European assets in strategic beta exchange-traded products have soared by more than 25 per cent over the past year, research by Morningstar shows.
The latest Global Guide to Strategic-Beta Exchange-Traded Products – Morningstar’s third such report – found that in Europe assets rose from $32.5bn to a record $40.7bn in the year to 30 June 2016. During that period 58 new products were launched into the market.
Globally assets were boosted from $519.2bn to $550.5bn over the course of the year, with the number of products in Morningstar’s database increasing from 911 to 1,123.
“Growth in strategic beta ETPs has been driven primarily by new adopters across the investor
spectrum, ranging from individuals to state pension funds,” the report says.
Findings from the report suggest fees are set to become increasingly competitive in the strategic beta ETP space.
The report found that 71 of the 608 strategic beta ETPs examined saw their fees fall by an average of 0.03 per cent between 2014/15 and 2015/16.
Meanwhile 63 strategic beta ETPs increased their fees by an average of 0.01 per cent, with the remaining 474 products leaving their fees unchanged.
“We expect that fees for strategic beta ETPs will trend lower with time,” the report says. “We have already seen instances of proactive fee cuts among the PowerShares FTSE RAFI suite as well as in the iShares Core lineup.”
The report points to the Goldman Sachs ActiveBeta US Large Cap Equity ETF GSLC, which launched in September 2015 levies a fee of 0.09 per cent.
“This is perhaps the most meaningful data point to date indicating that a trend toward lower fees is forming in the US strategic beta ETP market,” the report says.