ETFs, which are listed and traded like individual securities without the investor having to own the underlying index component, have expanded rapidly, giving investors access to sometimes hard-to-enter sectors such as infrastructure, hedge funds and commodities as well as more mainstream assets such as equities.

BlackRock – which bought the iShares ETF brand last year when it acquired Barclays Global Investors – is now one of the world’s biggest ETF providers. Other notable names in the sector are Lyxor , db x-trackers , State Street and InvescoPowersShares.

These funds, which do not charge stamp duty tax, have boomed due to factors such as their ability to enable asset managers, such as discretionary wealth managers, to construct client portfolios for relatively low costs.

Although ETFs are increasingly used in alternative asset class sectors, they will remain predominantly used for “core beta” reasons, where investors hold them to deliver performance of a mainstream market, the BlackRock report’s author, Deborah Fuhr, said.

“ETFs have fundamentally changed the way both institutional and retail investors construct investment portfolios,” she said.

“We expect ETFs to continue to be one of the preferred investment vehicles for low-cost beta exposure across both retail and institutional markets,” she said.

However,  Fuhr said there is a pressing need for the industry to agree common standards on definitions of various product structures and to have greater transparency about issues such as pricing.

“ETFs are one of the greatest financial innovations in the last decade in Europe and we expect a bright future, but the industry is at a critical crossroads,” she said. “Clarity is critical if the industry is to help investors understand the structure, mechanics, tax and regulatory implications of using ETFs,” she added.