Investors continue to turn to exchange traded funds as their preferred vehicle of choice, with actively managed ETFs and fixed income funds, in particular, gaining momentum, according to Brown Brothers Harriman’s 10th Annual Global ETF Investor Survey.
After surveying more than 300 global investment professionals, BBH found that ETFs are continuing to see healthy inflows, with investors allocating $856 billion globally to ETFs in 2022, the second-highest total ever. The survey found that 61% of investors plan to increase their overall allocations to ETFs over the next 12 months. While this suggests a 23% year-over-year decrease, overall allocations to ETFs remain strong.
“Our findings this year suggest investors are focused on accessing new types of ETFs and investment strategies in an ETF wrapper and expanding their ETF product toolkit to drive outcomes for their clients,” the survey said.
Increased Appetite for Fixed Income, Active Management
Investor appetite for fixed income is growing, with 62% of investors saying they’re either “very” or “extremely” interested in fixed income. Meanwhile, 40% of survey respondents said they plan to allocate even more of their portfolios toward short-duration fixed income.
In addition, active ETFs are also gaining stream with investors. Per the survey, 82% of investors plan to either increase or at least maintain their exposure to actively managed funds this year as conversions from mutual funds into active ETFs increase. Most investors (92%) said they bought an active ETF in the last 12 months, with 46% allocating from index mutual funds, and 42% allocating from active mutual funds.
Investors are also becoming increasingly interested in semi-transparent active ETFs as awareness and education on these types of ETFs are growing. Per the survey, 80% of respondents said they know what these structures are, and 70% said they will or may buy one.
ESG, Commodity ETFs Also See Growing Demand
Environmental, social, and governance (ESG) investing has also become a leading source of demand for ETFs, with AUM into ESG ETFs growing 40% CAGR. ESG-focused ETFs have enjoyed 43 consecutive months of inflows, reaching $403 billion invested in these funds as of November 30. More than half (53%) of respondents plan to add ESG exposures to their portfolios this year.
In addition to ESG seeing increased interest among investors, commodity ETFs are also gaining attention as investors look to diversify their portfolios. After seven of the 10 best-performing ETFs in 2022 were commodity products, 69% of survey respondents plan to maintain or increase their allocations to commodities funds.
“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,” according to BBH.
Source : VettaFi