UK investors expect to increase their usage of ETFs in 2012

A survey of investors at the annual iShares Insights conference revealed over two thirds of those surveyed expect their use of ETFs to increase over the coming year.

UK investors, including asset managers, discretionary wealth managers and private bankers, were asked about their use of ETFs and how they select them to execute their asset allocation decisions.

84% of investors look beyond the Total Expense Ratio (TER) when considering the total cost of investing in an ETF.

Costs associated with liquidity, such as the bid-offer spread, and costs associated with index rebalancing were important factors for 64% of respondents.

All other things being equal, investors prefer to use UCITS compliant funds, with 65% naming physically replicating UCITS funds as their structure of choice.

Over two thirds (69%) of those surveyed expect their use of ETFs to increase over the coming year. Investors voted the domicile of the product as their least important consideration when selecting an ETF.

Commenting on the survey's findings, David Bower, Head of iShares UK, said: "As the ETF market has grown in size and in the number of products available, investors are fast recognising that not all products are equal, and that factors such as structure, performance versus an index and cost can determine the overall performance of their investment. As our survey reveals, looking beyond TER is also vital as there are many factors which affect the true cost of holding an ETF. Product providers can play a vital role in helping investors to conduct effective due diligence when they are choosing how to invest."

Investors attending the conference heard from a range of BlackRock and iShares experts on how to generate returns within a period of market uncertainty.

Stephen Cohen, Head of iShares Investment Strategies EMEA, told attendees: "During market volatility and with UK interest rates so low, many investors are adopting an agile and global perspective to achieve returns. ETFs can help them to make tactical shifts between asset classes and regions efficiently, and to maintain strategic allocations in a cost-effective and transparent manner."

iShares' investor survey questioned over 50 clients attending the Insights conference on 9 November 2011.