Irish ETF industry set to grow to $800bn over next five years

Irish exchange-traded funds (ETFs) are set to grow to $800 billion (€719 billion) by 2021, representing an annual growth rate of in excess of 27 per cent, according to a new forecast.

Ireland’s market share of European ETFs has been consistently increasing over the last number of years and Irish-domiciled ETFs currently account for more than $260 billion, or half of the assets under management in European listed funds.

Accelerated growth

PwC says it expects ETFs, which are typically a basket of stocks, bonds or other assets that can be traded on a stock exchange, to show accelerated growth over the next five years with global funds under management expected to exceed $7 trillion by 2021. This represents an annual growth rate of about 23 per cent from current assets.

ETFs currently represent about 14 per cent of the overall assets under management in Irish-domiciled funds and PwC forecasts that Ireland is in a good position to achieve further growth.

"With our highly skilled English speaking talent pool, our pro-business environment and our experience and familiarity with ETF products, Ireland has a huge opportunity to continue to grow its ETF market," said Marie Coady, PwC Ireland ETF leader for Europe, the Middle East and Africa.

Record investment

Investors poured some $347 billion into exchange-traded funds globally last year, according to fund manager BlackRock, setting a new record for the industry. PwC said the significant growth of ETFs is largely due to the perceived benefits of the product, which include liquidity, the ability to trade intra-day, and a low fee structure.

“Given the momentum and speed at which the ETF industry is developing, it is not surprising to see regulators across the globe, including here in Ireland, focusing on investor protection. Regulatory developments will continue to be front of mind for those looking to expand in the ETF market, although not all regulations will be an obstacle – some European regulatory initiatives that promote fee transparency and low commissions may cultivate further ETF growth,” Ms Coady said.