More ESG ETFs to come

A major exchange-traded fund (ETF) manager has predicted there will be an increasing number of these offerings covering environmental, social and governance (ESG) investing being introduced to the market in the future.

“We’re experiencing a very strong demand for ethical investing and that’s certainly one area we haven’t expected, when we started our business, to see the ETF industry being associated with,” BetaShares chief executive Alex Vynokur said.

Vynokur pointed out this demand was in line with the finding in the recently released “BetaShares/Investment Trends 2017 Exchange Traded Funds Summary Report” that younger investors were dominating the make-up of individuals allocating funds to these vehicles.

“There have been a lot of learnings for our business in the ethical investment space. We think there’s still a long way to go as we’re only just in the very early, early steps,” he revealed.

“I think more and more investors will start embracing ethical investments and certainly we think that ETFs have an opportunity to become the natural vehicle through which those investments are actually made.”

He nominated fixed income as another growth area for ETFs in future years as they allow an easier avenue of access to this asset class, which traditionally has had minimum investment amounts applicable only for wholesale investors and has predominantly been driven by over-the-counter trades.

“Where ETFs add value is making that segment of the market more transparent, making it more available and again driving the benefits of diversification that fixed income as an asset class can provide,” he said.

Smart beta was a third area he predicted would see future ETF product innovation.

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