Fund manager BlackRock expects the global exchange-traded fund (ETF) sector's assets to continue to grow strongly over the next few years as more fee-based advisers embrace the product and an increasing number of indices are covered.
Global ETF and exchange-traded product (ETP) assets were anticipated to jump by 20 per cent to 30 per cent annually over the next three years, taking the industry's funds under management to around $2 trillion by early 2012, BlackRock said in an industry outlook report.
"Demand for ETFs globally has surged as professional and retail investors alike have discovered their unique combination of benefits, such as versatility, transparency and significant cost advantages," BlackRock global head of ETF research and implementation strategy Deborah Fuhr said.
"The availability of cost-effective, flexible, liquid, diversified investment products that enable rapid implementation of a comprehensive range of investment strategies has struck a chord with investors - during both bull and bear markets."
The global ETF and ETP industry combined had 3503 products with 7311 listings and assets of $1.48 trillion as at December 2010.
Despite growth in the use of ETFs covering alternative asset class exposures, investors would continue to prefer ETFs based on broad-market indices that served as core holdings, Fuhr said.
"With today's increased market volatility, no single sector, style or stock consistently outperforms its peers," she said.
"Having core holdings invested in broad-market indices not only helps reduce volatility but can also achieve competitive returns for the overall portfolio."
BlackRock is the owner of iShares, the world's largest provider of ETFs.
Last month, Russell Investments predicted the Australian ETF sector's assets would jump 33 per cent to $6 billion by the end of 2011.
The growth would be driven by factors including providers taking advantage of broader investor community understanding of ETFs and more flexible regulatory conditions, Russell director of ETF product development Amanda Skelly said.
The local ETF market grew from $3.1 billion to $4.5 billion in 2010, according to Australian Securities Exchange data.
