PwC research has looked at the emerging trends in the fast-growing global ETF landscape
You have only to look at the recent IFIC stats on Canadian investment funds to see how strong exchange-traded funds are in 2023, while mutual funds are losing momentum.
But while the industry remains far smaller than the more established option, ETFs are evolving fast globally and offering investors some new choices and competitive fee structures.
But what do ETF managers and sponsors think is going to happen next?
PwC asked executives, mostly ETF managers and sponsors, for their view of the direction of travel over the next five years.
Growth is expected to accelerate and make ETFs a US$15 trillion AUM global industry by mid-2027 according to 70% of respondents, while 29% think it could reach $18 trillion in that time, almost double the $9.2 trillion of December 2022, and 13% believe it could be even higher.
Untapped potential
The executives believe there is plenty of untapped potential for fund providers to get more innovative and offer new investment opportunities with ETFs including alternatives such as T-bills.
While passive equity ETFs are expected to remain popular, respondents also see growth for fixed income ETF products, active ETFs, and new thematic options which are seen as having significant demand in the coming years.
New routes to market are also set to assist the growth for ETFs, with the development of effective distribution channels seen as key.
Model portfolios are expected to play a major role in the growth of the ETF market along with greater demand for the funds in Europe and Asia where adoption is less mature than in the US and Canada, and expansion into new markets such as LatAm, Africa, and the Middle East.
