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Morningstar ETF Survey 2011: The Results Are In

Despite recent moves towards greater transparency and investor protections, investors remain wary of swap-based ETFs

Ben Johnson 31 March, 2011 | 10:58AM
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The results from our second Morningstar ETF Centre survey look very similar to those from the first, released in September of 2010. Our survey captured a broad range of investors that are either interested in or already investing via ETFs. Out of 807 total responses, 691 came from individual investors, while 116 came from professional investors, mostly advisers. Survey respondents were roughly split between those who have already invested via ETFs, and those who were still looking into this relatively new investment vehicle.

It remains apparent that the need for further education is paramount, especially amongst private investors. Of those individual participants who are unsure whether they will invest via ETFs, 67% responded that they would like to learn more about them before investing. While this is a noticeable decline from the 77% of individual investors who responded similarly in our first survey, it remains indicative of the need for further education. Meanwhile, just 47% of professional investors who responded that they were unsure whether they would use ETFs in the future cited a desire to learn more about them before deploying them in their own or their clients’ portfolios. This compares to a figure of 67% in our prior survey, marking a substantial decline. While it is important to note that the sample in question is fairly small, this could be evidence that professional investors are becoming increasingly familiar with ETFs.

Despite a number of high-profile steps taken by providers of swap-based ETFs like Credit Suisse, db x-trackers, and iShares to improve the level of transparency and investor protection in their product lineups, respondents remain wary of swap-based ETFs. Amongst survey participants, 82% expressed that they were at least somewhat concerned about counterparty risk in ETFs, whilst 74% stated a specific preference for physically-replicated funds over synthetic-replication funds.

While there is still a need for further education, especially as it pertains to the variety of structures employed by various providers of exchange-traded products and the pluses and minuses associated with them, the appeal of these vehicles remains clear to both current and prospective investors alike. In particular, the low cost of ETFs continue to resonate with investors, with 89% of current ETF investors and 93% of prospective users citing ETFs’ low costs as being either a “very important” or “important” attribute.

Review the results for yourself by clicking here.

The third ETF survey is now open--click here to register your views and be in with a chance of winning a £500 or one of five £100 lastminute.com vouchers. The six lucky winners from this, our second ETF survey, have now received their prizes. If we have not contacted you then you didn't win...this time. Visit Morningstar's ETF Centre for more information.

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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About Author

Ben Johnson

Ben Johnson  is director of passive funds research at Morningstar.