The Retail Distribution Review (RDR), which is set to kick in on January 1st 2013, has provided an added boost to the ETF market, as it will be require advisers to consider the suitability of ETFs should they wish to remain independent, according to financial research company Defaqto.

Adrian Gaspar, senior consultant at Defaqto said: “With continued investor frustration at the performance of active funds and increased usage by fund managers and discretionary fund managers, it is clear that ETFs are here to stay and will continue to grow assets under management in the UK.”

“In addition, the RDR has and is likely to continue to act as a catalyst for the growth of the ETF sector.”

In addition, the cost pressure that the RDR will place on many firms means that the option of a low cost investment solution is likely to be enticing.

Defaqto’s report suggests that while ETFs are a relatively new type of investment, their use by fund managers and discretionary fund managers has already led to them establishing a strong presence in the UK.

This follows recent reports of record inflows into the ETF market, with fixed income exchange traded funds market set to grow to more than $2tn in assets over the next decade, according Blackrock’s iShares.

The global market for fixed income ETFs currently stands at $302bn today, but analysts predict that this is likely to grow to more than £2tn in assets over the next 10 years.

According to the Blackrock’s analysis, global market growth is likely to be driven by the impact of changing demographics as more investors seek income producing investments, the on-going evolution of the global bond markets and the discovery of fixed income ETFs by a widening investor universe.

Gaspar added: “The liquidity, variety, low costs and dealing flexibility make ETFs very attractive to advisers, particularly those advising clients with more sophisticated investment aspirations or objectives. However, due diligence is still very important before recommending any ETF to an investor.”

According to Defaqto, the availability of ETFs through wraps and platforms is also a key ingredient to strong retail distribution in the UK as most advisers, who favour ETFs, will likely manage their clients’ investments through either a wrap or a platform.

Defaqto’s data indicates that 21 out of the 27 wraps and platforms that they research allow investments into ETFs. They are also available on 102 out of 111 pure SIPPs, which suggest that gaining access to ETFs through various tax wrappers has become easier.