Active ETFs set to grow in 2020 says new global report

The rise of exchange traded funds (ETFs) will continue in 2020 according to a new report from one of the largest private banks in North America.

A global study of investors by Brown Brothers Harriman reveals that 57% of global ETF investors plan to increase their exposure to actively-managed ETFs in the next 12 months.

The strength of the actively-managed ETF market is most evident in North America while investors in Europe are more focused on ESG and those in Greater China are looking for low volatility ETF strategies.

“This survey takes the pulse of the ETF industry,” Heather Bell, Managing Editor at ETF.com and Editor of ETF Report said. “This year’s survey shows the continuing growth of ETFs overseas, and the increasing importance of environmental, social and governance (ESG) based strategies.”

Overall, ESG is the global favourite with 30% of respondents expecting to have between 11% and 20% of their portfolio in ESG ETFs within the next 5 years.

“Across the globe, ETF market growth shows no signs of slowing,” said Shawn McNinch, Global Head of ETF Services at BBH. “In 2019, investors found creative—and differentiated—ways to use ETFs to drive results. That said, regional nuances exist in terms of ETF usage and managers need to be aware of these as they build a global ETF offering.”

Read more: While mutual funds suffer losses, active ETFs continue to flourish.

Strong AUM, smart beta
Among other key finding, the survey shows that buying a new ETF requires a solid AUM foundation with just 12% of investors saying they would buy a new ETF with less than U$25 million AUM.

Smart beta ETFs have emerged as core portfolio staples with 40% of global investors having between 11 and 20% of their portfolio in smart beta, up 7% from last year.

Investors are using ETFs for diversified fixed income exposure amid volatile markets; for the second year in a row, investors ranked fixed income ETFs as their go-to product type in periods of heightened volatility.