Data and analytics provider Trackinsight has released the results of the Trackinsight Global ETF Survey 2023 which seeks to shed light on the trends affecting the ETF industry and on the needs and concerns of ETF investors globally.
Trackinsight’s Global ETF Survey aims to take the pulse of the ETF industry.
Supported by JP Morgan Asset Management and State Street, polled over 500 investors globally including some of the world’s largest asset managers, financial advisors, private banks, family offices, and institutions who collectively manage nearly $900 billion in ETF assets.
Philippe Malaise, CEO and Founder of Trackinsight, commented: “We are excited to release the Global ETF Survey 2023 in collaboration with our partners, JP Morgan Asset Management and State Street. This report offers an in-depth analysis of the ETF market, and the survey’s findings will provide investors with valuable insights into the industry’s trends and outlook.”
ETF market overview
The report notes that investors’ interest in ETFs in general remains high despite a slowdown of net inflows from $1.2 trillion in 2021 to $782bn last year. Over half (56%) of respondents plan to increase their allocation to equity ETFs over the next three years, while 40% plan to boost their fixed income ETF investments over the same period.
European investors highlighted lower fees as their primary motivation for using ETFs, while in the Americas, robust liquidity and tax efficiency also rated highly as two fundamental aspects of ETF popularity.
Active ETFs
Interest in actively managed ETFs continues to strengthen among respondents – over two-thirds of investors (68%) have at least some allocation to active ETFs, compared to a little less than 60% last year.
Many of those who are currently investing in active ETFs are dedicating a significant portion of their assets to the segment – approximately 12% have allocated more than 40% of their assets to active ETFs, 10% have allocated between 21% and 40%, and 15% have allocated between 11% and 20%.
Equity-based strategies appear most favourable for the active ETF wrapper with 62% of respondents citing it as their preferred asset class within active ETFs. Interestingly, nearly three-quarters (73%) of investors in the Americas prefer active ETFs for equities exposure compared to just over half (54%) in Europe.
Active ETFs are seen by investors as both a replacement for as well as a complement to existing investment strategies. Approximately a third of respondents see active ETFs as suitable for replacing active funds (cited by 35%) while some respondents consider these ETFs a good alternative for passive ETFs (29%) and direct investing (30%).
For the second year in a row, lower management fees relative to traditional funds remains a key reason for investing in actively managed ETFs, as stated by 44% of investors, although the diversification these ETFs provide is crucial to an almost equal number (43%). Potential excess return over passive investments (cited by 37%) sits third on the list of importance, notably down from 48% last year, perhaps indicating that investors have tempered their expectations for returns in 2023.
Commenting on the findings, Travis Spence, Head of EMEA ETF Distribution at JP Morgan Asset Management, said: “The momentum in the ETF market shows no sign of letting up, and this survey provides an important view of the trends fuelling this growth. Zooming in even further, an active ETF revolution is underway with nearly 70% of global ETF buyers predominantly using active ETFs for equity, fixed income, and thematic exposures. It’s critical that we understand the drivers of value and investor perspectives as we move forward on this journey.”
Thematic ETFs
Considerable interest in thematic investing remains with more than 40% of respondents anticipating an increase in their allocation to thematic ETFs over the next few years.
For the first time in three years, diversification became the most popular reason (cited by 60% of respondents) for investing in thematic ETFs, although a similarly large portion (56%) of investors invest in thematic ETFs as a means to execute a long-term strategic bet.
Reflecting heightened volatility across financial markets, investors have a close eye on the level of risk they are willing to accept relative to the anticipated return. Nearly half (47%) stated that the risk-return profile was more important than any other criterion when selecting thematic ETFs.
Technological innovation remains the most important megatrend for professional investors. A massive 92% of respondents declared either being invested in (68%) or interested in (24%) thematic ETFs which address disruptive technological innovations. Environmental-based thematic strategies were not far behind, however, with 81% noting they are invested in this area or interested in being invested.
ESG ETFs
Despite greenwashing issues remaining a key concern among investors, with the majority seeking more transparency across investment products, nearly one-third (30%) of respondents are planning to increase their exposure to ESG-aligned and sustainable ETFs in the near future.
Societal good and convictions remain the biggest reason for choosing this investment style, cited by 59% of respondents, although the number is notably down from 73% in 2022 and 84% in 2021. A significant portion of investors cited avoidance of long-term risks (35%) and performance (30%) as key factors motivating investment in ESG ETFs, highlighting how the segment is being viewed as not only a way to invest in one’s moral leanings.
Crypto ETFs
Investors have made a decisive move away from cryptocurrencies with more than three-quarters (76%) stating that they have currently allocated nothing to the segment, a notable jump from last year when around half of investors were out of this market.
Despite the immediate pullback from the segment, investors continue to see opportunities for cryptocurrencies over the long-term with nearly half (48%) stating they would consider investing in single-cryptocurrency ETPs and about the same amount (47%) approving of multi-cryptocurrency ETPs.
When asked what cryptocurrencies they are invested in, or want to be invested in, Bitcoin and Ethereum were the two most popular, cited by 59% and 49% of crypto-friendly investors.
Convenience was cited as a key reason for utilizing the ETP wrapper for cryptocurrency exposure as, compared to a direct investment, investors are able to adjust one’s exposure without the hassle of digital wallets.