The growth of the global ETF industry, which recently reached total assets of $12.71 trillion, is driven by a strong interest in active ETFs. These funds have demonstrated an annual growth rate of 38.4% over the past decade, according to a report.
The Brown Brothers Harriman 2024 Global ETF Investor Survey has also indicated that investors are not only planning to increase their use of ETFs but also diversify their investments across a broader range of ETF providers.
The survey, conducted by Brown Brothers Harriman and Co. (BBH), a global ETF custodian and administrator, gathered insights from over 300 institutional investors, fund managers, and financial advisors from regions including the US, Europe and Greater China.
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Key findings from the report highlighted the ongoing expansion in ETF usage, with 82% of investors globally planning to increase their ETF investments. In the US, this sentiment is even stronger, with 97% of investors intending to boost their ETF usage. Additionally, 74% of ETF investors are looking to expand their relationships with multiple ETF issuers, signaling a desire for greater diversification and choice.
The demand for active ETFs is also on the rise, with 78% of respondents expecting to increase their portfolio exposure to these funds in the next year. Over the past 12 months, 80% of ETF investors have already purchased at least one active ETF. This shift is part of a broader trend where nearly half of the investors are reallocating capital from index mutual funds to active ETFs, highlighting a market share shift.
Investors are particularly interested in expanding their active ETF options, especially in fixed income and liquid alternatives. The report indicated that 70% of investors foresee increased exposure to fixed income ETFs, reflecting a positive sentiment towards financial market risks. Popular choices include corporate bond “high yield” ETFs, non-US sovereign debt, and mortgage-backed or asset-backed securities ETFs.
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Additionally, digital currency ETFs are gaining traction, with 23% of investors expressing bullish sentiments towards digital currencies and Bitcoin over the next year. This interest extends to alternative asset classes and equities, further showcasing the dynamic and evolving landscape of ETF investments.
“In the current environment, it’s clear that investors are still confident in the ETF industry and are focused on innovative products and strategies that balance the demand for strong returns with mitigating risk,” Tim Huver, MD, ETF servicing team at BBH said. “In particular, we’ve seen the active ETF category grow in popularity and expect even more managers and investors to allocate their funds to ETFs with an active strategy.”
“With accelerated product innovation driving greater diversification at a low cost, the ETF market continues to demonstrate that it has the tools to navigate the varying market conditions for the long term.” Huver added.
