Hong Kong, May 30, 2022 – Brown Brothers Harriman & Co. (BBH), a market leading ETF custodian and administrator, today released the findings of its 5th annual Greater China ETF Investor Survey.1 The report captures responses from institutional investors (42%), financial advisers (15%), and fund managers (43%) based in Mainland, Hong Kong and Taiwan, who invest in ETFs. The data was gathered as part of a broader global ETF investor survey which also covered professional ETF investors in the U.S. and Europe. 87% of respondents in Greater China manage more than $100 million in assets and 66% have more than 25% of their portfolio invested in ETFs.
The survey found that the demand for ETFs continues to grow in Greater China, especially around thematic ETFs and fixed income strategies. Advances in digital assets and innovation in ESG ETF strategies have also captured investors’ attention.
Read the full 2022 Greater China ETF Survey.
Key Findings:
- The pace of ETF adoption continues to ramp up amid intense competition: 84% of Greater China investors expect to increase their ETF allocation in the next 12 months, an increase of 8% from 2021. A staggering 95% of institutional investors in the region expect their allocations to increase, compared to 78% in 2021.
- The interest seen in thematic ETFs continues to grow, especially in Mainland: There’s resounding interest across the region with 96% of Mainland investors, 78% of Hong Kong investors, and 70% of Taiwan investors looking to increase allocations to thematic ETFs this year. A third of Mainland investors plan to invest up to 50% of their portfolios in thematic ETFs in five years.
- Investors across the region lean into digital assets/crypto: 66% of investors across Greater China are planning to add them to their portfolios in 2022. In particular, in Mainland, investors rank crypto ETFs as the second most important strategy after defined outcome ETFs.
- Interest in ESG grows as policymakers enhance climate disclosure rules: 88% of investors in Greater China plan to allocate more capital to ESG investments this year. Across all three markets, there is a pronounced uptick in demand for ESG products.
- Investor comfort with fixed income ETFs appears to have solidified: 79% of respondents plan to increase their exposure to fixed income ETFs over the next 12 months compared to 76% in 2021. Notably, 88% of institutional investors plan to increase their exposure.
- In anticipation of the Mainland-Hong Kong ETF Connect scheme, U.S. equity investments earn the highest demand from Mainland investors: U.S. equity and high yield fixed income are the top choice of Mainland investors when buying Hong Kong listed ETFs.
“The demand for ETFs in Greater China continues to grow year on year, and while adoption and usage are at varying stages, investors recognize the structural benefits the ETF wrapper provides.” said Chris Pigott, Senior Vice President and Head of ETFs, Asia. “Interest in thematic ETFs is growing, and with fixed income and ESG ETFs also playing an important role, product development in the region is strong and has created a more diverse set of investment options for investors.”
2021 proved to be another banner year for ETFs in Greater China with the region growing to $300 billion of assets under management.2 Mainland in particular, has seen a large number of new ETFs coming to market, the majority of which are highly targeted sector or thematic exposures. Investors in Hong Kong (78%) and Taiwan (81%) also plan significant increases in their use of ETFs this year, up from 65% and 58% respectively, on last year. While historical performance has dropped in importance for investors in the U.S. and Europe in the last year, it remains a top selection criteria for investors across Greater China.
“2022 looks set to be another impressive year in terms of growth, and the strong focus on thematic ETFs and strategies such as digital assets and crypto will continue to drive product innovation in the region. The inclusion of ETFs in the Stock Connect Mutual Market access program will also provide a valuable channel for Mainland investors interested in accessing the Hong Kong ETF market.” said Chris Pigott.
About Brown Brothers Harriman
BBH is a privately held financial institution that has been a thought leader and solutions provider for over 200 years. The firm serves individuals, families, businesses and institutions in its three business lines: Private Banking, Investment Management, and Investor Services. BBH’s culture of accountability fosters deep and lasting relationships built on commitment, adaptability and trust. The company is independent, selective, and specialized by design.
BBH’s Investor Services business provides cross-border custody, accounting, administration, execution and technology services to many of the world’s leading asset managers and financial institutions. With deep ETF product expertise, BBH works with both experienced ETF managers and new, innovative market entrants to introduce and grow their ETF products. BBH helps asset managers launch, list, and cross-list ETFs across the globe. On September 7, 2021 State Street Corporation and BBH announced that they have entered into an agreement for State Street to acquire BBH's Investor Services business, including its custody, accounting, fund administration, global markets and technology services. Following the transaction, BBH will continue to independently own and operate its separate Private Banking and Investment Management businesses. We believe that regulatory reviews should be complete in the coming months.
BBH operates its global business out of seventeen offices located in New York, Beijing, Boston, Charlotte, Chicago, Dublin, Grand Cayman, Hong Kong, Jersey City, Kraków, London, Luxembourg, Nashville, Philadelphia, Tokyo, Wilmington and Zürich. For more information, please visit www.bbh.com.
