Actively managed, thematic, and socially responsible ETFs are poised for further growth, according to the ninth annual global ETF investor survey conducted by Brown Brothers Harriman.
Brown Brothers Harriman has released the results of its ninth annual global ETF investor survey.
The custodian and fund administrator interviewed nearly 400 institutional investors, financial advisers, and fund managers from the United States, Europe, and Greater China to identify key trends and areas of innovation in the ETF marketplace.
The survey found that, while active strategies represented just 10% of global ETF net inflows in 2021, interest in the segment is gaining pace. More than three-quarters (78%) of respondents globally plan to increase their exposure to active ETFs this year, up from 65% in 2021.
Defined outcome ETFs topped the list of products that respondents want to see more of in the active wrapper, suggesting that investors are looking for low-cost, liquid hedging tools in their portfolios during 2022.
Global equity strategies also ranked highly, however, highlighting that specialization in foreign markets could be a differentiator for active ETF managers.
Amongst US-based investors, half (50%) said they will definitely invest in semi-transparent active ETFs over the next 12 months, while a further third (36%) indicated they will possibly do so, pointing to growing acceptance for the new fund structure two years after the first active semi-transparent ETFs hit the market. The semi-transparent ETF wrapper is not yet available in Europe.
Continuing the strong trend identified in last year’s survey, thematic ETFs look set to further increase market share with 85% of global ETF investors planning to increase their exposure over the next twelve months. Additionally, more than a third (38%) indicated they will allocate between 11% and 20% of their portfolio assets to thematic ETFs over the next five years.
Technology-focused and internet-based strategies, such as those targeting cloud computing and cybersecurity investment themes, remain the most popular amongst investors with nearly two-thirds (64%) highlighting their interest in these ETFs. Other areas worth noting include robotics & AI, healthcare, and autonomous & electric vehicles.
Reflecting the growing interest in digital assets, more than half (54%) of investors globally plan to add blockchain-focused and cryptocurrency exposures to their portfolios in 2022. While this interest bodes well for the segment, ongoing regulatory questions and heightened volatility so far this year may impede growth.
Turning to socially responsible ETFs, despite citing the lack of a consistent methodology as a headwind to adoption, a massive 89% of investors globally plan to add more ESG investments to their portfolios in 2022.
Europe continues to be the engine for global ESG growth with half (51%) of the region’s aggregate ETF flows going into ESG ETFs last year. Amongst European investors, more than a quarter (28%) utilize the EU’s Sustainable Finance Disclosure Regulation (SFDR) classifications when selecting ESG ETFs. Of those, nearly half (47%) favour Article 8 products while a quarter (27%) opt for the stricter Article 9 ETFs.
According to Brown Brothers Harriman, the survey findings underscore ETFs’ use as a foundational tool in portfolio construction and paint a bullish outlook by investors for the ETF market in the year ahead.
Shawn McNinch, Global Head of ETF Services at Brown Brothers Harriman, said: “2021 was a year of record growth, and 2022 looks set to follow suit as investors demonstrate their confidence in ETFs and increase their allocation across multiple strategies. With allocations rising across active, thematic, and ESG strategies globally, it’s evident that the depth of choice in the market continues to provide new portfolio opportunities for investors of all types.”