Van Eck Global said investors are attracted to ETFs due to their low cost, which will likely result in the industry gaining an additional $8 billion in investment this year.
Van Eck Australia managing director, Arian Neiron, argued that investors are looking to ETFs to diversify from traditionally owned assets like mining companies and banks.
“ETF investors have always had the benefit of diversity that overcomes single company risk,” he said.
Mr Neiron added that strategic beta is set to play a large role in investors’ portfolios throughout 2016 – “it better meets their needs in achieving cost effective outperformance”.
However, while the ETF sector is expected to grow in 2016, the industry does face multiple headwinds.
Mr Neiron said these include challenging markets, reinforcing the need to make asset allocation and diversification a central aspect of portfolio construction.
He also signalled the need for further investor education, especially when considering the increasing range of ETFs now available and more set to come in 2016.
Van Eck noted that in 2015, 34 new exchange traded products (ETPs) were launched, taking the total number of listed products to 138.
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