ETFs have become an increasingly popular tool for European investors’ portfolios, but despite good progress, many investors are still not clear on the difference between active and passive ETFs, according to recent Fidelity research.
Fidelity International’s Be Invested Global Study – which researched 6,500 retail investors across Europe – found that a third (35%) of respondents already invest in an ETF or ETP.
Some 31% of investors understood the distinction between active and passive products, despite active products being new to the market, the report noted. Stefan Kuhn, head of ETF distribution at Fidelity International, said this was encouraging given how fast the active ETF market has developed.
However, with roughly 69% of investors not aware of the difference, there is still a way to go for the market.
Levels of understanding differed depending on location and age group. Markets such as Germany, the UK and Switzerland were much more informed, with 47% of German investors saying they understood the distinction between active and passive ETFs. In the UK, this stat dropped slightly to about 39%.
By contrast, France and Italy are lagging with just 28.7% and 27.9% understanding the active and passive distinction, according to the report.
Some 44% of 18 to 34-year-olds said they understood the difference between active and passive, compared to just one-third of older investors, according to the report.
Across all age groups, the fundamental drivers for why investors picked ETFs remained consistent, despite the varying understandings: ETFs are valued for their simplicity, accessibility, competitive fees and efficient diversification.
In total, 44.8% of investors were attracted by ease of trading, 43.2% by diversification and 41.4% by competitive costs, the report found.
Kuhn added: “The strong momentum we’ve seen in Active ETFs so far demonstrates that investors increasingly value having a choice of approaches.
“As innovation continues, helping investors understand the different approaches available – and how they can support different investment objectives – will be key to building investor confidence.”
See also: The active ETF explosion: Tools of the trade or tightening the screws for OEICs?