Institutional investors across the Asia-Pacific region are set to increase their allocations to exchange traded products (ETPs), according to a survey commissioned by State Street Global Advisors.
Conducted in August this year by Greenwich Associates, the survey found that 40 per cent of those surveyed planned to lift their ETP allocations in coming years, with equities exposure the most popular asset class, followed by commodities. Forty-six per cent said they would continue with their current allocations.
“Although current ETP allocations are small relative to institutions’ total assets under management across all regions, indications that institutional investors will increase their ETP allocations in coming years signals tremendous growth opportunities,” said Michael Henze, head of exchange traded funds in the Asia Pacific region at State Street.
According to Bloomberg, Asia Pacific assets under management in ETPs is currently at US$118 billion.
Henze says the increase in funds under management will prompt more diversity in asset allocation and lead to growth in ETPs.
The three most common applications for ETPs among regional institutions, according to the study, are to obtain beta exposures within portfolios, portfolio completion and hedging or risk management. Cash equitisation, common in the US, is less common in the Asia Pacific.
The researchers interviewed 58 asset managers and proprietary traders across the region, with nine of the interviewees being based in Australia.