3.3 One last word!
In this European ETF survey (2014), the EDHEC risk institute
provides some statistics about the preference of European investor for ETFs for
their asset allocation in both core and satellite (Appendix 1). The most use
ETF in the core is the broad market ETF. For instance, 69% of equity broad
market ETFs users use them in the core. Whereas style, sector and other narrow
ETFs lie mainly in the satellite. For instance, 59% of equity sector ETFs users
use them in the satellite. Note that these ETFs are clearly less popular than
broad-based ETFs. Some investors use ETFs both in core and satellite. The
equity broad market ETF is the one which is the most use in both part of the
portfolio (12,5%). This study approves what I said in the two previous section.
That is to say, the narrower ETFs are widely used as satellite vehicles for
tactical asset allocation and the core is built around broad market ETFs to get
a broadly diversification.
To sum up, ETFs are especially adapted to the core/satellite
approach. They offer a natural vehicles for implementing allocation strategies
both in the core and in the satellite. Their use can help to optimize the
risk/return of the portfolio. On one hand, they allow to get easily a broadly
diversified core. On the other hand, they can help investors to improve the
return of the portfolio thanks to the addition of specific ETFs in the
satellite. Their tradability is one of their main advantages, we're going to
see that this later allows the management of highly dynamic strategies by
facilitating the shifts from the core to satellite.
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