ETFs are expected to see global assets under management grow to $7trn (£5.4trn) by 2021, with the European market experiencing the highest growth, PwC forecasts in a new report.
North America would still be the largest ETF market, growing to $5.9trn, marking 23 per cent cumulative annual growth, while the European market is expected to grow to $1.6trn, with a 27 per cent CAGR. Asia is forecast to reach $560bn AUM with a CAGR of 18 per cent.
Financial advisers, platforms and retail investors are expected to drive this growth.
Increasingly sophisticated data analytics and technology will lead to more ETF products, says the report, ETFs: A roadmap to growth.
Industry professionals questioned in the report said a strong brand was the most important factor in raising AUM, with 60 per cent stating it was very important.
ETF providers are expected to compete outside domestic markets and offer products across borders to build AUM, the report says, meaning firms will have to develop an understanding of local and global tax laws and regulations.
Nigel Brashaw, global ETF leader at PwC says: “Firms across the globe that wish to take advantage of the booming ETF industry will need to invest in investor education, differentiated products and strong distribution channels.
“There is plenty of competition in the sector and we expect the industry to grow at a healthy and accelerated rate.”
Increased regulation is seen as a major obstacle to growth by 47 per cent of respondents questioned in the report, while Bill Donahue, US ETF practice leader at PwC, says it could also present an opportunity.
“Regulatory developments will continue to be top of mind for those looking to expand in the ETF market, although not all regulations will be an obstacle – some initiatives that promote fee transparency and low commissions may cultivate further ETF growth.”