Exchange-traded funds (ETFs) are getting a lot of attention in the U.K. right now, according to a survey done by FinEx ETF, a U.K.-based ETF provider. Its latest survey sees pension funds in that country planning a big push into the space, with 38% saying they aim to boost their investment in ETFs over the next year. The findings follow an upward trend identified by State Street Global Advisors earlier this year—it surveyed European pension professionals on ETF use and found 47% saying they planned to increase their exposure to ETFs over the next five years.
Part of the reason could be increased reliability of the products, a factor cited by some industry experts over the last year. As European and U.K. pension funds seek to boost liquidity in the wake of the ongoing euro crisis, they are increasingly using ETFs for short-term overlays on existing holdings.
But while liquidity has oft been named a key reason for pension funds to invest in ETFs, the numbers from FinEx’s survey seem to rank it a bit further down the list. When asked about the most important attribute of ETFs, only 24% said liquidity, while 43% noted efficiency, and 27% said diversification—a distinctly strategic use. It could be a sign of more strategic long-term use of the product, which has typically been seen as a tactical tool by many institutional investors.
Other notable findings include attitudes toward corporate debt ETFs. Nearly a third (32%) of pension funds surveyed think ETFs are a good way to gain exposure to emerging market corporate debt, and 74% said they believe institutional investors will boost their holdings of that asset class in the next five years. Roughly half also say they plan to invest in emerging market high-yield debt over the next five years.