ETFs are becoming increasingly popular among private investors and are set to grow in this space, Credit Suisse says.
Credit Suisse UK's Private Banking Business head of investment solutions Dennis Geelan says one reason for the growing interest may be that indexing allows fund managers to pinpoint risk. ETFs can provide benchmark returns while the risk budget is reserved for pursuing alpha.
As portfolios are tailored to the investor's profile, ETFs are also a useful tool for shaping a specific strategy.
One ETF trend Geelan identifies is a large pickup in commodities, fuelled by the appeal of holding physical assets.
He says: "Clients definitely become interested when you mention physically backed funds, where they can ask questions about what exactly they're holding and how much."
Increased awareness of the success of emerging markets is also fuelling demand for ETFs, both in equities and debt.
Another advantage of ETFs continues to be their transparency. Geelan says that a few years ago, only professional investors were asking questions about the risks of swap-based models or the performance of active managers. Now, private investors expect answers too.
It is a sentiment that Credit Suisse global head of ETFs Dan Draper echoes, commenting that leading private banks now have robust due diligence procedures which ETF providers must satisfy.
The leading provider in Switzerland since it launched the country's first ETF in 2001, Credit Suisse ETFs moved into the UK with a platform of 45 products earlier this year
For Draper though, the UK is a distinctive market. Unlike Europe, where the distribution of funds is driven by the major banks, over half the funds in the UK go through IFAs.
Faced with a relatively fragmented marketplace, Credit Suisse ETFs have had to adopt a more diversified strategy, working with fund provider platforms and trade groups as well as holding conferences, in order to reach IFAs.
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