BBH’s 10th Annual Global ETF Investor Survey captures the opinions of ETF investors around the world about how they are selecting and utilizing ETFs in their portfolios.
This year we captured responses from 325 ETF institutional investors, financial advisors, and fund managers from the U.S., Europe (including the U.K.) and Greater China. In total, 40% of respondents had more than $1 billion in AUM. The survey highlights the reactions and responses to the macro-economic changes and market shifts of the last 12 months.
As the survey enters another decade, it’s evident the last 10 years of ETF product innovation and market maturity has presented global investors with a versatile and expansive toolkit to help meet their objectives, especially in the face of recent volatility and market shifts. At its core, our findings show:
- Investors continue to embrace ETFs as a vehicle of choice, with emerging categories such as active and fixed income continuing to gain ground
- Investors are allocating capital from index and active mutual funds to active ETFs
- Thematic ETF categories such as robotics / artificial intelligence and digital assets / cryptocurrencies continue to exhibit their staying power
- ESG ETFs remain in high demand across the U.S., Europe / U.K., and Greater China
Below we highlight key findings from our survey and encourage you to download the full report here.
- ETF allocation keeps pace: ETFs saw global inflows of $856 billion in 2022, the second highest total ever. Interestingly, the number of investors who plan to increase their ETF allocations in 2023 dropped 23% YoY, but overall allocations remain strong with 89% planning to maintain or increase.
- Appetite for fixed income is growing: 62% of investors say they are extremely or very interested in fixed income, while 40% expect to direct even more of their portfolios toward short duration fixed income allocations.
- Commodity ETFs boom as investors seek diversification: 69% plan to maintain or increase allocations to commodity ETFs. This is not surprising given that seven out of the top 10 best performing ETFs in 2022 were commodity products.
- Active ETFs on the rise: 82% of investors plan to increase or maintain their exposures to active ETFs this year as conversions from mutual funds into actively managed ETFs intensifies. 92% of investors bought an active ETF in the last 12 months with 46% allocating from index mutual funds and 42% allocating from active mutual funds.
- Semi-transparent structures gaining more visibility: Investor interest in semi-transparent active ETFs is reflected in the growing awareness of these ETF structures, which are still in their nascent phase. 80% of investors know what these structures are, and 70% of investors say they will or may buy one.
- Investors are favoring alternative and managed risk strategies: To enhance diversification and manage risk in volatile markets, 59% of investors favor defined outcome ETFs, which cap their exposure to broad equity markets and offer a downside protection. 67% of investors favor strategies based on specific factors of return such as value, growth or momentum and around 70% of investors favor managed risk strategies.
- ESG ETFs are becoming a leading source of demand: Over the last five years, AUM has grown at a phenomenal 40% CAGR, with 43 consecutive months of inflows, to reach $403 billion invested in ESG ETFs at the end of November 2022.3 53% of respondents are planning to add ESG exposures this year.
- Crypto ETF demand persists amid market chaos: Despite a tumultuous market and value destruction, a quarter of respondents expect to allocate more of their portfolios to ETFs with cryptocurrency related exposure, compared to 33% in 2022. Institutional investors are particularly keen, with 74% saying they are extremely/very interested in this strategy. 48% of investors still plan to add cryptocurrency and digital asset-themed ETFs.
- Investors prefer virtual to in-person meetings: 62% of investors prefer to engage digitally with sponsors, and 53% prefer having digital content and insights pushed to them. Enhancing digital engagement strategies will be key for industry participants going forward.
- ETF allocations strong, but with nuances: 89% of investors plan to maintain (28%) or increase (61%) their allocations to ETFs over the next 12 months. Last year, 84% planned to increase allocations, indicating a 23% dip year-over-year, but overall, ETF allocations remain strong and promising.
- Shifts in how investors select ETFs: When looking at the most important criteria for selecting ETFs: in the US, expense ratios replace ETF issuer brand; in Europe, tax efficiency led the way; and investors in Greater China care most about the index this year, which is up from 6th place last year.
- Investor use of robo-advisors has tripled: Use of robo-advisors to access ETF model portfolios almost tripled year-over-year, from 10% to 29%, as investors gained more comfort with utilizing these typically lower priced advisory solutions which tend to use ETFs as core instruments in their asset allocations.
- Volatility sparks demand for non-correlated assets: To manage risk and reduce the impact of volatility, 69% of investors plan to maintain or increase allocations to commodity ETFs, while 76% plan to maintain or increase allocations to buffer/market neutral strategies.
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