ETFs attracting more new investment

New client cash in the US is now just as likely to be invested in an exchange-traded fund (ETF) as a traditional mutual fund, according to a study by Cogent Research.

Almost a quarter (22 percent) of ‘new client dollars’ go to ETFs, according to Cogent’s survey of more than 1,700 US financial advisers, while 23 percent are invested in active mutual funds.

Last year 19 percent of new investment went to ETFs, compared with 27 percent going into a mutual fund, according to the Financial Times.

Overall, adviser allocations to ETFs have increased from just 5 percent in 2007 to 12 percent in 2013 – and have jumped from 9 percent since last year alone, adds the newspaper.

Meredith Rice, senior product director and author of Cogent’s ‘Advisor Brandscape’ report, told the FT the shift among US advisers to a fee-based model – where they are paid based on the value of clients’ assets – was putting a spotlight on costs. ‘ETFs are popular as they help to lower costs,’ she explained, adding that 73 percent of US advisers now use ETFs, up from 46 percent six years ago.

Cogent now expects the growing popularity of passive ETFs to also make actively managed ETFs more attractive, a trend highlighted by applications from high-profile funds including Fidelity, Franklin Templeton, Janus Capital and Legg Mason to launch their own active ETFs.