Chief executive and co-founder of ETFmatic, Luis Rivera, thinks the cost of physical and synthetic replication will continue to come under pressure.
He says more and more providers will compete at lower and lower prices.
“In many ways ETF issuers face commoditisation, which is why some are venturing into the robo-adviser space,” he says.
Mark Fitzgerald, product manager for Vanguard, echoes the view ETF investors will benefit from lower prices in 2017 – he says through increased product and cost competition, cost transparency and product suitability.
However he adds that while cost transparency and fee sensitivity will continue to drive investment in ETFs in 2017, this “will force consolidation into products with unsustainable asset levels.”
Mr McManus sounds his own note of caution, foreseeing problems in advances in ‘active ETFs’ over the next 12 months.
“For us, active ETFs raise the prospect of decreased transparency for investors and potentially introduce a product that is structurally different to those in the existing market, under the same ETF banner.”
But Joe Parkin, head of UK wealth and retail sales at iShares, is more open to ETFs being used as part of active strategies.
In 2017 and beyond he sees investors increasingly use core and satellite strategies when developing portfolios with ETFs where, with what he says is the extensive range of market exposures that they can offer, ETFs can be used as ‘core’ investments, or as more flexible ‘satellites’.
“The approach combines the most effective characteristics of index and active investment, and offers more flexibility and lower costs than more conventional approaches,” he says.
“The flexible and liquid attributes of ETFs makes them ideally suited to build portfolios with. They enable investors to get exposure to markets quickly, and cost effectively.”
For Mr Greenhough, 2016 suited passive investing, particularly in UK equities, pointing to a good 2017 for the investments.
“The best performing funds in one year are generally the best-selling funds the next – so it should be positive for ETF flows.
“I expect we will continue to see model portfolio services providers creating passive only model portfolio for advisers to use with clients.”
laura.miller@ft.com
