20% of their portfolios invested in ETFs.

These results indicate that ETFs are being used as a compliment to individual shares and funds within investors’ portfolios. Amongst participants, 80% reported owning individual shares in their portfolios, whilst 64% currently own funds.

Current ETF investors also appear to be a buy-and-hold bunch, with 74% reporting that they plan to trade their ETF holdings only occasionally.

Investors also show a marked preference for physically-replicated ETFs over synthetic-replicated funds. 89% of survey participants reported that they preferred physically-replicated funds, which are generally seen as more transparent compared to their synthetic counterparts.

“Despite the efforts made by providers of synthetic replication ETFs to improve the level of transparency and investor protection in their product lineups, respondents remain wary of [synthetic and] swap-based ETFs,” said Ben Johnson, Morningstar’s director of European ETF research. “This is despite the ongoing conversation around counterparty risk recently shifting focus to highlight those risks arising from securities lending within physical replication ETFs. Clearly, despite the many benefits around low cost and ease of tradability, there is still some way to go in providing investors will all the information and transparency they need to feel comfortable with ETFs as a larger component in their portfolio.”

Amongst investors, the low costs of ETFs continues to resonate, with 89% of current ETF investors and 96% of prospective users citing ETFs’ low costs as being either a “very important” or “important” attribute. A majority of both current and prospective ETF investors attribute some level of importance to other key ETF attributes including intraday liquidity and the fact that they facilitate access to alternative asset classes such as commodities.

The Morningstar survey compiled results from 155 individual investors and 26 professional investors.

For the detailed ETF survey report, click here.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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