Global poll of investors gives glimpse into plans for increased allocations to ESG and thematic funds
Even with the pandemic-driven turbulence that ripped through markets last year, global investors haven’t shown any signs of declining conviction on ETFs.
That was one of the key findings from the 2021 Global ETF Investor Survey conducted by Brown Brothers Harriman (BBH).
Based on responses from 382 ETF investors across the U.S., Europe, and Greater China, the report found that 80% of all respondents has plans to raise their portfolio allocation to ETFs in the next 12 months, a three-percentage-point rise from 2020.
“While ETF flows turned negative in some markets, the resiliency of the product structure and supporting capital market infrastructure saw them not only weather the storm, but cement their status as a go-to option for investors to trade during market stress,” BBH said.
However, there are signs that investors will exercise more discretion in their ETF selection this year, with 43% of respondents reportedly looking for ETFs with at least US$100 million in AUM. But even following the volatility in 2020, respondents still prioritized criteria such as expense ratios, track records, and brand of issuers before considering trading spreads and volume.
With respect to active ETFs, two thirds (65%) of respondents said they plan to increase their exposure, compared to 57% who had plans for increased active ETF investment in 2020.
ETF investors in the U.S., meanwhile, said they planned to purchase shares of a semi-transparent, active ETF in the next six months. A lack of regulatory approval currently prevents European ETF investors from getting exposure to the structure, though the Central Bank of Ireland (CBI) is reportedly in early-stage talks with parties within the European ETF ecosystem, and are expected to make progress this year.
Partly due to strong performance and wide media coverage of several prominent thematic managers, demand for thematic ETFs skyrocketed in 2020, prompting plans from 80% of investors to increase their allocation to such vehicles this year. While tech ETFs attracted the greatest interest, areas such as healthcare, ESG, and fintech also showed signs of rising interest.
ESG ETFs are also emerging as a sunshine category, with 56% of investors planning to have at least 11% devoted to ESG ETFs. Over the next year, four fifths (82%) of respondents said intend to put more into ESG ETFs over the coming year, though they will have to contend with a lack of industry standards and variations in track records.
The report also highlighted defined-outcome or buffered ETFs as an area to watch, as they saw increased popularity in the U.S. last year 2020 and captured the attention of managers and investors worldwide.
