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Looking to the Future of ETFs

A new report from PwC examines the current impact of ETFs and seeks to predict the 2020 market. The report notes that “ETFs are no longer a niche product, and their impact will continue to be felt much more widely than imagined.”  The report is the result of a survey conducted by the firm of executives from 60 firms. Two-thirds of respondents were ETF managers or sponsors and the remainder were service providers and asset managers that did not offer ETFs.

Three-quarters of respondents predict that global ETF assets will reach more than $5 trillion by 2020 from the current level of $2.6 trillion. The report notes that Asia accounts for only 7 percent of ETF assets and Latin America, the Middle East, and Africa in total amount to only 2 percent. While the report predicts that flows from the United States and Europe will continue to account for the lion’s share of assets, the largest percentage growth will likely come from other parts of the world. Respondents identified regulations (63 percent agreed) and lack of distribution (53 percent agreed) as challenges to future ETF growth.

For new products, 46 percent of respondents predicted that “new types of indexing” would be the most important area of innovation, while 34 percent selected active ETFs. The SEC’s approval of non-transparent ETFs would have a “significant” impact at their firms, according to 59 percent of respondents.

The full report can be found here