Market Overview

Advisors Continue Allocating Assets To ETFs

Advisors Continue Allocating Assets To ETFs

More good, if not predictable, news on the growth front for exchange-traded funds. Fresh data from brokerage giant TD Ameritrade Holding Corp. (NASDAQ: AMTD) indicate registered investment advisors (RIAs) continue allocating client assets to ETFs.

Survey's In

In its Institutional RIA Sentiment Survey released Monday, TD Ameritrade said, “A large majority of RIAs indicated that they use ETFs in their clients’ portfolios because of their low cost, market liquidity and as a convenient way to achieve asset-allocation goals. While the survey found that RIAs expect to see strong economic growth in 2017, it also points to reasons why RIAs will continue to ramp up their use of ETFs.”

Here in the United States, the world's largest ETF market, ETFs gathered $279 billion in new assets on their way to a record assets under management tally of $2.549 trillion at the end of the year, according to ETFGI, a London-based ETF research provider.

“At the end of 2016, the U.S. ETF/ETP industry had 1,969 ETFs/ETPs, assets of US$2.549 trillion, from 105 providers listed on three exchanges,” said ETFGI.

RIAs surveyed by TD Ameritrade favor broad market and sector ETFs, according to the survey. The survey indicates favored sectors for 2017 include financial services, industrials and materials as plays on President Donald Trump's policy initiatives.

Assets And Asset Allocation

Last year, seven of the top 10 asset-gathering ETFs were equity funds. To start 2017, that number has increased to eight.

Seventy-seven (77) percent of RIAs polled by TD Ameritrade cite asset allocation as a primary reason for using ETFs while 72 percent said they embrace ETFs for lower fees. About two-thirds said they like ETFs due to the availability of robust liquidity.

The survey indicated that 43 percent of RIAs polled always use equity ETFs, more than double the amount of RIAs that said the same of fixed income ETFs.

Usage Trends

Current trends regarding usage of smart beta ETFs among RIAs supports the notion that fundamentally-weighted ETFs have ample room for growth, but that RIAs might need more information and education on these types of ETFs.

For example, the TD Ameritrade survey revealed that only 9 percent of RIAs always use low volatility ETFs, while just 4 percent use other smart beta or other fundamentally-weighted strategies


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