Citywire Selector - For Professional Investors

Register to get unlimited access to Citywire’s fund manager database. Registration is free and only takes a minute.

ETFs are the way to go, says selector

ETFs are the way to go, says selector

Cost is one of the main selling points when it comes to ETFs, but are low fees enough to continue to peak investors’ interest? One investment professional tells Citywire Selector how he is using passive vehicles.

Selector: Andrej Lippay

Company: Corpia Group (Slovakia)

The development of the ETF industry over the past five years has been exceptional and the introduction of active/smart beta ETFs has supplemented ‘vanilla’ alternatives well. We continue to favour passive ETFs as they offer acceptable exposure to sectors where we don’t have in-house expertise.

However, there is a positive outlook for more innovative approaches. We have used both types of ETFs in clients’ portfolios and, due to the positive tax treatment here in Slovakia and a lower cost structure, we have opted for more of these investments than in the past, but only if the products are suitable.

The new normal

From a cost perspective, ETFs are the way to go, assuming the markets are fairly strong and efficient. We won’t beat the market but in the past 52 weeks we have enjoyed strong growth. Considering that equity ETFs are supplementary in our overall strategy, this is very beneficial.

Recently, we have been interested in EM bond ETFs (EUR hedged), which give our clients exposure to higher yield markets, hedged currency exposure to euro, and coupons that pay out monthly. We are also investing in bond ETFs in developed markets (EUR, short-term).

Competitive edge

With increased pressure from investors on costs, established mutual funds are likely to face fierce competition to keep pace with the development of ETFs. The cost structure is a key factor for investors in their decision-making process and demand for traditional ETFs is likely to hold up while markets remain reasonably strong and efficient.

However, there is already evidence that issuers have noticed investors’ changing preferences and have expanded their offering to include smart beta and active ETFs, for example.

I favour absolute return ETFs as they offer a good investment mix, diversifying volatility while providing stable returns.

This article originally appeared in the November edition of Citywire Selector magazine.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Events
  • Citywire Luxembourg Forum

    Citywire Luxembourg Forum

  • Citywire DACH 2017

    Citywire DACH 2017

  • Citywire Italy 2017

    Citywire Italy 2017

  • Citywire Berlin 2017

    Citywire Berlin 2017

  • Citywire Miami 2017

    Citywire Miami 2017

  • Citywire Professional Buyer

    Citywire Professional Buyer

  • Citywire Madrid 2017

    Citywire Madrid 2017

  • Citywire Switzerland Retreat 2017

    Citywire Switzerland Retreat 2017

  • Citywire Amsterdam 2017

    Citywire Amsterdam 2017

  • Citywire Frankfurt 2017

    Citywire Frankfurt 2017

  • Citywire Alternative Ucits Retreat 2017

    Citywire Alternative Ucits Retreat 2017

  • Citywire Paris 2017

    Citywire Paris 2017

  • Citywire Milan 2017

    Citywire Milan 2017

  • Citywire Deutschland 2017

    Citywire Deutschland 2017

  • Citywire DACH 2017

    Citywire DACH 2017

  • Citywire Italy 2016

    Citywire Italy 2016

  • Citywire Milan 2016

    Citywire Milan 2016

  • Citywire Alt Ucits 2016

    Citywire Alt Ucits 2016