A third of European investors mainly use ETFs for tactical purposes, which is a lot more than in other regions. In the US, just 23% of investors use ETFs mainly tactically, while the corresponding figure in Asia is just 19%.
European investors also use ETFs slightly more often as core building blocks for their portfolios than their counterparts elsewhere (see chart). Some 27% of European investors typically buy index trackers for strategic allocation purposes. This is only 25% in the US, even though use of ETFs is much more widespread there.
ETFs are used relatively more frequently for rebalancing and/or transition purposes by investors in the US and Asia. Interestingly, Asian investors also use ETFs a lot more to manage risk.
A possible lack of liquidity is often cited as an impediment for investors to allocate large amounts of money to ETFs. According to riks.net’s poll, the majority of investors across the US, Europe and Asia indeed consider liquidity an important or very important concern in all asset classes apart from developed market equities.
Liquidity concern is greatest for high-yield bond ETFs, with 40% of respondents “very concerned” about, an an additional 30% seeing it as an important concern.
But liquidity is even seen as a “very important concern” for government and investment-grade corporate bond ETFs by a third of respondents, in a sign this is very much on investors’ minds as central banks around the world are preparing to withdraw monetary stimulus. This will quite possibly have adverse consequences for market liquidity.