Investors ditching mutual funds for ETFs, suggests new research

Investors are increasingly swapping out of mutual funds and into passive or thematic exchange-traded funds (ETFs), according to new research from HANetf.

More than a fifth (22%) of retail ETF investors have cashed in mutual funds to switch investments to ETFs in the past year, according to new research by the white-label ETF and ETC platform.

In a study of 1,000 retail investors, nearly half (46%) said they were funding investments from their salary, with long-term investing cited as the most popular reason for using an ETF.

Fees on ETFs are much lower than mutual funds or unit trusts, which has sparked an upsurge in their use over the past decade.

Around two-fifths of HANetf respondents were active, using ETFs as thematic options or trading on a regular basis like individual shares, with some 38% held in ISAs and 30% in SIPPs.

In the research note, Hector McNeil, co-CEO and co-Founder of HANetf said: “The growth in interest in ETFs from retail investors is underlined by how people have been funding their investments in the past year with many moving away from mutual funds and investment trusts.

“It is interesting to see that while most retail investors use ETFs as part of their long-term financial planning there are substantial numbers trading ETFs and making use of them to access investment themes which highlights the variety of investment needs ETFs can be used for.”