The fund industry has undergone significant changes over the past 10 years. Some of the key changes are:
- The increased popularity of passive investing: The popularity of passive investing has increased significantly over the past decade, with more investors opting for low-cost index funds and exchange-traded funds (ETFs) instead of actively managed funds.
- Rise of robo-advisors: Robo-advisors have become increasingly popular over the past 10 years, especially among younger investors. These online platforms use algorithms to provide investment advice and manage portfolios for clients.
- Growth of sustainable investing: Sustainable investing, also known as environmental, social, and governance (ESG) investing, has become more mainstream over the past decade. Many investors are now looking for investment options that align with their values and positively impact society and the environment.
- Increased focus on fees: With the rise of passive investing and robo-advisors, there has been increased pressure on fund companies to lower their costs. As a result, many fund companies have lowered their fees in recent years.
- Expansion into new markets: Many fund companies have expanded into new markets, including emerging markets and alternative investments such as private equity and hedge funds.
Overall, the fund industry has become more competitive, with a greater focus on innovation, technology, and cost reduction.
Nina Petrini, head of UBS ETFs and index funds for UBS AM in Iberia and Latam, gives us her vision for the ETF industry.
She points out that the growth in ETF AuM has been exponential, unlike other financial products within the industry. “The Global ETF industry gathered $856.16 Bn in net inflows in 2022, following the record annual net inflows of $1.29T in 2021. The European ETF market has grown by 19% CAGR over the last decade alone. Globally the numbers are even higher with a CAGR of 22% over a 10-year basis*”, she details.
On the other hand, she points out that, the simplicity, transparency, liquidity, and ease “with which capital markets have included this specific segment in their trading capabilities, all helped to satisfy the increasing demand for such instruments. This has led to ETF AuM in Europe alone reaching a staggering 1.4T USD, up from only 331m ten years ago**”.
In terms of products, Petrini says, traditional core equity ETFs replicating plain vanilla indices “have been increasingly supplemented by innovative fixed-income benchmarks, and therefore new fixed-income ETFs. Alternative asset classes such as commodities are replicated synthetically to round out the offering. And then came sustainability! UBS Asset Management had already launched its MSCI SRI range over a decade ago, and since then collaborated with various index providers to continue innovating in the ESG and climate space. Sustainability has become a significant trend that the overall financial industry has had to adapt to, to meet growing client demand”.
* Source: All market data is sourced from ETFGI global and regional research. ** Source ETGI Dec 31.12.22, Dec 31.12.12.